Controlling Costs in Hard Times

In this time of economic downturn, third-party logistic providers can control and monitor costs, insuring a competitive edge for their customers.


“In a multi-client environment, the 3PL can limit issues with existing driver shortages and allowable in-service hours that have been a problem for most wholesalers,” says Dean. “Tighter cold chain controls are also a requirement within the industry, requiring in-transit temp tracking included in most major 3PL transportation management systems.”

Dan Sanker, president and CEO of Case-Stack, a leading multi-vendor consolidator, says, “A lot of CPGs have too many LTLs (less-than-truckload) orders coming in every day to ship out to retailers. They cost a lot of money, it’s inefficient and there’s a lot of waste.”

His company works with many CPG clients who are all shipping to the same places: retailers and distributors. What his company does is work with retailers and distributors to turn, for example, a truck and a quarter into a truckload; a truck and three quarters, into two truckloads.

“And if you can do that, we’ll make sure that we ship full truckloads all the time; and if we can do that, that means the truck goes directly from point A to B,” he says. “It costs less money, it uses less fuel and there is less damage because the item did not have to load and unload three times to get where it’s going.”

Both retailers and manufacturers benefit, according to Sanker. Instead of the retailer having 15-20 LTLs the next morning, he has one truck with the entire order on it and is able to cut down on half the dock labor. The manufacturer, on the other hand, can save 20 to 40 percent on the cost side of shipping and can level the playing field with a Kraft or a Unilever for a company that might be 10 percent of their size.

“The interesting thing about grocery is synchronized balance between their desire to manage the freight, route the freight inbound from the manufacturer and their ability to handle that on a consistent basis,” says Matt Menner, senior vice president, sales and alliances for Transplace, Frisco, TX. “There remains opportunity for the grocer who runs a sizeable fleet to continue to control a lot of their own freight expense by aggressively pursuing backhaul opportunities and also considering utilization of those fleet assets to handle other people’s freight.”

UNTAPPED OPPORTUNITIES

There are still lots of rocks to be overturned when you think about the grocer and their operation and the CPG company that are typically suppliers and 3PLs who are in between, according to Menner. There are still untapped opportunities for CPG manufacturers and suppliers to retail grocery and distribution.

“Areas of improvement exist which makes it exciting and hopefully gives opportunities for providers to tackle those challenges,” he says.

In discussing grocery specifically, Ryder’s Dean uses the instance of a private label manufacturer that has a number of smaller suppliers in the Northeast shipping to the Midwest. Given the 3PL has visibility to these orders and suppliers, the 3PL can manage pick-up and merge smaller orders into full truck loads, reducing costs and insuring on-time delivery, he says.

“Placing warehouses close to your key client’s DCs to provide quick and easy sourcing is the best way to do business with a grocer,” says A.N. Deringer’s Parrott. “Communication and partnering is the roadmap to success working with any 3PL. Work with your providers to develop standard operating procedures so both parties understand each other’s needs.”

With grocery distributors, Sanker of CaseStack says that his organization has to be prepared for things like recalls and reverse logistics. There are typically a lot of SKUs and a lot of codes to be managed in a 3PL’s systems. Given the fact that most CPG and food products are lower-value items, it means you have to run a tight ship, he adds.

“If you look at logistics companies that succeed, there is no tolerance for extra cost in the system,” he says. “If you have a $15 case to run through a system, you can’t spend $10 doing it.”

WHAT’S NEXT?

Marcoly at Weber Distribution thinks that private label opportunity will be the next big thing.

Rising commodity prices and consumer desire to get the best price/value products are driving private labels’ growth.

Backing this up is a recent survey by The Nielsen Co. that found that three-fourths (72 percent) of respondents viewed private label brands as equivalent to name brands, while 62 percent said store brands were just as good as name brands.

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