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Consumer Goods Logistics

Top logistics problems for small- and mid-sized CPGs

Alex Stark | January 15, 2015

Small and mid-sized companies (SMBs) have some advantages in the busines world. They can be more agile and perhaps more focused on customers than large, publicly owned competitors. But they still have to compete on the shelf, and that means managing costs and running a lean supply chain.

CPG Logistics We write about it in our paper:  Logistics Strategies to Help Mid-Sized Manufacturers Compete and Win.

Here are a few logistics problem areas where SMBs struggle to match the efficiency and economies of scale enjoyed by larger competitors.  

Controlling Freight Costs

Without the freight volume, SMBs must use higher-cost, LTL shipments for retail replenishment.

One way to level the playing field is to work with other SMBs that are moving products to the same retailers. 3PLs that specialize in serving consumer goods manufacturers and grocery suppliers are in an ideal position to enable a freight consolidation strategy because they have relationships with multiple shippers. When freight from multiple shippers can be consolidated onto one truckload shipment, it's good for the shippers, who pay only for their share of a lower-cost truckload move; good for retailers like WalMart, who reduce their costs by receiving the same volume in one truck; and good for the environment because it takes trucks off the road.

Managing Seasonality

Another big logistics problem for SMBs is fluctuating volumes linked to seasonal product demand or other factors. They can't afford a logistics infrastructure that is built for peak season. But neither can they afford distribution glitches during these peaks, when they make most of their profit.

The solution is to partner with a third party logistics provider (3PL) that can offer a variable rate structure. The provider would have the space and labor to accomodate the largest volume spikes, but then reduce that space and labor as volumes declined.  The shipper would pay only for the space and services used. Think parking meter.  

The ideal 3PL partner would not only have a variable rate structure option, but would also offer nationwide distribution with locations across the country for U.S. distribution.  That gives shippers the ultimate in flexibility.

Avoiding Chargeback Penalties

Chargebacks are fines levied against vendors by retailers to recoup costs the retailer incurs for shipments that don’t meet established guidelines for delivery, labeling and other shipment specifications. Large consumer goods companies have internal departments that monitor chargebacks. But SMBs don’t have the resources to focus on chargeback reduction, so they often accept chargebacks as a cost of doing business.

For these companies, an experienced 3PL can be the ticket to huge chargeback reductions. 3PLs that ship for multiple CPG manufacturers know retailers’ requirements and can police outbound shipments to ensure compliance. 

A Virtual Distribution Capability

More and more consumer product brands have become part of multi-billion dollar companies whose distribution infrastructure they can leverage to continually improve service to retail customers. This creates logistics problems that make it difficult for SMBs to compete. But partnering with the right logistics provider can give you access to the same capabilities – albeit virtually –
enabling strategies that position your brand to win.