At times integrating new business into a company strains capability to the point that a new entity offers the best solution. Mile Hi Specialty Foods in Denver, Colorado, provides a perfect example.
In fact, the Taddonio family, owners of Mile Hi have been adapting to changing markets in Denver since 1923, when the first of a succession of Mile Hi companies was founded by the grandfather of the current president, Tony Taddonio. Through four generations — two of Tony's daughters are now part of the business — the company has progressed from a retail produce merchant to a wholesale produce distributor to a frozen foods house to a general foodservice distributor to the largest McDonald's distributor in the Rocky Mountain region. Essentially distribution to McDonald's engulfed the general foodservice side of Mile Hi Frozen Foods. McDonald's has become such a large part of Mile Hi's business that the company even supplies the chain with hamburger buns from an on-site bakery producing 3,000 dozen buns an hour. The general foodservice business was sold to Shamrock Foods in 1983 to allow for more focused concentration of McDonald's.
Mile Hi Specialty Foods is the latest incarnation in the Mile Hi family. Founded in 1999 as a division of Mile Hi Frozen Foods, the McDonald's distributor, Mile Hi Specialty is designed to serve the special needs of seven chains of restaurants, each operating within concepts. Chipotle and Boston Market, two of the restaurant concepts within the McDonald's specialty group, and Starbucks Coffee Company are among its clients. In four years of operation, the new company has grown from a standing start to more than $50 million in annual sales.
Separate concept inventories
The purpose of forming the new division was to serve the new clients without interfering with the basic distribution to Mile Hi's largest customer. Each restaurant concept operates with its own list of menu items requiring Mile Hi to stock 250 to 300 separate, and usually exclusive, products for each customer. The inventory at Mile Hi Specialty is designed to provide everything each restaurant concept needs, Taddonio says. “Each restaurant operating within a given concept orders from the same list of items; only the quantity varies,” he says.
The seven chains total 500 service locations, all within Colorado. In contrast to the McDonald's division that employs 120 drivers to operate a fleet of 50 tractors and 75 refrigerated trailers, Mile Hi Specialty has 15 drivers and 15 vehicles. However, the McDonald's business is spread throughout the Rocky Mountain region. In fact, only 19 of the McDonald's drivers live in Denver. The rest are spread among five relay points that allow distribution in the areas beyond Albuquerque, Grand Junction and Pueblo, Colorado, and Casper and Rock Springs, Wyoming. Basing most of the drivers in remote areas has the advantage of keeping delivery personnel close to the customers and making sure that the restaurant manager sees the same face at each delivery, Taddonio says.
The relays to distant distribution points are more than just a way to improve delivery efficiency. On the return, what might otherwise be empty trailers are operated as an internal for-hire carrier hauling general freight. “Typically, the trailers are already loaded and ready for the return trip,” Taddonio says. “Most of the freight is product used by Mile Hi. However, we have a few outside receivers in Albuquerque that use our service, because we are on a set schedule that they can count on.”
Daily delivery at Starbucks
Within Mile Hi Specialty, the distribution pattern is relatively stable with each restaurant getting two to three deliveries a week. The exception is Starbucks where each location receives daily delivery of dairy and pastry products. “Starbucks stores start with fresh product every morning, having thrown away unsold product at the end of the previous business day,” Taddonio says. “We have 130 Starbucks locations in our system, and they require 800 deliveries a week.”
The Starbucks operation runs with the tightest delivery windows in Mile Hi Specialty, because every single delivery must be made before 5:30 am. Luckily, most of the stops are in metropolitan Denver, but outlying locations from Cheyenne to Pueblo also must be served. Eight trucks are assigned to Starbucks every night. Because drivers have keys to the store locations for delivery while they are closed, stops are completed in an average of 15 minutes each. Only on the longest runs is Starbucks product mixed with other loads.
When deliveries to Starbucks are complete, equipment returns to the distribution center where it is reloaded for another route. Straight trucks that handled 15 Starbucks stops overnight are put on routes to Boston Market restaurants with an average of four to five stops per route. Metro Denver routes ensure that the equipment will be available for use again that night.
Locations concentrate on Front Range
The Mile Hi Specialty fleet is based mostly in Denver, because chain restaurants tend to be an urban phenomenon. In general, Mile Hi Specialty concentrates its efforts on customers in Denver and the other cities along the Rocky Mountain Front Range. The corridor from Colorado Springs through Denver to Boulder is particularly rich in customers.
That customer density has the somewhat counter-intuitive effect of causing the smaller Mile Hi Specialty fleet to make more deliveries than the larger Mile Hi Frozen Foods fleet. This can be explained by considering the distances traveled to reach all the McDonald's locations and the large deliveries that each restaurant receives.
Although small, the Mile Hi Specialty fleet is remarkably diverse, including 28-ft straight trucks, 28-ft distribution trailers with ramps, 53-ft trailers with lifting tailgates, and pairs of 48-ft and 28-ft trailers for use as Rocky Mountain doubles. Trailers are equipped with multi-temp refrigeration systems capable of holding loads at 0° F, 35° to 38° F, and at ambient temperature. The straight trucks are primarily used for the Starbucks operation and for metro delivery to Boston Market. The extensive equipment mix came about as a response to needs, Taddonio says. “We want to match the equipment to special needs as much as possible without creating a separate design to serve every restaurant concept,” he says.
No single-drive tractors
In a fleet with a large number of 28-ft trailers, Mile Hi Specialty has no single axle tractors. To ensure that all tractors can be used with all trailers, tandem drive tractors are equipped with sliding fifthwheels, which combined with a 36-in kingpin setting for the trailer upper coupler provides a compromise for pulling short trailers with dual drives.
Loads are sized to match driver capability in a standard workday rather than to vehicle capacity. For larger stops, Mile Hi Specialty puts four to five stops on a 28-ft trailer. A 53-ft trailer with a rear lift and carrying an electric pallet jack to assist in product movement can handle up to 10 stops, each lasting 45 minutes to an hour. The doubles are used for long routes and often include product for McDonald's. Four stops on a pair of doubles are fairly common.
Many of the 28-ft trailers at Mile Hi Specialty began life as 48-ft refrigerated vans in truckload carrier fleets. “We have bought several used trailers from a carrier well known for maintaining equipment,” Taddonio says. “We made the purchases as that carrier was in the process of converting from 48-ft trailers to 53s. It costs about $3,000 to modify a used trailer. With purchase price and modification included, we can buy three used trailers for the price of one new one equipped to our specifications.”
Within this equipment mix, trailers are from Utility, and tractors come from Kenworth or Peterbilt. Daycabs for single day routes are Kenworth T800s while sleepers for the longer runs are longnose Peterbilt Model 379s. Caterpillar is the engine vendor of choice for Mile Hi with C10 medium engines in the Kenworth T300 straight trucks and C12 or C15 heavy-duty engines in the larger tractors. The company has one new C13 in service as a test. Straight truck bodies are built by Alfred Industries, a local company that is the successor to the former Timpte Inc body operation in Commerce City, Colorado. All fleet equipment is leased from an internal leasing company that is a part of the Mile Hi family of companies.
The equipment service life depends on vehicle assignment. City tractors stay in the fleet for an average of 10 years. Longhaul are traded every three years, Taddonio says.
The fleet is maintained with an on-site four bay shop. “We try not to outsource any of our maintenance functions,” Taddonio says. “We are authorized to perform warranty work for all our vendors, so we handle all repairs right up to overhauls. That includes diesel injectors, particularly since the only thing to do with injectors anymore is to test them and replace them if they don't meet test standards. We keep the shop open from seven am to nine pm daily through the week and open all day on Saturday even though the warehouse is closed.”
