As CPG suppliers follow their large retailer customers into the uncharted territory of e-tailing and increasingly lean supply chains, compliance with retailers’ transportation routing guides is a make-or-break element in the ongoing relationship. According to a study by a research team at Auburn University, sponsored by Kane Is Able, transportation is the linchpin to CPG-retailer supply chain success, and poor compliance with retailers’ transportation needs will cause fulfillment problems and jeopardize customer goodwill. Many manufacturers now report that their retailer customer’s tolerance for transportation delays or errors is nearly zero.
The report, which surveyed 110 high level logistics executives at CPG companies, found that retailers’ desire for perfect deliveries and continuous flows often results in a reduction of overall supply chain network efficiency because of the consequent need for smaller, more frequent deliveries. Problems cited by CPG manufacturers included retailer receiving dock backups, unrealistic lead times, and the growing delivery cost burden for manufacturers. Mid-sized CPGs, in particular, said they were affected.
Historically, CPG orders moved in efficient truckload (TL) quantities according to routing guide requirements. Today, a growing proportion is delivered by less-than-truckload (LTL) carriers. This demand for higher cost LTL delivery disproportionately impacts mid-sized CPG manufacturers. A related issue is that retailers’ distribution facilities are often set up mostly to receive TL deliveries rather than LTL ones, leading to congestion and unloading delays. Late delivery fines and carrier detention charges accrue as a consequence.
“Gridlock at retailer receiving docks makes it very difficult to schedule LTL appointments and get our products received on time.”
In order to overcome these barriers, mid-size CPGs are under pressure to come up with creative solutions. Here are three strategies to consider.
Choose Service Providers That Already Understand the Retailers’ Routing Guides
Because few mid-sized manufacturers have the time and internal expertise to effectively manage day-to-day delivery operations, it’s important to work with high quality transportation management providers, preferably ones who already have a relationship with the retailer customer.
“When a category manager says that they have a preferred transportation provider, you should be dialing that number now.”
Adopt Tactics to Alleviate Receiving-Dock Congestion
Mid-sized companies must stop treating bottlenecks as simply a necessary pain of doing business, and need to proactively propose creative solutions to retail DC traffic jams.
Potential options include:
- delivering goods at off-peak hours
- establishing standing, scheduled appointments
- using unattended unloading
- consolidating deliveries
“Our VP proposed a fixed delivery schedule last year to major retailers. Only one refused to participate.”
Often, it’s worth investing in a good TMS technology to help build better schedules and identify opportunities for consolidation or multi-stop deliveries that were not previously visible.
Leverage 3PL Capabilities
One of the strongest findings of the survey was that the respondents’ Number One strategy for improving compliance with transportation routing guides was to use capable service providers. (This ranked ahead of enhancing transportation processes, adopting transportation technology, and collaborating with major retailers.)
Partnering with CPG logistics service providers who already have leverage with major retailers because of the combined volume of multiple CPG manufacturers they serve gives a mid-sized CPG more clout than they would have on their own.
“We are scrappy, detail-oriented, and aggressive as the day is long, but we can only do so much. Experienced 3PLs help us handle major challenges.”
Retailers’ relentless drive for lean inventory requires a continuous balancing act by CPG companies. They must provide sufficient service levels while efficiently complying with many retailer requirements. For tips, suggestions and examples from other CPG companies about how to successfully walk this tightrope, read the full report: Key Supply Chain Challenges of Mid-Sized CPG Companies.