Page 6 - Apple Supply Chain Co-op Inc. 2016 Annual Report.

Message

MIKE LEIKAM

PRESIDENT & CEO
CENTRALIZED SUPPLY CHAIN SERVICES

As our Apple Co-op Chairman, David Paradise, references in his Message to
Membership, CSCS exists to be a source of strength for its Members. Ironically, that
very source of strength is derived from the Members themselves. By every Member in both the Apple and Pancake
Co-ops agreeing to align and work together, it positions CSCS to take $2 billion of combined purchasing leverage to the
marketplace…..and that leverage is a key source of strength that allowed us to deliver strong results in 2016.

Softer commodity markets and strategic sourcing strategies by Mark Smith and the Procurement team lowered the
Applebee’s market basket by 4.0% versus 2015 and was better than the corresponding producers’ price index.
Participation in our optional service programs grew by 13% with total spend under management in this category now
exceeding $170,000,000. Paul Allegri’s Logistics team delivered sustained freight management results and focused on
several key distributors whose service levels were not to acceptable standards. Chris McNutt and the Brand Program
Management team delivered strong results with effective campaign management and improved collaboration with
Applebee’s, and we continued to make progress against our technology road map under the direction of Dustin Pittman,
our Chief Financial Officer. In addition, under his direction, we earned our eighth consecutive clean audit from our
independent audit firm and operated the company within the Board approved budget.

The CSCS team also invested considerable time and resource into managing the supply plan for the Hand Cut Wood Fired
initiative (HCWF). The team coordinated with Applebee’s to roll-out almost 1,800 grills in less than 5 months, transition
steak platforms from tri-tip to top sirloin with no inventory obsolescence or outages and managed costs below market
forecasted levels. We also implemented a financing program through CSCS for the grill purchases in which one-third of
the system participated.

We manage CSCS guided by our core company values – Results Driven, Member Focused, Accountability, Integrity,
Continuous Improvement and Community. In September 2016, we again celebrated our Member Focused value by
conducting Member Maniac Week, a week where we attempt to contact every Member of the Apple and Pancake Co-
ops to find out how we can continue to improve and add even greater value to your businesses. Our 2016 Member
satisfaction scores matched those of 2015 earning an average rating of 4.63 out of 5.0. We continue to receive a
tremendous amount of feedback through this process that will help us continue to improve.

Emulating the commitment demonstrated by all our Members to support their local communities has been important to
us since the formation of CSCS. Through various fundraising activities, the CSCS team raised more than $21,000 for
the Spofford Home in Kansas City. Spofford is a leading provider of prevention and therapeutic treatment services for
children in the area suffering the effects of physical and sexual abuse, neglect, and mental disorders.

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