The uncertain economy is putting more pressure than ever on the cold chain industry. Food manufacturers and distributors are looking to their warehousing and transportation providers for guidance to control costs while still expecting high-level services. Providers, meanwhile, are faced with tight capacity, decreasing inventory volumes, dramatic changes in customers’ supply chains and slow payment problems. Despite these harsh deterrents, providers are figuring out ways not only to stay in business, but to offer customers innovative and cost-effective solutions to manage their cold supply chains more efficiently. We will discuss some top trends affecting the industry today, followed by a roundtable discussion among industry participants.
The pressures to providers have been ramped up even more after the dismal year that was 2009, reports Jack Ampuja, president and CEO of Buffalo, NY-based Supply Chain Optimizers. “The top concern last year was simply to maintain revenues,” he says. “Just about everyone’s revenues and profit margins decreased and companies in the industry were simply trying to hold onto their market share.”
The tight and uncertain economy is driving food manufacturers and distributors to look for support and new cost-effective ideas from their transportation and logistics providers, continues Ampuja. “Companies today are getting away from the month-to-month kinds of deals of the past because that doesn’t serve anybody well. There is far too much uncertainty in that kind of relationship. So we are finding that manufacturers are shopping around and making long-term commitments with their providers. Warehouses appreciate this because now they can feel confident in committing to investments in technology and in their facilities.”
Capacity is yet another trend the industry must manage effectively, notes Joe Finney, vice president of LTL sourcing and supply chain engineering for Salt Lake City-based England Logistics. “There are carriers who have actually left the industry because of economic pressures and still others who have changed their business profile. Carriers on the LTL portion of the business who had been offering a lot of long-haul transportation have moved more toward a regional focus, which has affected some of our ability to find carriers. Some regional carriers have simply drawn themselves in and have limited their delivery area now because of economic reasons.”
One major trend involves customers wanting to streamline their supply chains, adds Gregg Claassen, regional vice president for Des Moines, IA-based Jacobson Cos. “Many times in the past, departments within companies would work independently and as separate entities to the point that departments like manufacturing, marketing and transportation were not communicating with each other. But today we are seeing that all of the departments within companies are trying to work together to find more efficiencies for their supply chains. This is critical because they discovered that you can be the best manufacturer/vendor in the world, but you still must have an efficient transportation/distribution network to support the movement of products to serve customers. Companies are working more closely than ever before to develop more efficient supply chains that run smoothly all the way to the end user.”
Supply chains in food and grocery had a lot more tolerance two to three years ago to accept the empty miles inherent in distribution systems, reports Jim Kitz, vice president of business development for Greatwide Logistics, Dallas. “But providers have to manage today’s economic pressures, the higher cost of fuel, and the move toward sustainability. These conditions came together at once so logistics providers had to find ways to match freight against trucks in order to reduce empty miles.”