Transportation issues a top concern for CPG companies

By Jenny Eagle contact

- Last updated on GMT

Bumble Bee Foods
Bumble Bee Foods

Related tags: Cpg companies, Logistics, Supply chain management

Transportation issues are a top concern for many CPG companies, according to a survey by BCG (Boston Consulting Group) and the Grocery Manufacturers Association (GMA).

As part of its report, ‘A Hard Road: Why CPG Companies Need a Strategic Approach to Transportation’, based on the 2015 BCG/GMA Supply Chain Benchmarking Study, it claims driver shortages, growing congestion and delays, are threatening delivery times, inventory management, and service levels.  

72% of companies are changing their logistics network structure

Elfrun von Koeller, BCG principal and co-author of the report said 72% of companies are changing their logistics network structure, up from 6% three years ago.

"Some CPGs are going back to the fundamentals and making sure all of their systems operate at peak efficiency​,” he said.

Others are integrating transportation within the supply chain strategic agenda​.” 

According to the report, the CPG industry now spends about $15.5bn a year on transportation, 14% of all CPG companies' costs, reversing all other supply chain cost-saving efforts.

Freight capacity shortages in domestic rail and truck transportation, have fallen hard on supply chain managers and the economic recovery has boosted the construction industry, allegedly luring workers away from the trucking industry.

Supply chain leaders are caught between two challenging transportation trends, as they either must pay more to meet service-level expectations or sacrifice speed and reliability for cost efficiency. That is hardly a prescription for long-term success​,” added Daniel Triot, senior director, Trading Partner Alliance, the Food Marketing Institute and GMA.

Bumble Bee Foods

Co-author, Peter Dawe, also a BCG partner said: “Supply chain leaders used to view transportation problems as cyclical, but these problems are here to stay​.

Now we're seeing such an acute capacity shortage that it can be near impossible to get loads on some lanes moving​.” 

The report goes on to say a variety of tactics, when organized as a part of a comprehensive plan, can go a long way toward overcoming the challenges.

Tactics from efficiency moves and the choice of ownership model to new partnership approaches (with customers, carriers, and even other manufacturers) and network redesign. 

Some CPG companies, such as Procter & Gamble, Bumble Bee, and Land O’Lakes, are already deploying this approach and achieving results.

In a pilot program, Bumble Bee Foods is restricting LTL shipments and has created multi-stop routes to consolidate them. Its savings are 2% of total freight costs.

Land O’Lakes is aggregating orders to reduce the number of stops per truck on multi-stop customer shipments. In this way, the company wants to make freight more carrier friendly and boost on-time delivery.

BCG estimates implementing a suite of tactics within an integrated approach can lead to a potential cost savings of 7% of transportation spending, or approximately $1bn, industry wide.

There is no silver bullet, but those CPG companies that recognize and address the need for a comprehensive response will enjoy competitive advantage​,” added Dawe.

A Hard Road​ is the first in a series of reports on the joint BCG/GMA 2015 Benchmarking Study. Soon to follow will be reports on the study’s top findings, segmentation, and direct store delivery (DSD) practices.

Related topics: Processing & Packaging

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