Businesses in the cold chain today are faced with a transportation capacity shortage while new and existing customers are requiring smaller, more frequent, shipments to meet their lean inventory objectives, according to the findings of a recent survey conducted of Food Logistics readers.
Food Logistics and AmeriCold Logistics, Atlanta, conducted the survey to determine how companies are adapting to changing cold chain business requirements. It came as no surprise to find that the capacity shortage the trucking industry is currently experiencing--coupled with the smaller shipment size requirement--has placed companies in a challenging situation.
More than 50 percent of the respondents' customers are requiring smaller shipment sizes and more frequent shipments that drive up the cost and complexity of moving product.
The study revealed that most companies are utilizing multiple modes of transportation instead of relying on one mode to meet total transportation needs; however, trucks are the primary mode of transportation. Full truck and multi--stop trucks (63 percent) are the transportation modes most utilized, followed by private fleets (23 percent).
Respondents are somewhat likely and very likely to increase the use of truckload (TL) and less--than--truckloas (LTL) services within the next year, adding additional capacity pressure on these modes.
As a result of the capacity shortage, 41 percent of the respondents have an active plan in motion to relieve carrier capacity issues and control costs. An additional 23 percent have a plan on paper ready to be implemented.
Businesses have a variety of options when it comes to addressing their transportation challenges. Improvement initiatives are categorized as operational programs, technology--enabled programs or capital--intensive programs. Here's how these options address today’s challenges:
Operational programs focus on both the physical movement and storage of product, and the information flow from purchase order receipt to customer delivery. Generally offered by third--party logistics providers (3PLs), they are aimed at increasing the level of service while controlling cost. Some of the programs were designed to help the shipper, while others were designed for the consignee. Regardless for whom the program is designed, either party can reap some kind of cost or service benefit through participation.
Third--party logistics providers can manage the information flow associated with operational programs through the use of multi--platform messaging and Web reporting tools. The use of barcode scanning, messaging and the Internet allow for real--time status of inventory, orders and transportation and provide customers with supply chain visibility. With visibility, decision--making can be more effective, allowing for proactive instead of reactive decisions.
The operational programs include:
Consolidation warehousing: Consolidation warehousing is the most commonly planned or implemented operational program, with 39 percent of the respondents participating in this program today and another 32 percent either planning or thinking about using it in the future. Consolidation warehousing pools products from multiple manufacturers shipping to a common destination through intermediary facilities. Product typically arrives at the consolidation warehouse in a full truckload shipment from the manufacturer and then is ordered in smaller less--than--truckload (LTL) quantities by retailers, wholesalers or foodservice providers.
The service provider strategically consolidates these LTL orders from multiple manufacturers into shipments destined to the same geographic region or customer by using tactical transportation modeling tools. These tools use customer and purchase order date requirements as input and look to minimize cost by selecting the most appropriate mode and carrier, optimizing routes and generating a detailed load plan. Participants benefit from shared transportation costs as the load size increases from shared routes and delivery locations.