Which transportation strategy is right for your business?
Inbound and outbound freight are two of the elements that can impact your ability to meet production schedules and service your customers.
There are many components of a successful food and beverage business, and they all need to coordinate to ensure products are produced and ready for markets when they need them.
Inbound and outbound freight are two of the elements that can impact your ability to meet production schedules and service your customers.
Transportation of inputs and finished goods adds cost, and it’s essential to the value you deliver. Unfortunately, it’s not a feature that provides a premium price or differentiates your offering.
It can be complicated, and you don’t always have the leverage to dictate the terms of the arrangement. Logistics is a component of your business that requires the right focus to ensure you get the service you’re paying for and that it has a positive impact on your reputation.
Internal or external transport?
You have options – invest in internal transportation or use the services of a full-time carrier.
Moving goods is a significant percentage of your cost of goods sold. It’s worth considering the options and calculating some projections to determine what’s the most cost-effective.
Internal transportation division can provide flexibility and more commitment. You’ll have the resource at your disposal, and there are times when it can be a real advantage to control this part of the customer relationships. But it does add complexity, and if inefficient, will be an extra cost you have, relative to your competition.
If you decide to invest in internal transportation, you can also explore the opportunity to do deliveries for other producers and processors. It can be a real advantage for them to work with a company that understands the food industry, and they’ll pay for the service.
If you decide to use an outside company, a reliable procurement process is the foundation of a dependable transportation strategy.
Start with a clear definition of the service you require and your expectations for the level of execution. Many factors impact the price, and it‘s important to confirm you and your suppliers have the same understanding. Temperature, responsibility for inspection before shipping, ownership of goods during shipping, inspection upon arrival and arrival times are some of the factors that can impact your price.
Multiple quotes should be part of your procurement strategy for segments of your business over time. Find the right balance between soliciting numerous quotes and volume, which will impact your price.
Transportation companies have different routes, and some work can be priced lower when they have a complete route. Contacting several suppliers for quotes will often illustrate some of the differences.
Regular reviews pay off
Perform regular audits of your results to gauge if the relationship is working effectively. If possible, use more than one company so your suppliers understand they can’t take the business for granted. Retailers rarely have one supplier in a category. They have at least two, to maintain an environment of competition for a bigger share of the business.
Recently, retailers and distributors have increased the penalties for late deliveries into their warehouses. This can be very costly and impact your reputation with your customers. Review these policies and communicate them clearly to your transportation providers. Responsible parties for these fines and fees should be clearly defined.
Regardless of the option you choose, clearly define responsibility and price. Your transportation solutions can have a significant impact on the cost of goods and your reputation.
Article by: Peter Chapman
In uncertain times, it’s even more important to review your supplier strategy, processes and relationships to operate efficiently and effectively.
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