Today’s third-party logistics companies are more than just yesterday’s warehouses and trucks, storing and delivering products. These relationships are developing into highly sophisticated and collaborative strategies for operational excellence resulting in some pretty impressive cost reductions for all parties involved.
Food and beverage companies and their third-party logistics (3PL) counterparts together are discovering win-win successes being felt throughout the supply chain—right into the back offices of financials, sales, marketing and IT.
So how do you develop these win-win relationships? First and foremost, agree our experts, talk is not cheap and should not be taken for granted.
“There has to be open communication between the parties,” says Bruce Siberski, director of dry distribution for Pinnacle Foods Corp. in Cherry Hill, NJ. “For instance, we give our 3PL (DSC Logistics) a heads-up when we anticipate heavier-than-usual volumes—rather than blind siding them all of a sudden with customer promotions.”
He also advises giving your 3PL an accurate profile of your business, including your product line and volumes and whether you require pallet picks or case picks, the latter requiring more labor.
Establish your mutual expectations, suggests Chris Kane, vice president of sales and marketing for Kane is Able in Scranton, PA.
“Set clear expectations between yourselves. We sat down with The Topps Co. to discover what services they needed us to handle,” says Kane. “Then together we developed a strategy so each of us could live up to our respective responsibilities. We manage our part by measuring KPIs (key performance indicators) on a monthly basis to assure we are measuring up to Topps’ expectations.”
Determine if your potential 3PL is flexible enough to handle surges and special promotions. “One of the biggest values is being able to offer your customers product customization like building club packs, rainbow packaging, and pre-priced and pre-labeled packages,” says Tom Patterson, senior vice president of warehousing operations for Saddle Creek Corp. in Lakeland, FL. “Any time you try to do these things at the plant level, it could hurt production. It is a significant benefit to be able to have your existing inventory converted into promotional material so the existing inventory does not age.”
SHARED RISK MANAGEMENT
One of the more innovative alliances between RLS Logistics and Philadelphia Cheese Steak Co. is the captive insurance group the two companies are part of, along with about 50 other companies, some of which are friendly competitors to Philadelphia Cheese Steak. The company—Mac Casualty—was formed 13 years ago to take a more active role in the risk management, underwriting, and purchase of insurance coverage.
“We have the benefit of being self-insured without assuming the entire risk of being self-insured,” explains Jim Trivelis, president of Philadelphia Cheese Steak. “We each own one share in the insurance company. We are considered good risks as family-owned and family-operated companies. We are tied very closely from a risk control and risk management perspective.”
The group of 50 companies meets twice a year, sharing information on risk control and rates. “From an underwriting standpoint and a risk-control standpoint, we own the company,” says Trivelis. “If one in the group happens to have a bad year, we help underwrite that company by spreading the loss. This is a great way of being self insured without taking on the entire risk because we are pooling ourselves with some very well-run risk management companies.”
Philadelphia Cheese Steak has maintained its relationship for about 16 years with both RLS Cold Storage and RLS Logistics. As its business continued to grow, Philadelphia Cheese Steak required a tempering program.