Dive Brief:
- J&J Snack Foods is expanding its supply chain with the launch of three distribution centers as the company aims to simplify its warehouse network, CEO Dan Fachner said on a call with investors last week.
- Fachner noted that the new facilities will allow the food manufacturer to better locate its inventory and simplify its warehouse network by cutting down its managed party logistics (PL) locations from more than 30 to approximately six.
- The first facility will open in June near Dallas, Texas, with the second coming online later in fiscal year, followed by the third site in FY2024. Locations for the two other facilities were not disclosed.
Dive Insight:
Heightened distribution costs have weighed on the food manufacturer in recent months, though Fachner noted they are expected to ease throughout the year. Distribution expenses made up 12% of sales in Q1, down from 12.7% in Q3 2022 and 12.4% in Q4.
Construction of the three distribution centers is one facet of J&J Snack Food’s larger supply chain investment, which includes the addition of seven new production lines. Altogether, the company is investing nearly $100 million in the new lines and facilities, CFO Ken Plunk said on the call.
With that, the company has also completed transitioning its logistics and distribution management to third-party logistics provider NFI, which Fachner said would generate approximately $4 million in annual savings.
“Strategically, we are transforming the business, investing in our brands and capacity to grow while implementing initiatives to help us operate more efficiently,” the CEO told investors.
Last November, J&J announced that it was exploring further expansion of recently acquired Dippin’ Dots brand into retail, complementing the company’s existing frozen novelty and frozen beverage businesses. J&J is now planning its first cross-brand collaboration with the launch of Icee cherry and blue raspberry-flavored Dippin’ Dots.
Upgrading its supply chain operations has proven a tricky task for J&J Snack Foods. Fachner mentioned the company’s continued work to implement a new enterprise resource planning system, despite the issues the company had with the transition process last year.
In Q2 2022, the snack company lost $20 million in revenue due to a botched ERP system implementation, due to unforeseen manufacturing and supply chain challenges in doing so.
