2022 P11 Business Update Snapshot

Hi everyone, Dick Tracy. We just finished the 11th period. Let’s take a look and see how things went.

We got off to a great start for the 4th quarter and came in at 139% of plan. That’s a fantastic number, appreciate everybody’s hard work in making that happen.

Let’s talk about some of the details. On the wins front, this is similar to what you saw last time. The gross margin continues to be strong. We’re not always going to be able to count on that, but it was really strong in the 11th. Because we’re driver planned, custom haul numbers are looking really good and we’re minimizing our use of carriers which is really helping our costs. Those were two really big wins there. Thanks to the great work our drivers and all the staff in DTI are doing. On the injury front, we did okay, almost came off the win column. We had 12 injuries and the warehouse in particular had a big improvement over the 10th period. They had half the number of injuries they had in the 10th. We need to finish very strong in the 12th and the 13th to hit our year-to-date numbers which we are right at. We have a really good chance. Be safe everybody. Service level was actually a win. We almost got to 81% in the 11th. We’re trending towards +83% in the 12th. Our customers want us to go faster, but this is headed in the right direction, and this is going to help us reduce volume barriers. Let’s keep that up.

Opportunities. This is again similar to what you saw last time. We missed volume plan by almost 22 million pounds. We’ve got lots of things we’re chasing. I do believe that’s going to turn, but it’s going to be a while. Everything you can do to help us with volume is a big help. Employee turnover was actually a lot better in the 11th than it had been in the previous periods, but it’s still above goal. Still an opportunity. The biggest part of our company staffing that we need to focus on is retention of existing employees. Cost of inventory had another rough period. There’re a few things in there, I won’t take the time to go through it all, but we’ve got to get better on that front. Part of it is because of the last bullet point you see which is that our inventory is too high. We’re slowing down flow at many of our locations. Replenishment and others are working really hard to correct course there. I think we’re going to finish the year with less inventory and less inventory costs, but those are both opportunities right now. Motor vehicle accidents was a pretty tough period. 11th period has historically been one of the tougher ones for us to hit and that was certainly the case this year. Drivers, please make sure that you’re paying attention to the little details and those of you that are supporting them and training them, let’s do what we can to make sure 12th and 13th periods are back headed in the other direction.

I want to take a few minutes to talk to you about an important component of our brand promise this time and that’s shared growth. What do I mean by that? Well shared growth is as the company does well, we want to pass on that experience to you, our employee. The better we are financially, the better you are financially. So how do we do that? Well, we do that through how we pay you through our compensation structures. We need to make sure that that plan design is right. It motivates you to do the right things and that we’re being fair in all components of it. This busy slide here is my attempt to visualize this for you to explain it, because it’s important for you to understand your pay. When most people think about their pay, they think about their base pay, what it is per hour, whatever their salary rate is, and that’s the first column you see there. That is the biggest part of pay, but at Dot, it’s not the only part. There’s much more to our story here. Many of you are in jobs where you can earn incentives, so think about the warehouse, on production, your production levels, or if you’re a driver, the number of miles that you drive, or the drop pay that you get. Many of you are in hourly positions so when you work more than normal there’s overtime pay. All of you that are full time employees have an opportunity to help us serve our customers better and earn a bonus called the service bonus. This year it’s about company staffing. We’ve hit the first 2 quarters. We missed the 3rd. We’ll see in the 4th. The biggest part of our bonus program is a quarterly bonus program and there’s two levels, that blue and yellow column there, Level 1 and Level 2. Well this year we’ve had some of the best results we’ve ever had. We’ve hit level two in the first 3 quarters. Again, we’ll see what happens in the 4th. We’re off to a good start. The final one is that recovery bonus that we’re going to pay here really soon and that’s a one-time event that doesn’t happen every year. It’s really meant to reflect the rough 3 years that we’ve had with a pandemic that we’re still coming out of as it relates to the implications to all the moving parts of the supply chain. That all adds up to your total compensation.

Let’s take a look at an actual employee here at Dot so that you can look at the numbers. We’re looking at warehouse floor employee on average company wide, their per hourly pay in each of these buckets. The reason why we picked this job is because it’s really important to us. There’s a lot of them. It’s always open in most of our facilities and pretty much anyone can do it. I thought it’d be a good example to use. If you look at the base pay in 2022 that average is $22.35 an hour. Well add up all the other pieces and parts of the bonus and that’s another $3.70 to get to the number that you see at the bottom of the screen. 

Now if you look at this slide, it’s the same information. It just quantifies it or turns it into dollars for you. That’s almost $7,700 on top of the base pay that you see on the top line there. When you compare it from ‘22 to ’21, we had above normal bonus results this year in our quarterly program. We have that one-time recovery bonus. But even if you pull those out, we had pretty good results in ‘21 and that was certainly the case in other years. So again, hopefully this helps you understand the overall compensation packages we have. There are many jobs at Dot. All of them will look a little bit different, but these are the main buckets that we have. In the future we’re going to go over other important benefits like health, like profit sharing, and retirement plans that we have so that we can help you understand the financial benefits that those provide you as an employee. That would probably be maybe in the 2nd period or something like that that we’ll go over those details.

Speaking of shared growth, the other way we like to do that is with our communities. Nothing better at making our communities better than investing in important charities that are there. Here’s three examples that I want to highlight this time. Chicago invested $35,000 in Skills for Chicagoland’s Future, which is going to help needy people find jobs, hopefully with us in some cases. Mt. Sterling has a town near it, where we have lots of employees living called Beardstown, that has a food pantry. We’ve invested $20,000 there that’s going to help the needy. Finally, in New York they invested $15,000 at Bishop Grimes High School for a scoreboard. Education is really important to us. These are just a few examples of other investments we’re making across the country, and I look forward to showing you more of them in the future. 

Now I’m going to end here with our priorities. These are the same as last time. I’m not going to go over every single one of them, but I appreciate you making them part of your everyday work where appropriate. I appreciate all that you do for us. Fantastic work in the 11th period. I wish you the best of luck in the 12th. Hopefully, I can come on this video and share similar good results. Have a great Thanksgiving depending on when you watch this and I’ll talk to you next time.