In a perfect world, products would ship out in full truckloads (without being held to max out a trailer), would travel directly to their final destinations (with no intermediate stops or cross-docking) and would arrive damage-free precisely at the requested arrival date (RAD).
Food manufacturers would ship to the DCs of their retailer customers more frequently in smaller quantities and with a high degree of certainty that products will arrive within the RAD. They would cut costs by reducing their inventories. Furthermore, this process—offering end-to-end supply-chain visibility—would cost less and would improve customer service for all participants along the supply chain.
Although this might sound like a supply chain manager’s dream, today’s 3PLs are helping their clients make this dream come true. But the model requires some supply chain changes in habit and practice among food manufacturers and retailers.
Collaboration Is The Key
With their vast and efficiently operated transportation and logistics infrastructures, 3PLs offer the mechanism by which manufacturers and their retailer customers can increase service levels cost-effectively. To state a very complex process in its simplest form, 3PLs consolidate products from multiple manufacturers in their warehouses to create full truckloads of shipments to multiple retailers. The two terms used interchangeably to define this process are collaborative distribution and multi-vendor consolidation. “In order to achieve what we refer to as multi-vendor consolidation, there must be collaboration among manufacturers, retailers, and logistics providers,” says Dan Sanker, president and CEO of CaseStack in Fayetteville, AR.
Kane is Able calls the process collaborative distribution, notes Chris Kane, chief customer strategy officer for the Scranton, PA company. “Collaboration makes this process successful. In our program, we engage all parties in the supply chain—from the manufacturers to the retailers. We even reach out to the retailers’ buying and merchandising groups to educate them about the importance of getting their orders collaborated on a single day. So instead of having their mustard orders coming on Monday, ketchup orders coming in on Tuesday and mayonnaise orders on Wednesday, we try to get everyone within an organization to order together so all of these products can ship out together on one truck. This means savings and efficiencies for them from a receiving and order management perspective.”
Kane adds that his company does not ask customers to extend the RAD. “We just emphasize how important it is to achieve savings by collaborating orders on the same day. If 10 of our manufacturer clients say they want a weekly replenishment to a major retailer, we ask that they pick one day for delivery—then everyone achieves cost benefits and service levels rise substantially.”
This collaboration concept is not new, explains Sanker. “It goes way back, but it wasn’t that successful in previous incarnations. There were many people working hard to communicate and collaborate across company lines, but there wasn’t the technology available that we have today to keep the network from falling apart.”
In its present form, collaborative distribution has been around since about 2000, when technology and the Internet helped facilitate collaboration and communication among all supply chain participants. “It’s really the available visibility and recording tools that help promote and sustain collaboration,” continues Sanker. For instance, he adds that some of CaseStack’s larger customers use the technology forecasting tools to help them determine how much product they need to manufacture down the road based on sales history.
That Was Then
The old way involves retailers sending electronic orders to manufacturers. The manufacturer then contracts with an LTL carrier to pick up the order and deliver it to the retailer’s DC—in many cases resulting in a convoluted and longer transit time.