Food Logistics

MAR 2015

Food Logistics serves the entire food supply chain industry with targeted content for manufacturers, retailers, and distributors.

Issue link: https://foodlogistics.epubxp.com/i/490456

Contents of this Issue

Navigation

Page 31 of 43

30 MARCH 2015 • FOOD LOGISTICS www.foodlogistics.com consolidating its freight with other shippers. My Brother's Salsa, a Bentonville, Ark. chips and salsa company, managed all warehousing, replenishment and logistics in-house for its first 10 years, notes CEO Blake Pointer. When his 5-person company decided outsourcing made more sense than investing in more warehousing, he reached out to Gravette, Ark.-based, R&R; Solutions, a local 3PL. He appreciates R&R; Solutions' partnership and creative approach to operational excellence. "We're working through how we best use a third party partner for our warehousing and replenishment needs," Pointer says. "We believe finding the right 3PL partner will add capacity back to our team and allow us to focus on building our brand and serving our customers." The partnership with R&R; Solutions has enabled the company to supply Walmart, Whole Foods, The Fresh Market, Harris Teeter and many local grocery stores across more than 25 states. Big players need versatility For larger companies, other factors can come into play. Meeting customer requests on short notice can require the services of a 3PL adept at making changes to packaging to create promo- tion packs. Larger companies also often rely on a 3PL's ability to do pallet-to-store deliveries. Consolidated freight ranks as a concern for many shippers since it can reduce the number of shipments and minimize the need for costly less than truckload (LTL) deliveries. In a col- laborative warehouse that houses many similar consumer products, even competing products, 3PLs must have the ability to create aisle-ready, multi-vendor pallets and prepare them for either cross-dock handling at the retail DC or direct- to-store delivery. Alex Stark, director of marketing at Kane Is Able, a Scranton, Pa.-based 3PL, claims manufacturers can cut 35 percent of distribu- tion costs by moving to a more collaborative distribution model. He says shippers pay more in customer owned and operated space versus sharing space and over- head costs. But whether or not consolidating freight provides such a benefit depends on a number of variables, says Derek Ridenoure, a partner with 4Clarity, a Rogers, Ark.-based supply chain consultant. "Suppliers can be reluctant to share the costs on outbound shipping as it may impact the overall cost of their inbound logistics if they lose price breaks based on volume," Rid- enoure says. Ridenoure nonetheless sees freight consolida- tion as a growing trend. In 2011, candy makers Hershey Co. and Ferrerro Group invested in joint distribution operations to reduce carbon emissions and energy consumption in warehouse and freight. "For companies like Hershey and Ferraro that both will use the same raw materials, it would make sense as they can benefit from inbound Best Practices For Selecting A 3PL By Laura Easley, Chief Operating Officer, Transportation Insight F ood and beverage companies are faced each day with getting their products to supermarkets or big box retailers in a timely manner. Daunting challenges of fluctuating commodity prices, short expiration dates, government regulations and shelf space competition directly impact profitability and growth potential. Winning contracts with large customers is coupled with demanding service levels. It is a steep price to achieve product innovation and expand geographically. Plus, growing competition from private label offerings, which provide comparable value at a lower price, is ever challenging. Despite these circumstances, food and beverage companies have adapted by making operations more efficient. Utilizing third party logistics (3PL) providers with significant industry experience helps food and beverage companies drive process improvement, reduce costs and enable growth – all critical aspects to stay ahead of the competition. Choosing the right 3PL, however, is key to making the relationship work. Usually, when a 3PL partners with a food or beverage company, their first order of business is to iden- tify ways to reduce freight costs both inbound and outbound. The food and beverage industries produce high-volume and low-value products, making it very important to keep transportation costs as a percent- age of sales as low as possible. The best 3PLs collaborate with manufacturers to define and implement solid distribution strategies by analyzing and understanding their historical shipping data. Business intelligence is vital to continuously improve and track progress. For example, being able to understand the cost to serve by customer, region, mode and product can help companies effectively price their products to be competitive while still maintaining healthy margins. Understanding this data could also uncover opportunities to relocate a distribution center or warehouse. Utilizing a 3PL may be the most economical way to obtain this information. Aside from reducing costs and providing sophisticated reporting, a 3PL can help foster expansion and growth for food and beverage companies. New contracts and products make it imperative for processors to create agile supply chains, allowing them to meet shifting consumer demands and reach new buyers. Many choose to partner with a 3PL to gain economies that could not be obtained on their own, therefore leveling the playing field with larger competitors. How would a 3PL assist in these circumstances? Securing warehouses, logistics staff, installing and maintaining information systems are all large, up-front investments. A 3PL can quickly bring knowledge and technology at a fraction of the cost. Food and beverage companies can then focus their energy on core competencies such as producing desirable products, while the 3PL keeps the logistics function in tune with state-of-the-art technologies and trends in the logistics world. Additionally, for many food and beverage companies, expanding to sell to big box retailers is a critical channel of growth, but meeting their logistics demands is not a simple task. A 3PL that understands the importance of these situations focuses on improving vendor scorecards by ensuring optimal carrier perfor- mance. Having extensive knowledge of carrier service levels is an example of how a 3PL's expertise can be valuable in a food or beverage companies' quest of serving big box retailers. Experimenting with different products to meet regional appeal is another aspect of expansion. Since the cost of product innovation is high, it is especially helpful to partner with a logistics provider who is able to not only reduce costs, but also quickly change distribution strategies. Without the necessary speed to market, food or beverage companies might miss the opportunity to introduce and maximize exposure of new products before the trend passes. Food and beverage shippers want reliability, speed, innovation and value for the money they spend with partners that help them get their products to market. For a 3PL to offer innovation to customers, the 3PL needs to understand the business of their customers – who are their customers; what industries do they target; and what benefits do their solutions provide customers? Secondly, 3PLs need to focus on becoming a strategic partner by delivering value for customers, such as superior services, supply chain talent, industry knowledge and best practices. Being proactive and taking a closer look at the supply chain can truly be game changing for compa- nies. The landscape continues to change due to consumer tastes. Manufacturers, distributors and retail partners rely more and more on effective, flexible distribution strategies to remain profitable. The right logistics partner can help with the expansion of new products into new markets. In today's supply chain world, it should be less about "flavor of the month," go-it-alone trials and more about proven, data-driven strategies to extend reach and optimize customer service. With continuous analytics and supply chain expertise, the right 3PL can help shippers remain nimble and innovative to dominate their markets. ◆ Laura Easley is chief operating officer at Trans- portation Insight, a Hickory, N.C.- based logistics solutions provider.

Articles in this issue

Archives of this issue

view archives of Food Logistics - MAR 2015