Executive Spotlight: Randy Scruggs, Supply Chain Consultant
SCS: You've worked for some large brands. Tell us about the roles you've had and how you got to now.
RS: I actually went to school to be a vet and realized a little too late that it's really, really hard to get into vet school. I graduated with a degree in animal science and went to work for Tyson. My soon-to-be wife was a couple of years behind me in school, so I wanted to stick around close. I bounced around with Tyson at a few different facilities and ended up the production superintendent at a poultry operation and did that for a few years and really enjoyed it. But the reality of working for Tyson is that you can advance your career quickly, but you're going to work in places you may not want to live. My wife got into graduate school in Memphis, so I jumped ship at Tyson and went to work for Frito-Lay in a very similar capacity. I spent four years working for Frito-Lay in their manufacturing environment. While I was there, we got married, had my first son, and decided we wanted to settle down and live and in the Nashville area where we both grew up and had family close by.
That led to a job at O'Charley's. I went to work in their commissary operation because in that period of time, 2004, they were still operating commissary and they were servicing three brands and over 400 restaurants. We were doing full distribution and all of the protein, salad dressing, and roll manufacturing in that facility. It was a pretty robust production operation. I was the plant manager for all the protein fabrication there. We did the steaks for all the restaurants, we portioned and marinated all the chicken, and other project work we did internally in that commissary. Then in 2007, a lot changed in the restaurant world, leading to the late 2000’s recession. One impact in the restaurant business was the renewable fuel standard. That shifted a lot for the restaurant business and O'Charley's made the decision at that point based on financial liability and the challenging environment that was coming, to outsource that operation and remove the financial liability of self-distribution. It was high-risk for a restaurant company to have that much money tied up in inventory. So they shifted their focus to running restaurants and started outsourcing. At that point, the protein operation was sold to a new operator, and the other parts of the business were carved up and outsourced to other partners.
On the day of closing on the protein operation, the chief supply chain officer reached out to me and said, “Hey, why don't you stick around with the restaurant company and work in supply chain?” And I said you're asking me to walk away from something that I've been doing for 10 years that I feel I'm pretty good at and I have no supply chain experience. His response was, "It's not a big deal. We'll teach you how to do it."
I made that decision and never looked back and have loved every minute of it. I took a manager role in supply chain and was focused strictly on proteins for about six or nine months and I handled the transition of the facility into the new ownership's hands. We had some almost immediate shake-ups and by the end of my first year, I was in a director role with a couple of direct reports and it felt like a spot I was meant to be in. My manufacturing background gave me a unique insight into what our vendor community dealt with and how their cost structures work. It drove a lot more transparent conversations because I'd already seen a lot of what they see and what they deal with on their cost structure side, and it made for a really nice transition into a supply chain career. I did that for three years with O'Charley's, and they owned Ninety Nine Restaurant and Pub and Stoney River so we had a good family of brands. In 2010, the company was up for sale and around that time frame a role came open at Logan's and Logan's office is literally across the street from the O'Charley's office. The role was a lateral move, but it was much more expansive in category control. I made that move just to take any uncertainty out of the future and it ended up being a really great move for me. I expanded my experience a lot in the first few years there. I went from basically doing commodity categories to doing all categories including non-foods, equipment, some facilities, and indirect spend. Then I really started touching a lot of other stuff and moved pretty quickly into the ranks and was working for Lynn Wildman who was a great mentor for me in that role. She was our VP and had tons of experience from Darden and other brands she'd worked with and it was going really well. We went through a lot of shake-ups there after a few years as many casual dining companies had fallen on hard times at some point or another. Through some of those leadership changes the vice president role was vacated in 2015 and after a few months, I was promoted into that role and that's how I got into supply chain leadership.
In 2016 we went through our first restructure. I'll tell you that restructuring is a very developmental experience. It's not something that I think a lot of people want to do regularly but you learn a lot about your business. The on-the-job training and the advanced development really helped me for the next phase of my career, which was post-restructuring. We really put a strong turnaround in place for Logans and took the brand in a good direction and that led to being acquired by Craftworks. We went from one brand to nine brands in 2018. I think all the chaos of the prior few years really prepped me for what was going to come with the merger and the pace of work and what was going to need to be done.
We successfully integrated those companies only to run into some additional challenges really at the beginning of 2020 prior to COVID. We had some tough scenarios and we inherited some dead weight that we were having a hard time dealing with financially. We ended up in a position where a second restructure was needed. About ten days before COVID, Craftworks filed for restructuring.
We found ourselves in a really unique scenario and the next year was again, very developmental. It was challenging but we learned a lot about our business really quickly. We went through that process and ended up with another ownership change at the end of 2020. At the beginning of 2021, based on that ownership group and additional leadership changes that were made, that's when I decided to take my work in a slightly different direction.
Today, I'm working with two different small restaurant chains in the 40 unit range, and talking to a couple of others of similar size, because I've found that there's an experience gap. It’s expensive to hire an experienced vet but yet operators need strategic planning around their spend. They may be in a position in their life cycle where they need that kind of higher-level help because when you're in emerging growth mode, you're doing a lot of stuff and some of it is off-the-cuff. You're relying on your bottom line distributors to help you, and that works until you start spending millions and millions of dollars in food costs. That’s when you need a strategy to make sure it's done appropriately and that you get the product you need. That’s the niche I’m working in now.
SCS: You've seen economic destruction and economic disruption. You've made it through restructuring. You've seen a lot as a chief supply chain officer. What did the shock of covid mean to you last year?
RS: The first thing it meant for everybody in the restaurant business was uncertainty. We were in Denver meeting with the team on the restructure, calming the waters, making sure they understood what it meant and what it didn't mean. I was with my CEO and we flew home that Friday and New York closed within an hour of me getting home. We didn’t know what was going to happen, but I felt it was going to change everything. Our situation was even more unique because of the restructure timing. You have to have an external financing partner to go through a restructure, and we had a banking organization that had stepped up for the financing. There's an agreement with the courts that they're going to offer financing to get you from point A to point B but you've got to have a sustainable business going forward, COVID called that in question.
There was an option to walk away at that point and our financing arm had uncertainty. We were literally in a week to week scenario where on Thursday we had to pick up the phone and call the banker and say, “We need this much money to pay the twenty people that we still have on payroll and our utility bills to keep the restaurants in a position to where we can open them at some point.” It was this huge cloud every week and after about a month, they said, OK, we believe you’ve got a viable business.
Then our situation flipped completely and we went into business planning and startup mode, asking - what's it going to take to get the company running again? Because we shuttered every single restaurant when COVID took hold.
We started slowly opening restaurants off-premise only, and then we really just built the plan, and every week we started really bringing things back to life. We were doing this with the most remarkable skeleton crew. Our corporate support structure was about 200 people leading into COVID. We were starting the restaurants back up with about twenty-five people in that environment, so everybody was taking on multiple roles and doing a little bit of everything. I found myself in a role that was probably more like a COO than I was a chief supply chain guy because I was working with the operators on staffing, all of our indirect spend, working with our accounting guys. We had three executives on staff including a marketing officer, myself, and our CEO. So we were all doing everything. It was a pretty remarkable time.
Then came challenges like, how do we rebuild our menus? What does that mean for our inventory levels? How much obsolescence are we going to have and how do we make sure we get product? Then we had to start trying to become proactive, looking to the future and saying, here's our roadmap that we're going to use to open these restaurants. From a supply chain standpoint, here's all the new stuff that we've got to figure out really quickly all while chasing sanitizer and gloves and new cleaning products. On the food side, it was what do we have, what do we not have? How are we going to use all the stuff that we own that's not on our menu anymore because we cut our menu in half like everybody else? Honestly, I felt like we were really, really lucky. We prided ourselves on building great vendor relationships, not transactional relationships, but strategic relationships with our vendor partners, particularly on the food side of the business. Through all of the uncertainty, our director of supply chain and our senior manager supply chain were in constant contact with our key vendor community saying, here's what's happening this week and this is what we’re planning on. That allowed us to make a pretty solid transition. Our distributor was a big supporter, they helped us by taking in fresh product, putting it in the freezer, making sure we could get access to it when it needed it. I'll tell you, the reality is, is we had very, very few supply disruptions as we started back up and we did it slowly, which helped. I feel like a bigger fight was really taking care of the stuff that we decided to stop selling. We made the decision to walk away from some of that inventory and just treat it like a write-off. Because we were operating with limited staff in the restaurants, we might have a great selling item that's high intensity from a labor standpoint that we're not going to bring back and we might not bring it back for a year. So that item has three unique ingredients. What are we going to do with it? We might have created some things that were less complex to have a similar item and blackboard it or put it on delivery-only options and make sure that we can utilize some of that high-value inventory. There was a lot of new collaboration that had to happen inside the company to bridge all of those gaps. We spent a lot of time and energy on that and we got out of our own way pretty quickly and there's stuff that's on the menu today that was all part of that.
SCS: You mentioned you made it through the really intense part of COVID with a surprisingly lower than expected amount of outages than maybe others had. How much was based on leadership or technology?
RS: On the technology front, surviving COVID was about being able to generate revenue at a minimal cost structure and in an uncertain environment, so you look at the P&L for a protein-focused restaurant and your food cost is automatically low 30s.
That's a ton of money that's going to come out just to pay your guy at the back door when you don't know what your revenue is going to be. Then you've got another 30+ percent of labor when you talk about your front-of-house, back-of-house, your management labor. That doesn't leave you a lot of wiggle room. How do you take this P&L that's going to be 50, 60 percent down in revenue and turn that into a profitable sale? Some of that stuff can't be flexed - you're going to have certain food cost structures. But we redesigned everything with the idea of making the food cost significantly lower. We designed the menu to be able to take a lot of that labor out, and that gave us a menu that we could open and generate a profit from. Luckily we had launched on all the delivery platforms. We had some big gaps in the process of curbside pickup and some things like that. We found ourselves in an unfortunate position where there wasn't really revenue, and especially later on in the restructure, you couldn't go out and invest in curbside technology at that point. I think that cost us a lot of money. We were still able to drive enough with online and delivery platforms and It helped us keep going and survive like it did a lot of companies. You just had to be smart about the rest of the P&L so that reduced sales volume was still going to be profitable.
It just took a lot of time and energy and it took our team committing to doing a little bit of everything. If you're a manager of a restaurant, you're cooking during the slow shift. I mean, that's just the reality of it, because we can't afford to have the extra cook there. So, we had no front-of-house staff and just somebody to manage to-go. We flexed pretty well. We had some inventory management technology in place leading up to the pandemic that helped us adjust our forecasting pretty quickly and put our predictive demand in focus very quickly. So we did leverage some of that forecasting technology well at the very beginning.
SCS: Switching gears just a little bit, you really have a remarkable career. What skills have helped you the most with your advancement and what advice do you have for the next generation of supply chain professionals?
RS: The restaurant business is a people business. The closer you get to the corporate office and into a support role and out of operations, the less you think about it being a people business. One of the misnomers about supply chain is that you carry this heavy hammer and because you're the customer, you tell people what to do. My opinion is that's not really the practical or optimal way to behave in supply chain. You have to sell yourself to the vendors as much as the vendors sell their stuff to you because when vendors want you as a customer and they don't have to have you as a customer, it's not a transactional relationship. That term seems to be the easy way to frame it up. It becomes strategic and it becomes emotional. Growing up in the manufacturing world, I was responsible for two hundred employees when I was twenty-three years old. Tyson did a really good job at developing the people management skillset for me early in my career.
After Tyson I went to Frito-Lay. If you think about Frito-Lay’s position in the grocery store when you walk down the chip aisle, 80% of what you see is from their family of brands which is remarkable, almost unfair. But they have that because they have this incredible environment of continuous improvement and best practices and not settling, and it’s all through people leadership. There is no management-driven change at Frito-Lay. It's management facilitated change. So, as a leader at Frito Lay, I was challenged to pull the teams off the floor every week and say, OK, we hit all of our targets this week, let's pick one that we can get even better at, and let's let all the people in the room that do the work and make it happen, develop the action plans around how do we get better every week and how do we continue to improve.
The reality is that people management and taking those skill sets and empowering the people around me is what's had the biggest return and giving them the ability to sit down and say, here's how I can make my world better. I'm there to support them and not tell them how to do it. That drives self-development and people development. To be able to do that, the foundation is really relationships. It's being able to communicate to people, being able to listen and not talk as much, developing trust, and all of those things that develop relationships and allow that continuous improvement thought process to really blossom.
The people you're working with fully believe that your intent is to make them better and when your team and the people around you believe that, they're going to perform at their highest level and they're going to continue to evolve and improve, and you can apply that same thought process to your vendor community. Your vendors want to work harder for you because you do end up with an emotional connection and a relationship with the people on the other end of the phone. When you're in supply chain, the reality is, you really don't have control over all the things that are going to make you successful. You're relying on somebody else to do that. So my job is to make sure that all of those people out in the vendor community and in the distribution community want to work harder for us than they want to work harder for everybody else.
That's where I see the competitive advantage in leading that way because when things go south, it's going to go south for a lot of people. It's usually not customer-specific, so when we have a challenge in the industry and the person on the other side of the table has six customers coming to them, I want them to answer the phone for me first because of our history and because of our strategic relationship and our long term commitment. I want to be the preferred customer. I think we do that by helping them be successful because we have to give to them, too, because they need things in their world. They need information about our business and access to our culinary teams. They need to be able to visit with our marketing folks. They need to be involved in our vision. So doing all of those things falls under that leadership umbrella and leading to influence and leading through others.
There's always something going on, there's always something going wrong, and we're always going to be judged on how we handle what goes wrong. If something never went wrong, we wouldn't really need to be here. But that's really not the way the world works.