Last night, it cost me almost $40 to fill up my tank--the most I've ever paid for 15 gallons of gas. With fuel prices fluctuating as wildly as my 401K account, I hardly pay any attention to what I'm spending at the pump these days. I just don't want to know.
Diesel prices have risen 43 percent in the past year, averaging $2.28 a gallon, according to the Department of Energy. But at my local gas station, in the New York City metropolitan area, diesel is going for $2.57 a gallon. If that's not a record high, it's got to be pretty close.
Skyrocketing fuel costs are taking a toll on food companies. Not helping matters is the ongoing driver shortage and the fact that carrier capacity is maxed out. These factors have dramatically impacted transportation costs. According to a recent study by the Grocery Manufacturers of America, transportation costs per mile have gone up 23 percent in the past three years, to an average of $1.69 per mile.
Food Logistics conducted a cold chain survey with AmeriCold Logistics, the findings of which are reported in "Chill Challenge," [page 24]. The respondents to our survey said that in addition to capacity shortages, smaller shipment size requirements by customers is also driving up the cost and complexity of moving product. Both studies found that most companies are addressing these issues by using multiple modes of transportation, although full truckload is still the primary method.
In this issue's cover story, "Pool Party" [page 29], we look at how one company, Chef Solutions, a refrigerated prepared foods and bakery products manufacturer based in Schaumberg, IL, is dealing with transportation issues through pool distribution. The company is working with some 40 pool distribution carriers around the country. Since implementing pool distribution a year and a half ago, the company has been able to cut its carrier base by 65 percent, reduced delivery costs by 5 percent--and always has trucks available when it needs them.
"It's a great source of pride for me that we've handled our toughest delivery cycles without capacity issues," says Tim Egan, Chef Solution’s director of integrated logistics.
Chef Solutions is just one example of a shipper that is addressing the transportation dilemma head on. We spoke with others that are working with their carriers to negotiate better rates, another way to help reduce transportation costs.
While there is no easy solution--and no doubt that these problems will be with us for the long haul--there are opportunities for companies to reign in transportation costs. As for me, when it's time to trade in my car, I'm going to consider going hybrid. Unfortunately, I think these high fuel costs are here to stay.
Correction: In the May 15, 2005 issue, we identified Retalix incorrectly on our Warehouse Management System Vendor Chart [page 36]. The company's website is www.retalix.com. Food Logistics regrets the error.