Customers’ needs are changing at a faster pace than ever before, notes Christopher Ticknor, corporate marketing manager for Aspen Logistics Inc., Temecula, CA. “Things are speeding up, especially regarding government regulations that are changing constantly. We have to remain agile as we keep step with industry requirements. Customers are always looking for us to provide more transparency in their supply chains and they want an immediate sense of what is going on at all times, including knowing what their inventory levels are at any given time.”
Ask CEOs of food manufacturers what keeps them awake at night, and they will likely answer it is all about maintaining the safety and security of their products, says Ampuja. “It’s a matter of thinking about how to prevent sabotage. When I visit various locations, I see companies taking all the necessary precautions such as clocking people in and out, asking for IDs and controlling who handles what. If someone purposely compromises the security of the food supply chain, there would be widespread havoc. It’s a whole different level of awareness and security since 9/11.”
How is the economy affecting the industry?
Ampuja: This recession really forced companies to focus on how much inventory they could take out of their network and still do the job effectively. I think many companies surprised themselves on just how well they could manage at lower inventory levels, which actually did not affect service at all. Warehouses will tell you they watched their inventory levels reduce because their customers have learned to operate smarter. Although this hurts warehouses because they have less inventories on hand, this is a fact of life in that you can’t build a business on someone else’s inefficiencies; you have to figure out a way to work with your customers as they become more efficient. Ultimately, manufacturers will tell you that there is not a lot of value for them in having their products stored because their business is all about flowing product out into the marketplace. So this approach offers opportunities for warehouses to offer customers additional services providing more value. The more ways warehouses can help manufacturers get their products into the marketplace and maintain a good relationship with retailers, the more value there is on the table.
Ticknor: Our business has actually seen an increase in business. I think this is because many companies are looking to find a cheaper solution by getting rid of a lot of their in-house assets and outsourcing some of their fixed costs to a provider. There is a lot of liability involved when you purchase a fixed asset; then you have to weigh how much that fixed asset will be worth over the years. By using a contracted service, companies can remove that liability and let it become a 3PL’s responsibility.
Finney: Capacity is tight right now and has been since about March as some carriers left the industry because of the poor economy. However, we are still seeing the seasonality of the business that we have always seen. We have continued to keep our same customer base, which required us to get out and increase our carrier pool. We are considering different models relative to how we use our carriers, which could include putting them on a dedicated service.
Carriers will run long hauls when they know they will return loaded, so we are evaluating how to adjust using different methodologies. At times, we might have to change some of our margin expectations on some loads. We have also seen an increase in collection problems to the point where some companies need to prepay before we will pick up shipments. We are also seeing a lot more slow payers. This situation has been bubbling up since last year. Therefore, when we receive a new account on board, especially if it’s a good-sized account, we do our due diligence to assure they are credit-worthy and that they haven’t left another company for us because they had not been paying their bills.
Another factor relates to distributors not ordering in large volumes because they are not selling as much. They are giving up on truckload shipments because they don’t want to be stuck with product they can’t sell, so they are ordering more often and in smaller shipments because no one out there is overly confident in the current market conditions.