Page 13 - 2019 Pancake Supply Chain Co-op, Inc. Annual Report

The Logistics team conducted a series of Member Oversight calls to solicit feedback and help structure tests currently in process
for potential operational changes to assist distributors in improving performance. CSCS also implemented a program to recognize
drivers delivering to IHOP restaurants and encourage quality drivers to bid on Brand routes.

Members and their associates were a vital part of seven business reviews with distribution systems that service IHOP restaurants.
Member participation provided valuable feedback to the distributors with ideas on strengthening partnership and improved IHOP
restaurant operations’ perception of distribution.

To improve response rates and gain deeper insight into IHOP Managers’ perceptions of their distributors, CSCS conducted a
survey preceding each distributor’s business review. The change in process allowed us to follow up on missing responses and
resulted in an overall 34.9% survey completion rate. Results will be benchmarked to measure distributor performance and rank in
2020.

LOGISTICS MANAGEMENT

Freight market pressure is a ratio of supply, the number of seated trucks available, demand, and the amount of loads shipping
on the spot market. The capacity strain felt during previous years finally subsided in 2019 providing much needed relief to
the transportation industry. Market pressure dropped below the levels of 2018 but still outpaced the last five-year average.
Ironically, spot market rates declined suggesting that carriers added capacity specifically to their contract or dedicated fleets, a
more attractive option for drivers. Normally, spot market performance is an early indicator for upcoming changes to contracted
freight. However, in 2019, carriers were reluctant to apply spot market behavior to their new agreements. By the end of the
year, contracted rates were flat in comparison to 2018. CSCS regularly monitors spot market behavior to predict fluctuations
to supplier contracted freight rates. In 2019, CSCS generated $4.6MM in freight savings for IHOP members through four key
objectives.

Redistribution (Re-D)
Redistribution is the aggregation of less than truckload shipments (LTL) into one strategic Re-D facility. Full Truckload (FTL)
shipments with multiple supplier items are then consolidated and shipped to distributors creating efficiencies with freight savings.
In 2019, IHOP restaurants received 1.4MM cases through redistribution generating $3.7MM in annual savings. Savings per case
at $2.69 increased by 33% YOY. CSCS, in partnership with Kinexo, continues to grow Re-D savings for members.

Supplier 1 Supplier 2 Supplier 3 1.4M cases
shipped

LTL Shipments $3.7M annual

Re-D savings

$2.69 savings
per case
FTL Shipments
DC 1 DC 2 DC 3

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