Third-party logistics providers help keep the supply chain running smoothly, freeing up grocers to focus on their core business.
By Kim Ann Zimmermann
As the Beatles song goes, “I get by with a little help from my friends.” The same can be said for grocers as they are increasingly relying on third-party logistics providers (3PLs) to improve transportation efficiencies, provide extra capacity during peak periods and keep warehouses running smoothly, among other services.
By partnering with 3PLs, grocers can tap into the resources of larger transportation organizations to handle some of these issues, enabling them to redirect resources to their core business of serving customers, say industry observers.
“We have a great deal of experience in serving the food business,” says Steve Chapman, president and CEO of Ruan Transportation, a 3PL provider based in Des Moines, Iowa. “There have been cases where we have taken over all of the transportation requirements for our customers. This has enabled them to free up capital that they can invest back into their business.”
One of the biggest advantages that third-party logistics providers can offer is their expertise in optimizing the routing and scheduling of trucks and deliveries. “We are focused on traveling the fewest possible miles,” says Doug Waggoner, CEO of Chicago-based Echo Global Logistics. “In general, 3PLs are embracing technology more and more to help make the best decisions on how to plan a particular route or organize a shipment. We apply advanced decision-making tools. We have a lot of visibility into the overall supply chain that an individual retailer might not have.”
One area of third-party logistics that has captured the attention of some retailers is reverse logistics—in particular, the return of damaged goods from the stores back to the warehouses and eventually the suppliers. “Reverse logistics can be a headache for many retailers and that is something we can manage very efficiently,” Waggoner says.
3PLs can ease the process of negotiating with manufacturers when a shipment is damaged, say observers. “This has been a big area of mystery,” says Matt Myer, chief customer officer of Freight Handlers, based in Fuquay-Varina, N.C. “For example, where did the losses occur and how did the damage occur? We can provide supporting documentation. We collect information on every shipment and take pictures if there is damage.”
In addition, Myer says Freight Handlers can provide metrics to track trends in damaged shipments. “Like any good 3PL provider, we leverage a lot of technology, including Internet portals and reporting tools. We can provide visibility on a lot of different levels that can help the shippers, manufacturers and retailers improve the process.”
Myer also notes that it is in everyone’s interest to make sure that trucks do not travel empty on the return trip. “We’re not only focused getting product to store on time, but with filling up empty miles on the way back,” he says.
A 3PL can also offer a fresh set of eyes. “We can help to drive productivity,” says Myer. “Maybe a retailer has been doing something the same way for years, but someone taking a look at a process from the outside might see a better way.”
Another area where 3PLs can step in is at peak times such as the holidays when retailers’ transportation networks might be overloaded.
“Seasonal programs is one area where retailers find that 3PLs can provide great value,” says Tom Patterson, senior vice president of operations for Lakeland, Fla.-based Saddle Creek Corp. “These are programs that could otherwise choke a grocery distribution center.”
He says that a grocer’s supply chain is already stretched to capacity during the holiday season due to an increase in standard grocery items as well as seasonal offerings. “We can handle the specialty items and other things that typically don’t go through their normal supply chain, so there is not an established distribution pattern.”
Saddle Creek can customize pallets so that they can quickly flow through a retailer’s distribution center. “We can configure the pallet so that when it hits the dock, it is immediately slottable,” Patterson says.
Erin VanZeeland, senior vice president/general manager for Schneider Transportation Management, the brokerage division of Green Bay, Wis.-based Schneider National, says that many grocery customers are turning to 3PLs for niche capacity throughout the year to meet the demand for promotional as well as seasonal items.
“We can help them meet the spikes in their business, such as irregular demand and promotions,” she says. “They may have a traditional core carrier base they deal with, but if there is something out of the norm, their typical supply chain can’t cover all of their needs. Due to our size and relationships, we can meet their needs.”
Partners for all seasons
Grocers are expanding their use of 3PLs beyond handling seasonal surges, say observers. “The model has moved from being more tactical and execution focused to being more collaborative, consultative and strategic,” says Bob Biesterfeld, general manager at C.H. Robinson, a 3PL based in Eden Prairie, Minn. “Retailers rely on 3PLs to gain access to best practices in the marketplace and help in the implementation of those best practices. In the end, 3PLs have become more active in helping retailers plan their seasonal shipping patterns and working to take out volatility from the market.”
Observers say one of the biggest current challenges is meeting new requirements of the Compliance Safety Accountability (CSA) program, a Federal Motor Carrier Safety Administration (FMCSA) initiative to improve transportation safety, quality and performance. This program requires truck drivers to meet certain standards for violations and accidents, which could significantly reduce the pool of available drivers.
VanZeeland says that the implications of CSA are beginning to be felt as these guidelines begin to be implemented. “There have been so many projections, but there will be many drivers—100,000 to 150,000—who will not be eligible to drive,” she says, adding that many 3PLs have been preparing for CSA by focusing on recruitment and driver education.
“This could intensify the driver shortage, and the driver pool is already tight,” says Ruan’s Chapman. “With 10 safety specialists on staff, we have the expertise to ensure that we are compliant.”
He also says the company has instruments on the dashboard to monitor driver behavior. “This actually helps drivers, as it tells them when they are going too fast or made too evasive a move,” he says.
Third-party logistics providers should be strong consultants in all areas of governmental changes and regulations in addition to being able to assist food retailers in developing, implementing and monitoring their sustainability initiatives, Biesterfeld says.
“As supply chains continue to change, it is imperative that a 3PL has the flexibility to deliver service across a wide range of modes and services and have the ability to be mode neutral,” he says.
Cost and service are no longer differentiators for 3PLs, Biesterfeld explains. “A strong 3PL must be able to add incremental value throughout the supply chain. Retailers are asking 3PLs to help them unbundle costs in their own supply chains not related to inbound resale product, but focused on fixed assets like construction materials, replacement parts and IT components. Retailers are asking 3PLs to earn business in non-traditional areas.”
He says appointment scheduling and other task-driven events are being sourced to 3PLs as they can do things with greater scale and drive down costs. “Finally, retailers are asking for more robust business analytics in general so we are seeing retailers turn to 3PLs with greater technology and business intelligence tools to help them move their business forward.”