The news
Sysco is targeting at least $500 million of annual cost savings by fiscal 2029 from a program it calls “AI powered efficiency improvement.”
About $100 million of that arrives in fiscal 2027 and was already built into the company’s guidance. The remaining $400 million is spread across fiscal 2028 and 2029.
Thirty projects make up the program. Four of them carry about 70% of the savings, CEO Kevin Hourican said on an investor webcast:
Truck routing
Inventory forecasting and fill rate
Indirect procurement
Automation in sales and the back office
Sysco raised its earnings target on the back of the program. It now expects adjusted earnings per share to grow 9% to 11% a year in fiscal 2028 and 2029, up from 6% to 8%. The savings “reflect a durable change in how we execute our day-to-day business across truck routing, merchandising, and sales,” Hourican said.
Sysco is the largest foodservice distributor in North America, with 333 distribution facilities and about 75,000 employees. The four projects that carry the target are the same programs US Foods has been reporting savings on for two years.
How it works
Routing is the first of the four. Sysco drives 4.5 million miles a week in the US, Hourican said. The company is upgrading its routing software to build routes on live data, so trucks drive fewer miles, drivers work less overtime, and deliveries arrive inside the window the customer was promised.
Fiscal 2026 was the third straight year Sysco cut miles driven while raising pieces per mile. On-time delivery against the promised window improved 10 points in the fourth quarter, per the earnings call.
Inventory is the second. Hourican set what he called “a dual stated goal”: raise fill rates by 50 to 100 basis points while holding less stock. One day of inventory is worth about $250 million in cash at Sysco’s size, per the company.
The forecasting tools flag demand changes early, so the company can hold “right-sized inventory to sell at full value,” per an investor presentation last month. In a perishables business, that is stock sold at full price instead of marked down or thrown out.
Indirect procurement is the third. Sysco spends more than $1 billion a year on items it does not resell, tires, truck parts and janitorial supplies across its warehouses, Sewell said. Much of that spend has never been competitively bid.
The company tested reverse-auction software, in which suppliers bid against each other online for a contract, and now plans to run every indirect category through it. Sewell put the value at “tens of millions of dollars in savings on an annualized basis.”
Sales and back office is the fourth. AI360, an app Sysco co-developed, gives each sales rep a short list of suggested actions for specific customers each day. Hourican calls it “a sales agent in the palm of the hand of our sales reps.”
By the second quarter, 95% or more of sales colleagues were using it weekly, Hourican said on that quarter’s call, and the reps who used it more often outsold those who used it less.
A feature added this year, Swap & Save, suggests Sysco Brand substitutes that cost the customer less and carry a higher margin for Sysco. Sysco Brand’s share of US Broadline cases fell 59 basis points in fiscal 2026, to 35.4%. In the local business, where the tool is aimed, brand share rose 30 basis points in the fourth quarter, to 46.4%.
Two warehouse tools sit in the same presentation:
Slot IQ fixes item dimension data across the network and re-slots products to cut the distance selectors walk.
Shift IQ builds warehouse shift plans from demand forecasts, replacing spreadsheet planning.
The back-office work covers the contract bid business, where Sysco holds “many, many thousands of contracts” with hospitals, schools and government buyers. AI drafts contracts and monitors performance against their terms, Hourican said. Sysco’s own technology staff are using AI coding tools, which the company lists as “agentic software development.”
All of it runs on a platform Sysco calls SAGE, the Sysco Agentic Ecosystem, an internal layer that connects outside AI models to the company’s data and systems with human review built in.
By the numbers
The program measured against Sysco’s fiscal 2026 results, and what the first year looks like:
$500 million is about 14% of adjusted operating income of $3.6 billion, and 0.6% of $84.6 billion in sales.
Fiscal 2027’s $100 million is net of what the technology costs. It works out to about $160 million on a run-rate basis, Sewell said, starting late in the first quarter and weighted to the second half.
About $45 million of the fiscal 2027 figure carries over from corporate cost actions Sysco began in the third quarter of fiscal 2026. About $55 million is new, per the presentation.
Every 1% of miles removed from Sysco’s US fleet is about 2.3 million miles a year. At the $2.34 per mile average operating cost the American Transportation Research Institute reported for 2025, that is about $5.5 million before driver overtime.
Sysco booked $71 million of restructuring, severance and legal charges in fiscal 2026, plus $216 million of transformation costs, most of it tied to supply chain and technology changes.
The backdrop
Sysco agreed in March to buy Jetro Restaurant Depot for $29.1 billion:
$21 billion of the price is new debt. Net leverage rises to about 4.5 times earnings at close, from 2.7 times.
Sysco paused share buybacks until it pays down at least a full turn of that debt.
The FTC has issued a second request. Sysco still expects to close by the third quarter of fiscal 2027.
D.E. Shaw, which holds a Sysco stake of more than $1 billion, per Reuters, said last month it is “excited to partner with Sysco in support of its AI transformation.” The hedge fund is introducing Sysco to technology vendors and board candidates. Two directors joined this month, one of them a former Amazon supply-chain executive. The board’s technology committee now meets monthly with management on AI.
Sysco has also written the cost-out targets into its executives’ long-term equity awards.
The competition
US Foods runs the same four programs and has put numbers on each, per its second-quarter call:
Routing: it finished deploying Descartes software across its network in 2025 and reported about a 2% gain in cases per mile on broadline deliveries, per its fourth-quarter 2025 call.
Indirect procurement: more than $20 million saved in the first half of this year, more than $75 million expected for 2026 and more than $100 million in 2027.
Inventory management: about $35 million of gross profit added in 2025, with $10 million more expected this year.
Sales: its Visit Assistant tool generated more than 700,000 customer insights for independent-restaurant sellers in its first six weeks.
Performance Food Group is targeting EBITDA margin improvement over the next three years from warehouse slotting, routing technology and fleet utilization.
What’s next
Sysco’s fiscal first quarter ends late this month. The savings start flowing late in that quarter. The company typically reports it in late October.
The Restaurant Depot deal is expected to close by the third quarter of fiscal 2027, pending the FTC review. It carries a separate $250 million of cost synergies. The full $500 million run rate is due in fiscal 2029.
