How Sysco Uses AI to Drive Growth Across Sales, Service and Operations

This is an English adaptation of a FoodBud historical article originally published on July 25, 2024.

Sysco is accelerating its digital transformation around a demand-driven customer experience. The company is applying generative AI across sales, customer service, supply chain and warehouse operations to reduce cost and improve efficiency across the value chain.

Sysco is described in the source as the world's largest industrial-internet food distributor. It serves more than 600,000 customers globally, operates about 330 locations, and serves more than 90 countries and regions. Headquartered in Texas, Sysco supplies restaurants, healthcare facilities, stadiums, airports, cruise ships and other foodservice customers with food, equipment and supplies, including glassware and kitchenware. Its catalog includes nearly 2 million SKUs.

As of July 14, 2024 U.S. time, Sysco's market capitalization was $35.93 billion. In fiscal 2023, the company reported total sales of $78.02 billion, up 4.2% from $74.87 billion the prior year. Net profit was $2.08 billion, up 29.5%. Full-year capital expenditure was $814 million, and Sysco returned $1.6 billion to shareholders through dividends and share repurchases.

The article also cites Sysco as having more than $76 billion in annual sales, more than 725,000 customers, 334 global locations, 72,000 employees and 14,000 equipped trucks.

In its 2023 annual report, Sysco said it would continue driving growth through better core-business performance and increased capital investment. Its growth strategy also explicitly identified AI as a way to improve efficiency and reduce cost.

In early 2024, Sysco Executive Vice President and Chief Information Officer Tom Peck discussed the company's AI applications and future strategy with MIT Sloan School of Management, including use cases in sales, customer service, supply chain and warehouse operations.

From B2B Reordering to Demand-Driven Experience

The disruption three years earlier created major challenges for Sysco. CEO Kevin Hourican set a strategy to accelerate digital transformation and grow at 1.5 times the market rate. Peck said technology, data and AI, especially generative AI, are now embedded across Sysco's business and are helping drive that transformation.

His framing was operational: thousands of trucks and millions of SKUs ultimately create a data problem. Wherever data connects customers with operating processes, there is an opportunity to apply AI.

Sysco is trying to move from a traditional B2B model toward a more B2C-like experience. In the legacy model, a restaurant owner or chef repeatedly ordered products from a list. In the new model, Sysco uses data to understand customer demand, support self-service ordering and provide personalized recommendations.

The target experience includes personalized shopping, simplified ordering, self-service and broader platform functionality. Today, 80% of Sysco orders are placed directly by customers. Data and AI support upselling and cross-selling, turning reorder activity into a more complete shopping experience. That shift depends on Sysco's expanding technology and digital tools.

Generative AI in Business Processes

Sysco uses AI for order recommendations, intelligent customer service, call planning, menu management and customer segmentation.

In sales and customer service, generative AI is being used to improve customer order suggestions and optimize call-center work. Earlier recommendation logic relied on if-then rules. Generative AI can draw signals from larger data pools and large language models, helping customers fill shopping carts more effectively.

Peck said the richer and more personalized shopping experience is associated with higher order counts, larger order sizes and improved margins. Sysco also uses generative AI's natural-language capabilities for translation, sentiment analysis, intelligent customer-service scripts and post-conversation training, with the goal of building a more proactive service center.

For menu management and customer segmentation, Sysco uses AI-generated images to improve the customer's visual experience. It also uses AI to segment high-volume, high-value customers from lower-volume, lower-value customers, then recommend and deliver the right products to each customer. The stated goal is to improve customer experience and team efficiency.

Supply Chain and Warehouse Operations

Supply chain is central to Sysco's business, and AI is being applied to improve efficiency and reliability. Use cases include intelligent route planning, warehouse-management optimization and intelligent product substitution.

Intelligent substitution means that when products are unavailable because of climate, production or inventory shortages, AI can automatically generate substitute options for customers. The source says this improves fill rates and gives customers better product choices.

Intelligent route planning uses weather, traffic and other signals to dynamically plan truck routes, optimize truck loading and avoid empty-truck transport.

Sysco also uses AI across delivery, intelligent sorting, fleet information management and smart warehouse operations. In warehouses, the company is testing or applying robotic picking, augmented reality and virtual reality to assist picking, improve speed and reduce per-item sorting cost. Generative AI can process large volumes of unstructured data to provide more predictive and prescriptive routes inside the warehouse, improving picking efficiency and helping manage inventory and logistics so the right products reach customers on time.

In food processing, Sysco uses AI to operate processing equipment and standardize output. Image recognition is used to classify foods of different quality levels, and this is combined with customer segmentation so each customer receives the right product.

Sysco's Generative AI Strategy

Sysco's generative AI strategy is still in an experimentation and learning phase. The company is discussing use cases with large-model providers, building its AI technology stack, and continuously tuning and optimizing models. Peck described real-time learning and experimentation as the path to intelligence, model adjustment and confidence-building.

Sysco's automation strategy includes continuing to embed data and machine learning into all solutions. When a new application or feature is needed, the company first looks to robotics, robotic process automation or configuration within existing SaaS tools. Only after existing tools and functions are exhausted does it move to developing new AI capabilities.

AI is an important part of Sysco's automation strategy, but applications and technology capabilities must reinforce each other. The company sees the data cloud as the core of decision logic, while technology development must follow cybersecurity principles and regulatory compliance. The source also says technology R&D funding must come from within the business to avoid a disconnect between business needs and technology capabilities.

Two Implementation Challenges

The first challenge is organization and talent. Sysco sees AI and generative AI as productivity-enhancing tools, not replacements for people. The company believes employees must accept the technology and know how to use it, and that leadership attention and strategy are the starting point for AI transformation.

Peck said Sysco did not create a standalone AI team. Instead, it built an AI framework that lets employees in different roles participate and contribute. The company trains existing employees to improve AI skills while also working with partners and vendors to use external resources and expertise. Management must keep investing in existing talent while adding new talent where needed.

The second challenge is whether to buy or build. Sysco prefers buying rather than building AI models. The source cites research saying 92% of AI applications can be solved with existing tools. Sysco is evaluating whether it needs custom solutions for the remaining 8%.

Three Takeaways for Industrial-Internet Companies

Looking ahead, Sysco plans to deepen generative AI use in sales, customer service, supply chain and warehouse operations. Peck summarized three recommendations for industrial-internet companies adopting AI:

• Prioritize business value: generative AI should solve business problems first, rather than being driven only by technology investment.
• Encourage experimentation: test and learn in safe, compliant environments, matching specific tools to specific scenarios.
• Focus on organization and talent: ensure employees accept and master generative AI, encourage learning and participation, and have leaders understand role-level workflows before building an AI enablement strategy.

Sources cited in the original article include MIT Sloan Management Review, Digital Commerce 360, CIO.com, Samsara and Sysco Foodie.

Note: market-cap, shareholder-return and forward-looking strategy figures are historical as of the original July 25, 2024 article context.