For all their well-meant discussion of cooperation to make the supply chain a more efficient tool, shippers and motor carriers often speak past one another rather than to one another, making speeches to industry groups of their peers rather than interacting in front the same audiences at the same time. At its 2003 annual meeting in Incline Village, Nevada, the Refrigerated Division of the Truckload Carriers Association formed two panels of speakers — one of major shippers of refrigerated products and one of large motor carriers.
Members of the shipper panel were Jay Rich III, director of distribution for Rich Products, Buffalo, New York; Joseph Lombardo, director of transportation at Nestle USA in DeKalb, Illinois; Daniel Siefring, director of distribution for the Sara Lee Corporation, Cincinnati, Ohio; Tom Domanski, director of transportation operations for Kraft Foods Inc and the Kraft private fleet, Madison, Wisconsin; and Mark Sampson, director of logistics for the LambWeston division of ConAgra, Omaha, Nebraska. The Refrigerated Division annual meeting was held July 9 to 11, 2003.
The panel hit a whole series of topics of interest to their motor carrier audience, beginning with their reaction to the newly issued federal hours of service regulations for truck drivers. To encourage receivers to speed unloading to preserve driving hours for motor carrier drivers, Nestle has developed a program of menu-based incentives for its customers, Joseph Lombardo said. When customers reach certain benchmarks within the incentive program, they become eligible for specific economic benefits. In regard to the hours of service, one of the incentive benchmarks is to get inbound trucks of Nestle freight unloaded within three hours. “It is a successful program; although, we would like to see more customers take advantage of it,” he said.
Understanding the new HOS rules
Another program within Nestle is the education of its own personnel at distribution centers and sales personnel about the impact of the new rules, Lombardo said. The people at Nestle need to understand how the new rules affect driving time for motor carriers. “We may not be able to control dock activity at our customers, but we can control our own docks, and we can educate our people about the critical need to get these drivers on the road as soon as possible after they arrive at our shipping facilities,” he said. “In addition, we encourage our carriers to provide drop trailers at our distribution centers so that we can get their equipment moving with minimum delay. The next step is to get our customers to take drop trailers as well, both from for-hire carriers and from the Nestle private fleet.”
Nestle also has personnel called customer logistics managers whose job is to work with company facilities and customers to drive efficiencies in the supply chain. One important factor will be to get out the word about the new rules to these logistics personnel to make sure that Nestle loads freight in a timely manner, and that receivers unload it promptly so that drivers do not run out of hours, slowing down the entire distribution chain, Lombardo said.
Making sure the new rules do not add costs to the supply chain will require a renewed emphasis on precision in every part of the business, Mark Sampson said. “We can't control our customers, but we can control our own systems and we can have a strong influence on the public warehouses that store LambWeston products,” he said. “For instance, we can encourage those warehouses to expand their hours to take advantage of available driver time.
“On the customer side, most of our business is to foodservice distributors, so we have a different term of sale from the retail business. Our sales are FOB the customers' docks, so we have not been able to develop any incentives to speed handling. Where we have problems, we have asked our carriers to help identify customers who do not make economical use of driver time. We work with our sales force to explain to those customers what needs to be done. In some cases, we have cut off delivery to a few customers and have required them to pick up freight themselves.”
Complex distribution network
Rich Products has a fairly complex distribution system with 10 plants and 20 contract manufacturing sites feeding into four main distribution centers, Jay Rich said. Use of drop trailers for all these sites allows the network to operate more efficiently, he said.
Kraft Foods runs a private fleet of 350 tractors and more than 700 trailers to serve 90 Kraft facilities, Tom Domanski said. Drop trailers can help keep equipment moving through this network. “However, we now have a large number of customers who ask us to drop trailers at their facilities,” he said. “The down side to this is that we do not want to allow our trailer fleet to become a warehouse on wheels.”
Kraft has an incentive program for its customers, Domanski said. The goal of these incentives is to get trailers unloaded in a minimum of 2½ hours. In many instances, this program has reduced unloading time from eight to 10 hours to a period that will earn the incentives. “We have learned that what is good for the Kraft private fleet is also good for truckload carriers,” he said.
Sara Lee has begun to look at its distribution patterns in an attempt to reduce the number of multi-stop loads it tenders to carriers, Daniel Siefring said. One way to accomplish this has been to reduce delivery frequency. “It doesn't make much sense to ship three small loads into a given area every week when we could ship one load if the customer has the capacity to take the larger shipment,” he said. “Larger loads actually increase efficiency throughout the system, because it reduces our transportation costs at the same time that it cuts the time carriers spend at the receiving dock, and it reduces the time customers spend receiving a given amount of freight.”
Small shipments through distributor
Sara Lee also has begun to consolidate small shipments into loads for further distribution by other companies. “We have a policy that any order for less than 2,500 lb must be delivered through Dot Foods,” Siefring said. “We deliver a full load to Dot for final delivery of the smaller orders. The result has been a significant decrease in the average number of stops per load. In January 2003, our average was four stops per load, and today the average is just over two stops per load.”
Preventing a terror attack in the food supply chain has become a priority for all food manufacturers and their carriers. Food facilities are the critical point for securing loads and equipment, Rich said. A new Rich Foods facility in Tennessee, for instance, is fully fenced with security cameras inside and outside and guards on constant duty, including weekends. Access to the building requires a security card. In addition, the dock is built to allow trailers to be backed to the door with their doors closed. As a result, door seals are removed from inside the building, not outside on the apron, he said.
Education is the key to ensure that everyone in a company knows that security is vital, Lombardo said. One part of Nestle's security effort is to ensure that everyone at its facilities have identification. “That has been one of the hardest things to accomplish, because some drivers resist showing their CDL when asked,” he said.
Better trailer seals
Another program at Nestle involves better trailer seals. “We've been using cheap seals, so we have to upgrade our seals,” Lombardo said. “We also have a pilot program running at one of our facilities that locks every trailer as it enters the gate.”
In the past, seals were used more as evidence for claims, Sampson said. Now, they are part of the quality control process at LambWeston. “In fact, at one time, we did not seal trailers,” he said. “We trusted drivers to make a valid case count and to deliver the proper number of cases in the proper condition at the other end of the route. Now we have upgraded our program and use a seal that costs about 75 cents, which actually is fairly expensive for a seal.”
Following September 11, Kraft set up a task force on cargo security, Domanski said. One of the recommendations of that task force was that all trailers containing Kraft freight be locked and sealed. “It is not our intent to penalize carriers for broken seals,” he said. “However, we do want a report of any seal that is broken before the load is delivered. We now have instituted a formal process to investigate inadvertently broken seals.”
New tamper-proof packaging
As an additional security measure, Sara Lee has begun to study the use of a special tape on its cartons, Siefring said. If that tape has been pulled away from the box, it will show that tampering has occurred. This is intended to prevent whole loads from being condemned when only a few cartons have been breached, he said.
Carriers can avoid paying for loads with broken seals by providing good security, Siefring said. The first step is to protect the load followed by a showing of where the trailer has been so that the shipper can be confident that no one has had unauthorized access to the freight. Vehicle tracking can help with this.
The economic outlook at Kraft is positive with the company having a successful first quarter, Domanski said. However, the company is aware that consumers look at prices constantly and make comparisons between brand name products from Kraft and private label products. In some cases, tamper-proof packaging may become a value-added feature for competing against private label brands, he said.
Rich Products has a lot of good economic news mixed with some factors that make accurate predictions difficult, Rich said. The company has secured quite a bit of new business, especially with foodservice organizations and chain restaurants.
Soft foodservice meat sales
At Sara Lee, the retail meat and foodservice meat markets have been fairly soft in 2003 with growth in the 2% to 4% range, Siefring said. “Growth is positive, but just not into the double digit range that we would like to see,” he said.
Nestle is quite concerned about the available capacity of refrigerated carriers, Lombardo said. Within the past three years, between 10,000 and 12,000 trucking companies have left the business. In response to that, Nestle has a private fleet of 200 tractors stationed at five terminals for delivery to customers within 500 miles of company distribution centers. “That fleet is not in place to move freight between Nestle plants,” he said. “We have plenty of carriers to move product between plants. We have the fleet to reach our customers.”
In addition, Nestle is looking at intermodal service. The company already is a large shipper of refrigerated intermodal freight, Lombardo said. About 90% of the company's westbound candy shipments move as intermodal freight.
Longhaul remains priority
With its frozen potato product line, LambWeston wants as large a share of refrigerated trucking capacity as possible, Sampson said. The location of production in relation to customers results in an extraordinarily long supply line, which requires a constant supply of longhaul trucking. One way to deal with a capacity shortage is to move product into forward warehousing by rail, he said. This allows shorter hauls from warehouses to customers, a situation that uses fewer driver days to deliver the same amount of product.
In summary, Sampson said that LambWeston is a potato company and plans to remain a potato company. As such, it cannot relocate from the Pacific Northwest. It also is dependent on refrigerated trucking, shipping an average of 2,000 trailer loads a week. Constant communication all along the supply chain is necessary more than ever to obtain a higher degree of precision in the logistics system to cut costs and drive efficiency, he said.
Sara Lee is now one year into a program that began in July 2002 to combine the sales and customers service functions of 10 brands into a single group, Siefring said. The goal behind this consolidation is build the most efficient distribution network possible. To meet this goal, the company needs carriers to deliver on time. “We understand that our facilities are sometimes part of the reasons behind late deliveries,” he said. “With good communication between Sara Lee facilities and carriers, we can deal with delays. The company record now is about 95% on time. That needs to improve, and we want to see an on-time percentage in the 97% to 98% range in the near future.”
About 70% of Kraft shipments require refrigerated or protective service, Domanski said. At the same time, Kraft customers are attempting to lower their inventory, which usually decreases the lead time on orders. “We have a good on-time record, but we still spend too much time explaining late deliveries,” he said. “We would like to see more weekend delivery to take some of the pressure off the need to meet tight delivery windows during the week.”
In the past three months, customers have begun to ask for new service to increase the size of deliveries, Domanski said. They want multi-temp loads so that they can order chilled and dry products at the same time. “I think that pressure for multi-temp service will increase rather than disappear,” he said.
Rich Foods has instituted a new program called “deliver to spec,” Rich said. That requires the company and its carriers to do the job right the first time. Internally, the company is putting pressure on manufacturing and warehousing to deliver on time as a way to cut inventory. Carriers are a vital part of this process, he said. It is working and can work even better as shippers and carriers take advantage of communication technology to solve problems before they occur, Rich said.
Frozen and refrigerated products have been the engine of growth at Nestle for the past several years, Lombardo said. With the growth of the Stouffers and Lean Cuisine lines, the company sees more and more of its emphasis placed on frozen foods. With a product line that requires refrigeration for more than 70% of its shipments, Nestle sees refrigerated trucking as absolutely vital to the company's future, he said.