At KANE, we’ve been talking about the benefits of collaborative logistics for a while.
We believe consumer goods companies should think about our country’s logistics infrastructure in much the same way we regard our mass transit systems – as a shared resource and something that users pay for, collectively.
Granted, public money is not funding shared warehouses and truck fleets. But 3PLs and carriers have already done that work for us. Now CPGs need to figure out how to leverage that infrastructure to create cost sharing and cost saving opportunities.
Commuters do it every day with fellow passengers who live in the same area and travel to the city for work. Heck, why drive your car into the city when you can take a commuter train or bus for half the cost?
Well, guess what? Like commuters, many consumer products are going to the exact same place, specifically grocery chains and mass retailers. The benefits of mass transit can apply directly to product distribution. We just have to shift our thinking from “me” to “we.” Read more in our eBook “The Power of We.”
CPGs need to consciously co-locate their products with other companies who share the same storage requirements and customer base.
Why does KANE consistently revisit the subject of collaborative logistics? Consider this: Most trucks on the road today are either empty or underutilized. Capturing just half of this underutilized capacity, through freight consolidation, would cut freight truck emissions by 100 million tons per year and reduce fuel expenditures by more than $30 billion annually.
Most small and mid-market consumer goods companies ship retail replenishment orders via LTL. Co-locating inventory at a collaborative logistics warehouse can shave up to 35% off LTL costs by consolidating loads into lower-cost truckload shipments. That equates to literally millions in incremental profit for a $200 million dollar company.
According to Armstrong and Associates, 2013 total logistics costs in the U.S. alone was $1.35 trillion. Even an ultra-conservative reduction of 5% to supply chain costs would result in $68 billion in savings.
Logistics strategies tend to follow the money, and there’s simply too much there to ignore. The shift from “me” to “we” in product distribution will happen, but there’s a real upside to acting now.
Take the first step. Look for opportunities to place your inventory with 3PLs who serve a large concentration of companies in your space – even if your arch rival is one of them.
Especially if your arch rival is one of them.