Getting There
Transportation and logistics, like other aspects of food retailing, are changing with the times.
Remember when backhauling was considered the cutting edge of supermarket shipping? That seems long ago and far away — and it was, when seen in the light of today’s increasingly sophisticated transportation and logistics.
“As retailing everywhere remains highly competitive, successful grocery retailers are looking to deploy strategies that improve their operations and drive value to their customers,” notes Frank McGuigan, EVP and COO at Dallas-based Transplace.
McGuigan says improved supplier compliance can lead to better inbound logistics, which can lead to lower costs, reduced inventory, better regulatory compliance and increased flexibility to respond to market uncertainties with lower risks.
Among the trends McGuigan sees are retailers establishing a strict delivery regimen with rigidly scheduled appointments, tight delivery windows, and penalties for suppliers not delivering on time. “Trucks arriving outside of the scheduled delivery window are then forced to wait behind any other trucks on-site, which can be hours or days,” he says. “Monetary penalties for late arrivals are charged to the shipper, who then passes them along to the carriers in the form of a deduction from line-haul and freight charges. To help speed up the unloading process, many retailers have begun utilizing nonemployee loading services that are dedicated to unloading all inbound trucks and are paid for by the carriers.”
According to McGuigan, many retailers are establishing supplier scorecards to establish transparency into their suppliers’ supply chains to minimize the risks associated with customer service levels, product safety and regulatory compliance. These scorecards examine myriad criteria, including percentage of on-time delivery, percentage of damage-free items, and order-to-delivery lead time.
“Transplace closely tracks all appointments and establishes alerts indicating if a driver has not provided an arrival status update within two hours of the delivery appointment time,” McGuigan explains. “Transplace also has employees strictly dedicated to tracking all delivery appointments scheduled each day and contacting the carrier or driver at designated times during transit.”
Clearing Hurdles
Noting that retailers and manufacturers are establishing highly regimented pickup and delivery schedules, McGuigan says it can be a challenge for carriers to schedule delivery appointments that coincide with a pickup, especially if there’s a backlog of trucks or the driver misses the delivery window and must wait in line. “This not only puts the driver behind schedule, but has a negative impact on manufacturers and CPG companies needing to ship their freight on time to minimize the penalties incurred with late deliveries,” he adds.
Another challenge McGuigan points out is the California Air and Resource Board (CARB) standards that regulate trucks and fuel used within the state of California to reduce vehicle emissions. As a result, he says, many smaller carriers refuse to transport freight into, out of or through California, which creates a need for more refrigerated trucks going and coming from California and drives prices there up.
Down the proverbial road, McGuigan says, “As the Federal Motor Carrier Safety Administration (FMCSA) regulations for hours of service and Compliance, Safety, Accountability (CSA) standards are implemented, this could cause a driver shortage and considerable tightening of capacity as drivers are taken off the road and productivity is significantly hampered. As capacity continues to be an issue for shippers, FMCSA regulations will only further exacerbate the problem, while also driving up prices from the carriers, which will eventually be passed on to consumers.”
To meet these challenges, he says, Transplace offers a blend of logistics technology and transportation management services.
Preserving Capital
At Milford, Del.-based Burris Logistics, CEO Donnie Burris says, “The leading trends we are seeing in the industry are a continued commitment to gaining efficiency while providing the service our partners deserve, the increasing number of channels that are distributing food items, the growth of fresh and refrigerated product categories, and the industry commitment to sustainability, food safety and product traceability.”
Burris sees talent management and the continuously emerging cold supply chain as the current challenges facing his company. “People are our most important asset,” he notes, “and we work diligently at making Burris a great place to work. As stewards of cold supply chain, we invest substantially in technology, facilities, transportation assets and people to deliver the highest-quality products to our customers.”
In the future, Burris envisions many emerging and rapidly growing retail operators that seem focused on store operations and that are more likely to outsource supply chain and distribution services due to the high expense and complexity of running these operations. “In doing so,” he concludes, “they preserve capital — whether that is public or private equity — for store expansions rather than support assets.”
More to the Mile
Ginger Stegmeir, marketing VP at Ann Arbor, Mich.-based Llamasoft Inc., says that an increasing number of companies in the grocery industry are focusing more on optimizing their supply chain and transportation networks, in part because of rising food and fuel costs. According to Stegmeir, Llamasoft customers have leveraged modeling technology to analyze scenarios for multichannel distribution, customer delivery/in-store fulfillment, outbound multistop route design and positioning of inbound consolidation centers. Capacity planning for seasonal and promotional products is also a highly beneficial application, she adds.
“Llamasoft provides software and expertise to help large organizations across industries design and improve their supply chain network operations,” Stegmeir says. “Llamasoft Supply Chain Guru and Transportation Guru enable companies to model, optimize and simulate their supply chain and transportation operations for major improvements in cost, service, sustainability and risk mitigation.”
Route logistics, shelf-life requirements and rapidly changing preferences are continuing challenges for the grocery industry, Stegmeir asserts, noting that Llamasoft Supply Chain Guru includes features designed specifically to address these challenges. “For example,” she notes, “enterprise simulation is used for commodity price analysis and to test the robustness of the supply chain, given highly variable food costs. Demand segmentation and inventory right-sizing help analysts understand where inventory buffers should be placed to meet service-level goals while minimizing inventory holding costs. Supply-and-demand balancing is used to identify the lowest-cost solution to satisfy seasonal demand, while satisfying production and warehousing capacity restraints.”
To remain viable, Stegmeir says, the grocery industry needs to stay abreast of what the buyers want, and grocers can uncover hidden inefficiencies in their existing supply chain by using modeling technology.
For the grocery industry, it would seem, the old hippie phrase “keep on truckin’” has taken on a whole new meaning.
“As retailing everywhere remains highly competitive, successful grocery retailers are looking to deploy strategies that improve their operations and drive value to their customers.”
–Frank McGuigan, Transplace