Capacity is a big concern these days when it comes to logistics distribution operations.
Not enough trucks. Not enough drivers.
Yet research by Cnergistics has determined that 15–25 percent of U.S. trucks on the road are empty and, for non-empty miles, trailers are 36 percent underutilized.
The source of this inefficiency is a mindset of “me.”
Despite the fact that most consumer goods companies in America are moving products to the exact same retailer distribution centers, companies are still managing their own individual lines of supply.
That’s like tens of thousands of people driving their own car to the same city for work instead of sharing a train ride; it’s more expensive, takes longer, and does far more damage to the environment.
By viewing the nation’s warehouse and truck capacity as more of a shared distribution infrastructure, CPG companies can work through third-party logistics providers to share storage and freight capacity with like companies that supply the same mass retail and grocery chains. The key is to partner with 3PLs that can match your freight with other customers for money saving freight consolidation.
For every day we delay this more collaborative approach, the “me” mindset creates profit-draining inefficiencies for both manufacturers and retailers.
- High freight costs. Smaller shipping volumes force mid-market companies to move freight using higher cost LTL.
- Higher inventory. Longer supply lines require higher safety stocks.
- Higher warehousing costs. Shippers typically pay 5%-15% more in customer-owned and operated space versus sharing warehouse space and overhead costs in a multi-client DC.
- High labor costs. Unpredictable inbound schedules make it difficult to schedule labor to receive and process the inbounds.
- Dock congestion. Goods arrive from many different manufacturers, all in separate trucks, leading to congestion, longer waits, a higher carbon footprint, and inefficient receiving.
- Inflated inventory. Retailers must hold more safety stock to allow for less predictable LTL delivery schedules.
We can break this cycle of inefficiency in logistics distribution
With collaborative distribution, manufacturers win by sharing storage costs and paying only for their share of a less expensive full truckload move. Retailers win by receiving the same volume of freight in fewer, fuller loads. And 3PLs win, too, by establishing another level of added value, namely, an ability to bring together like shippers for shared savings.
In our eBook, “The Power of We,” we explain how Manufacturers can shave as much as 35% off logistics distribution costs and retailers can cut costs as much as 45% through a more collaborative model for retail product distribution. Download the Ebook.