The news
UNFI has taken seven distribution centers out of its network in two years. Over the same period its fill rate, on-time delivery and throughput improved against the year-ago quarter for four quarters in a row, President and COO Matteo Tarditi said on the fiscal fourth-quarter call.
Closing a warehouse usually costs service before it saves money. UNFI’s fill rate rose 2 points in the quarter, on-time delivery 5 points and throughput 12, per its earnings slides.
The network went from 55 distribution centers and warehouses at the end of fiscal 2024 to 48 by The Conveyor’s count, net of announced closures. Inventory fell 7% over the year to $1.95 billion, per the 8-K, so the service gain did not come from holding more stock. Receivables fell $172 million and payables fell $104 million, so the cash did not come from stretching suppliers either.
What changed
Three programs ran at once.
Network: a building-by-building review. “We’ve assessed our business on a DC-by-DC basis to evaluate where we are going to see growth, where the profit opportunities exist,” CEO Sandy Douglas said last year. It closed Allentown, Pennsylvania, after its main customer left, and this summer closed Sturtevant, Wisconsin, moving the volume to Joliet, Illinois. Joliet got full-case automation, meaning machines that move whole cases rather than picking single items, and a new warehouse management system.
Lean daily management: every DC reviews safety, quality, delivery and cost each day, with a huddle on the numbers. The rollout reached 44 of 49 buildings by year-end, from about 20 two summers ago.
Software: RELEX, an AI demand-planning tool, went into every DC by the end of the fiscal year. Samsara telematics have been on the trucks for two years. Miles per delivery were down nearly 5% through the third quarter.
How it works
The model is Manchester, Pennsylvania. UNFI opened the 1.3 million-square-foot site at the start of fiscal 2025 to replace York, eight miles away. It is about 50% larger than York and runs a Symbotic case-handling system. Tarditi pointed to it as the precedent for Joliet.
The mechanism is volume density. Closing an older building and moving its customers into a bigger one nearby raises the volume running through the receiving building’s case-handling equipment. It also gives the planning software one inventory pool to order against instead of two. Inventory fell to about 26 days of stock at year-end, from about 28, over the same stretch.
The precondition is a receiving building close enough to take the routes. Manchester was eight miles from York. Joliet’s transfer is still settling. “We are into the very early innings,” Tarditi said. “As with every transfer, there are a little bit of growing pains.”
Fill rate also depends on what is in the building. “Conventional fill rates are higher,” Douglas said. “On the natural side, with all the innovation and the slow moving SKUs, it is a whole different ballgame.” Both halves improved at about the same rate, from different bases.
The competition
The other food distributors are getting service gains from routing and software rather than from taking buildings out.
Sysco targets $500 million of savings by fiscal 2029 from routing, forecasting, procurement and sales tools, and posted a 10-point on-time gain in its fourth quarter.
US Foods finished deploying Descartes routing last year and reported about a 2% gain in cases per mile.
C&S closed its $1.77 billion purchase of SpartanNash a year ago and has said it will consolidate fulfillment across about 60 DCs.
UNFI is the only one of the four that has already closed buildings. C&S is a year into its integration.
The counter
UNFI does not publish its fill rate. Four quarters of improvement rest on a base nobody outside the company has seen. Sysco gives its target in basis points; UNFI gives the direction.
The fourth-quarter comparison is soft. A cyberattack took UNFI’s systems down for more than a week in the same quarter last year and cost an estimated $400 million of sales, per its annual report. Part of the 12-point throughput gain is that weak base.
Part of the network shrank because a customer left. UNFI built Allentown mainly to serve the Key Food co-op, exited the contract a year ago with a $53 million termination fee, and closed the building. Some of the drop in inventory reflects that lost business, not better planning.
Sales are still falling. The fourth quarter was down 0.7% after about 500 basis points of drag from closures and exits. Diesel crossed $6 a gallon after the call; UNFI’s guidance assumes about $5 million a quarter of net fuel cost after hedges and customer escalators.
What's next
A 100,000-square-foot Philadelphia warehouse closes in October. CFO Alfredo Luchini said sales decline again in the first quarter before returning to growth in the second half of fiscal 2027. The first quarter is the real test of the service claim: it laps a normal quarter, not the cyberattack, so a fifth straight improvement would stand on its own.
