A&A Weber Distribution Site Visit 4-2008

Reinventing Weber

California Site Visits

April 10, 2008

Richard Armstrong

Key Personnel:

Bill Butler, President & CEO

John Nutt, VP & COO

Bob Lilja, SVP

Tom Wilkinson, VP Information Technology

Carl Neverman, VP Client Solutions & Marketing

Bill Butler and his team have doubled Weber Distribution's revenue since Butler returned to Weber in 2004. In the process, Butler and Weber have brought in several younger, professional managers including COO John Nutt.

Weber was traditionally a public warehousing company with local cartage and some regional trucking. Butler and his team are reinventing it as a contract logistics operator utilizing modern IT with an emphasis on its less-than-truckload (LTL) refrigerated network operating in California, Oregon, Washington, Nevada and Arizona. Weber is a key part of the Network Distribution Solutions (NDS) network, which consists of five regional LTL refrigerated carriers operating as a single source refrigerated network throughout the U.S. As part of its contract logistics expansion, Weber is developing more value-added logistics capabilities for its retail importer customers. These customers are currently concentrated in the food and beverage, chemicals and medical products industries.

As part of its redesign, Weber has computerized its Customer Service Compliance Management Program run by the customer service representatives (CSR) group. Especially important for Wal-Mart and other retail accounts, is the information is readily available from Weber's CSR group. Making this information transparent helps to significantly improve key performance indicators (KPIs), simplify claims and lower the number of chargebacks to vendors. There are 35 CSR employees on the warehouse management side and 17 on the transportation management side.

Internally, Weber runs a warehouse incentive program (WIP) in its warehouses. The program provides monetary incentives for productivity, safety and security.

We had a chance to look at several Weber warehousing locations. Building 2 in Redlands, CA was opened in November 2006. Customers include Nestlé/Arrowhead Water (50-80 truckloads (TLs) a day seasonally), Cadbury/Schweppes (80% pallet / 20% case pick), Mott’s Juices (80% pallet / 20% case pick), Shell Lubricants (case pick), Elmer’s Glue and related products (3,500 stock keeping units (SKUs) per case and each picking). This is primarily a pallet storage warehouse. It has 7,000 pallet positions. It’s a modern, leased building with 32' high ceilings. Inventory is managed on an A, B, C basis using the Synapse warehouse management system and radio frequency (RF) devices. There are 98 doors. Tow motors are primarily propane and there are several which are “two-wide” and can handle two pallets at a time. The average number of employees is 54.

Fontana is a 303,000 square foot warehouse with 40 plus doors on the back side (see press release below).

The Rancho Cucamonga distribution center has 270,000 square feet. It includes 10,000 square feet of frozen, 20,000 square feet of chilled and 80,000 square feet of temperature controlled space. The principal accounts are Star Fine Foods, Mohawk Paper, Mitsui Foods, Croda (cosmetic ingredients) and Mission Foods (tortillas). This warehouse serves as a loading point for much of the reefer distribution network (Weber has 140 reefers). Mission Foods is a major customer in this operation. Its chilled and frozen turnover is 20-25 loads a day (about 75 inventory turns a year).

Weber has also added 1,000,000 square feet of space in Redlands for Applica (George Foreman grills, etc.). Applica and Weber are in the early stages of implementation.

Part of the change dynamic at Weber is to include four of the young execs including Butler, Nutt, and Lilja in ownership of the company. Nick Weber, the patriarch, is still majority owner and chairman of the board.

Butler and his team are now ready to move to the next level. Butler feels that the addition of Wilkinson fills out the top management personnel for continued rapid growth.

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