Executive Spotlight: Ed Malloy, Senior Director of Supply Chain, Torchy's Tacos

Executive Spotlight:  Ed Malloy, Senior Director of Supply Chain, Torchy’s Tacos

Interview conducted by Amanda Pape, 2nd year MBA Student at Texas Christian University

June 11, 2019

Amanda Pape (AP): All right, Ed. Thank you again for visiting with me and letting me pick your brain a little bit. I was hoping we could get started with you sharing a little bit about your background and the other roles that you've held that have led you to where you are now.

Ed Malloy (EM): Well I hate saying this, but I’ve had about a 40 year career in the food service industry. In fact, I've actually been in the food business going back to when I was a real youngster working on a milk truck making home deliveries. I started my career in a food brokerage company in New England, representing a large number of high quality lines. I learned the way companies take their products to market at a real basic user operator level. From there I went to a manufacturer and supplier, Borden, and we went through a large amount of consolidation over a very short period of time. Borden had acquired three or four companies and merged them together. Because of that, I really learned how difficult consolidation is. You have to think about a lot of things: how do you present yourself to the market, what is required in building a sales force, how do you present the products to both the distributor and the operator, and also from an operational standpoint what does it take to build your supply chain and make sure that everything is working the way it's supposed to?

From there I went to a national sales organization and worked as Director of National Sales and Director of Marketing. I was there about two and a half years. We were dealing with a lot of different companies on a much grander scale than I did at the New England local brokerage company. I got to observe how the different companies took things to market, how they developed their programs, and how their organization worked. While I was there, I was able to lay the groundwork for a refrigerated products distribution program that would have helped the organization. When I left there, I went to Ameriserve and they built—over the five years I was there— the largest customized distribution organization for restaurant chains across the country. While I was there, I got to understand what was needed operationally to accommodate different restaurant organizations that had different needs. For example, some chains needed three times a week delivery because of the shelf life of their product. Other chains just needed two [deliveries] or some needed one.  Others were dealing with fresh, never frozen, chicken which is totally different than using some other kind of product. And so going through that experience really taught me that you really have to pay attention to the details of how all aspects of the business had to work together and to be able to drive efficiencies. That was the whole goal of what Ameriserve was trying to do—being able to manage those efficiencies well to meet the needs of all their different customers.

When I left, I went to the Yum! supply chain and I was there for over 13 years. When I joined the company we were merging all three brands—Pizza Hut, Taco Bell, and KFC—into one with one supply chain. After Yum! bought Long John Silvers and A&W, we ended up managing five different brands with one supply chain. Because each brand had different needs and requirements, we became national account managers and our job was to not only work on the distribution side between the operators and the distribution centers making sure all of the needs were met, but also trying to get them to understand what services the organization actually provided. The biggest challenge to that was we were dealing with some distributor organizations that managed five brands, some organizations that carried one, or a mixture of those, and so we were working very closely with the Quality Assurance [QA] department on distribution services to make all of the processes were aligned properly.

Every job I've had up through that point kept giving me a different view of the supply chain management and gave me a better understanding of the overall industry. This brings me to where I am today as the Senior Director of Supply Chain for a restaurant chain out of Austin, TX called Torchy’s Tacos.  

AP: I am very familiar with Torchy’s. They’re delicious!

EM: Thank you. When I joined Torchy’s at the end of 2014 we had just opened store #25. We had probably started the year with 20 or so locations. Just a few weeks ago we opened store #63 and I believe we will have 72 or 73 stores by the end of this year with another 20 expected to open next year. And they're all corporate owned, which is interesting and very good because being corporate owned gives us a lot more control. This was very important and needed because when I joined the company they did not have a purchasing department.  They did not have anybody that was looking at supply chain, and so I've been able to build that literally from the ground up. I think we do things well. Our focus is strictly on the quality of the products we buy and an expected service level expectations from our providers. Over the course of the last five years we've grown not only in store count, but also our store volume has also increased as we've moved into other states and bigger markets. So we are now not only in the Texas market—in DFW, Austin, San Antonio, Houston, West and East Texas—we're also in Oklahoma, Colorado, and in the next few months we're getting ready to move into Arkansas. Next year we'll move into two more states.

I've been given the opportunity to build a supply chain from literally from the ground up, which is a chance that you don't get too often. It's more common that you walk into a [supply chain] that's already established and you try to manage it. This one here we're building from the ground up and we're doing things that I think a lot of other people may not have thought of or may not have wanted to do. Organizationally we moved all of our business to produce distributors and what we've found is that they manage our quality expectations extremely well. They're very well versed in temperature management. They're used to dealing with multiple temperature products which important because we don’t just have refrigerated, frozen, and dry. [Produce distributors] are able to manage the multiple temperature requirements within the refrigerated categories. So if we're buying pineapples, tomatoes, or avocados that have different temperature requirements compared to lettuce or a citrus, they're able to manage that. It has really helped us improve the quality of our product offerings and they sell us everything from our seafood, to our meat, to our chemicals, to our dry paper products. The best part about it is that we have about as strong a relationship with them as you can with your distributors. We originally started with them in one market—one distribution center for the state of Texas—and then when we were growing we asked them to open a second distribution center for us and they did. Now that we have added more and more stores, they're adding a third [DC]. By adding those new distribution centers what they have done is come back to us and said we can increase store deliveries, whereas everyone else is talking about how to reduce deliveries. So in the Dallas and Austin markets for example we're getting five times a week delivery. And when we open the Houston distribution center we will move to five times a week delivery. What that does for us is it allows us to manage the inventory and the waste factor because all of our products are fresh—we're running scratch kitchens, or as close to as you can get to scratch kitchens, in the fast casual arena as you get. Beyond that is the fact that some of the stores we have are doing very good volume, but they're very small in size. They don’t always have enough cooler space and we do not have freezers in the stores. By going to five times a week delivery it takes that pressure off of the restaurant’s managing partner to be able to manage their inventory, to see what they have, to make sure they’re turning the product effectively within the rotation levels that we track. When your cooler is jammed with product after delivery, for a day or so it makes it very difficult. So I just think that being able to walk into this environment which I did at Torchy’s and to be able to create something like this is just a once in a lifetime opportunity.

AP: That's obvious that it’s an outstanding opportunity. I'm assuming you get to eat a lot of tacos which is also an outstanding opportunity. I know as you described how Torchy’s had a ton of growth over the last five years that you’ve been with the organization. What are some of the challenges that you guys are experiencing?

EM: We're trying to reduce the pressure on the on the operations. We run a “Taco of the Month” program and so if you think about it, we run a new scratch taco for 30 or 31 days, 12 times a year, with new products at the same time as running a high volume restaurant. It gets really challenging. Additionally, we run our “Some like it Hot” promotion in August and that is the most challenging thing we do. [Some like it Hot] has four different tacos. The first one starts and runs for four weeks. The second one runs for three weeks. The third one runs for two weeks and then the last one runs for eight or nine days. [Taco of the Month and Some like it Hot] are all from scratch, they're all different, and they're all very complicated. And while you're doing that you’re also trying to run your restaurant with all of the other complexities like labor, managing your food cost, and all those things that go into running a restaurant. So how we’re able to help the operation manage things has been our biggest focus. We are putting together programs to help reduce the amount of frozen product that we get and need to defrost in the restaurant. We have evaluated different ways to control our costs as we go through these functions and all that goes back to talking to the distribution companies about going to five deliveries a week. How do you identify different ways to help the store become more efficient? That’s our focus and each store is different in that regard. You really have to pay attention to the details as we grow. For example, when you have a store that is a very small store that's doing incredible volume—how do you help that store versus a store that has a little more space? What issues do they have versus others.

We work very closely with our supplier partners and we're always looking for new ways to streamline a process so the distributor is not sitting on inventory and so we're turning that inventory faster, which is able to help us reduce our costs. One of the key things that’s different, I guess, is that I don't focus on chasing pennies. Not that pennies aren’t important, but we really focus on the things that are much more important to our goals. We do not switch suppliers to save a few pennies, by putting our product out for an RFP, if we have a supplier that is doing the right job for us—not just a good job but the right job for us. This means that they're meeting all of the expectations we have because everything we do starts with the quality of the product that we're using. So a lot of times I'll have people call me up and say I can save you money and my first answer to them is, “How do you know you can save me money if you don't even know what I'm using? You think I'm using product X, but you don't know the why behind it.” One of our owners and founder is an executive chef. He is wonderful and he has one of the best palates of anybody I’ve ever been around. So when [Chef] says this is what I am looking for, it may be extremely tight parameters, but that's what I'm going to give him. It doesn't matter if I'm paying a dollar a pound or ten dollars a pound—if the ten dollar per pound product is what he wants, then that's what he's going to get. It doesn't matter if I'm going to save him $9 per pound if it doesn't work. That's a little extreme on a price comparison, but he wants what he wants. The entire organization works around the fact we are going to serve “Damn good tacos” and the damn good tacos is based on his recipe, his product development, what he wants, and how he puts product together.

AP: That's awesome. I love it and especially as a consumer that goes along with everything that I've experienced at Torchy’s. Are there any pieces of technology that you have begun using that helps enable the processes that you're putting in place to make them run a little bit more smoothly?

EM: One of the things that we we've experienced as we've grown is that we’ve outgrown most of our software and our technology. We just rolled out a new point-of-sale system that's going to give us a lot more data than we had regarding what individual stores use. We're also looking at what the customer is telling us by what they're buying. One of the issues we face if you’ve been to a store is that you can wait in line for a while. You wait in line to place your order and then we're going to bring the food out to you. We added table trackers so the person wasn't running around the restaurant looking for where your table was. So we tried to accomplish that and we're trying to improve speed of service [in the front of the house] but we still have to improve speed of service a little bit in the back of the house. That’s being reviewed and then we're looking at a brand new back of the house system that will give us access to more data and more information. As that information becomes available, what we're trying to do is tie it in from a supply chain standpoint of what are we buying and how often are we buying it. In the past we have managed freight—during the past few years of driver shortages—I took the position I would rather leave the onus on the on the supplier to get us the product as opposed to either me or the distributor trying to manage the freight. Often somebody might not pick up the load and then we have to pay a fortune to get it. So we've tried to manage it under the expectation that “We need the product when we need it” and while the cost may be okay and it could be improved. Right now we'll take the okay price knowing we're going to get the delivery as opposed to not getting the delivery, but we are now starting to look at a freight management program to see if we can improve that. We are also looking at improving our refrigerated program so we're monitoring temperature on the inbound side, since we've already been doing it on the outbound side. While some of our suppliers have been doing in the inbound side, we're going to rollout one across the system.

We are also probably looking at adding some other functions from an analysis standpoint to get us a truer picture of our actual cost. That’s done by working very closely with an organization called Pro*Act, which we deal with because we use Pro*Act members to be our distributors. They’re a produce organization that also has distributor members. We're using them so we can track our quality by using  supplier identification with our produce because of what's going on with all the different strains of E. coli, salmonella, or different bacteria that can negatively impact our quality. We're working very closely to where we have a supplier identification system to where we know the supplier’s QA capabilities and they're double-checking the supplier’s capabilities. Together we're aligning with their produce distributors which are all SQF Level 2 or higher organizations so we know they're doing things properly. We're carrying that all the way through our in-store QA programs, which were already in existence, but we're tying more and more things together technologically. We haven't tied it all in together yet, but we are working with one of our distributors to see if we can put in a blockchain program, which is very much in its infancy, but that's what we are looking at doing to be able to say how we can make sure we’re tracking all of the variables that we're supposed to be tracking.

The final piece we are trying and probably will [get to] within the next year is that we're going to demand that everybody have a GS1 barcode on all our cases coming in. So that will hopefully be able to scan all the way through from inbound at the distributor, delivery to the store, and then even to the point where the store knows exactly what they have and what they're using. That’s probably the biggest opportunity for us from a technological standpoint.

AP: Well that brings me to my final question. What would be a great skill set or a piece of advice that I could encourage my fellow classmates to pursue or share with my fellow supply chain students?  

EM: It's tough when you're starting out in an undergraduate or a master's degree program in supply chain and to compare what I know today versus what I wish I’d learned 40 years ago when I was first starting out. In my experience, you’ll end up working for a lot of different companies and I think that what you realize is that companies you think are buttoned down are not. You have to identify what they could be doing differently or better and identify the “why’s” of why they're doing things the way they are, because sometimes there are reasons why they're not as buttoned down. It may be because they don't have the resources or the technology because their focus is on something else. And then other times you’ll realize that you work for a company that is extremely buttoned down and they know what they're doing and there's a rationale behind it. Each company is different and that's the biggest part that you have to understand is that there isn't one way of doing things.

When I was going through an e-supply chain course, this was one of the biggest examples I learned about. Now I’m not picking on Boeing, but we did a case study on them when they were making the 787 Dreamliner. One of the things they wanted to do was hopefully bolster sales. They went out to a lot of different countries and companies said we will give you this part or piece of equipment for the plane. Ultimately they came up with a very good plane, but the biggest takeaway I had was that when their due date came up, they had orders for over three or four hundred planes and they didn't hit their deliverable. So while this new process ultimately worked, they missed their due date by about two years. To me that's the biggest takeaway—you have to remember when a company tells you that this is the due date, the natural goal is to hit that due date. You come up with all the excuses and they may be legitimate excuses, but when you really get down to it if it’s your responsibility to hit that due date, then you need to hit that due date. Boeing missed that deliverable and they lost orders because they were unable to manage the process that they had put in place. The biggest takeaway you can have is to make sure you understand that when you get into a position and you're doing everything properly, to understand that your meeting or missing a deliverable can be masked by a lot of other factors, especially within a large organization like Boeing. However if you go to work for a startup or a company such as Torchy’s Tacos, and you're being tasked with building a brand new supply chain, then what you do is important and especially if you walk into an organization that doesn't have [a supply chain]. A lot of times they didn’t know what they didn’t know, but they were asking me to know it. And so I would say that to me is my biggest takeaway.

AP: That sounds like outstanding advice to me. I really appreciate your taking the time to visit with me and impart some of your wisdom. Thank you.