It is easy to identify changes in consumer behavior – increased interest in local, smaller households, a segmenting of consumer purchasing into many different shopping venues from drug stores to supercenters, from online to deep discount stores. It is harder to know how these consumer behavioral changes impact the produce supply chain, especially logistics.
When we heard that C.H. Robinson was investing in top-quality research to help clarify these matters, we reached out and asked the company to find someone to present some of this research at The New York Produce Show and Conference.
They agreed, and we asked Carol Bareuther, Contributing Editor at Pundit sister publication, PRODUCE BUSINESS, to find out more.
Manager – Complex Account Group
Souring North Region
Eden Prairie, Minnesota
Q: Could you give us a preview of the key issues you will be discussing at the New York Produce Show’s Global Trade Symposium?
A: I will be discussing the key changes that are impacting today’s global produce and perishable supply chains, how shippers and receivers are adapting to those changes, along with what the industry should be looking at from their transportation providers. Different people are buying different items through different channels, grown in different places, and they are coming to market through evolving cold chains.
The result of these changes is this movement toward smaller orders, delivered more frequently with greater visibility through the supply chain, which is creating demand for innovation for our industry. Shippers and receivers, who are adapting and bringing innovation to their supply chains, are those who are poised for long term success.
Q: Please explain the concept of perishable consolidation and why you say it’s one of the industry’s best kept secrets?
A: Perishable less-than-truckload (“LTL”) orders have been a challenge for the fresh produce industry for years, mostly associated with the lack of a planned environment for those orders. The world is getting smaller, and improvements in global product innovation appear to be optimizing shelf life and shelf space for these emerging categories.
As average order size continues to shrink with multi-channel sales and the consumer focus on freshness, relying upon transactional or ad hoc methods to meet customer and consumer demand becomes increasingly difficult. The creation of a planned environment aids shippers’ growth initiatives, but also drives efficiency through each gate of their supply chains.
Q: What makes the concept of perishable consolidation you mention different than simply consolidating loads of produce we’ve seen for many years?
A: Product-origin locations are changing, which is creating a massive new LTL marketplace. As average order sizes are shrinking in the produce and perishable commodities, traditional rolling consolidation is becoming less effective in our industry. This model still exists and works well for larger LTL orders with longer shelf life, but doesn’t work as well for a commodity that has a short shelf life and smaller order sizes.
This is where adapting your supply chain becomes increasingly important. For those parties who are able to aggregate volume from an origin region into a destination region at truckload equivalent per unit cost basis, they can use a forward-distribution model to service the smaller orders. Then a provider, such as C.H. Robinson or others, can consolidate compatible items for the final mile deliveries from within the destination region.
This is generally performed with LTL pricing and truckload service. In the end, this creates a planned environment for the LTL orders, and the shipper and receiver can focus on what they do best — selling and innovating their offerings.
Q: I understand C.H. Robinson has done research in worldwide transportation logistics. Could you give us an overview of this research?
A: One example would be where C.H. Robinson worked with Iowa State University researchers as they sought to understand the voice of U.S. truckload carriers and quantitatively measured the effects of “favored shipper” characteristics on transportation costs. Their results determined which characteristics actually make shippers favored in the transportation marketplace.
Q: What prompted this specific research?
A: The characteristics of “favored shippers” — the type that carriers prefer to haul freight for — have been debated for some time. Anecdotal evidence and some qualitative research suggest that favored shippers benefit from better pricing and service. However, no known studies evaluated whether being a favored shipper is actually measurable. Nor did any known research define which characteristics resulted in favored status in the market. Researchers at Iowa State University and C.H. Robinson’s transportation division decided to work together to find out.
Q: How was this research conducted?
A: To better understand which shipper characteristics should be included in a quantitative study, the researchers conducted semi-structured interviews with nine truckload carriers of varying sizes in the roles of sales and operations lead. They defined three top issues of concern:
1. Dwell time/asset utilization. Carriers most frequently commented on shipper and consignee dwell time and the influence shippers have on the carrier’s ability to utilize their drivers and assets (trucks and trailers).
2. Contract terms and liability. All carriers mentioned liability concerns including limited liability, but not limited to the freight being moved and the drivers who are on shipper/consignee property.
3. Driver experience. Several carriers mentioned concerns related to the driver’s experience at the shipper and consignee. These ranged from the check-in process and parking, to driver lounges and restrooms.
Q: What were a couple of your chief findings?
A: This research used two models to test the relationship of origin and consignee attributes on a shipper’s favored status in the U.S. truckload transportation market. The first model found that individual shipper attributes offered by the interviewed carriers did not significantly influence price or service.
The second model found that two hours was a reasonable industry standard as maximum dwell time. Shippers and consignees with variable dwell times see higher costs than those with consistent dwell times.
Q: Are there findings from your research that were a surprise to you? If so, how so and why?
A: Although this research did not show a significant relationship between specific shipper and consignee attributes and freight rates, significant and large relationships were found between both origin and destination dwell times and increased freight rates.
Carriers cite many attributes that may result in “shipper of choice” status. However, the research showed that keeping the driver moving and generating income is more important to these carriers than keeping a shipper as a customer.
Q: In a global supply chain era, what new roads will we see transportation logistics headed?
A: There is a continued focus on collaboration across the industry. Shippers, retailers, and transportation providers are collaborating with their business associations more than ever. Much of this has been post-recession activity, where companies understood that collaboration doesn’t necessarily enable their competition, rather collaboration can increase performance to cold chain performance, manage “spend” and improve efficiency.
Q: What should industry professionals consider when looking ahead to the produce supply logistics of the future?
A: The Millennial generation will continue to influence buying decisions. The focus on freshness, brand, and convenience are here to stay, as these are related to corporate social responsibility. Adapting to the changes with how, where, and when goods are purchased in today’s marketplace will provide an advantage in the future. The creation of strong relationships and collaboration allows for engagement with the customer where they want to buy.
We thought this was an import piece of the puzzle for the Global Trade Symposium because too many exporters to North America don’t focus on transportation beyond getting it to the port in America.. Yet success in accessing the American market depends not just on having goods salespeople but on having the infrastructure to serve as a supply chain partner for big buyers.
Getting product where it needs to be, when it needs to be there, in the proper condition, is the key. Without this capability, getting the order may not be meaningful.
It is complex stuff, but the produce industry today is complex in a way it never has been. Those who will succeed in the years to come are those that master these issues. We fortunate to have Steve Gabrick and C.H. Robinson to help us navigate them.
Come and attend The Global Trade Symposium and engage with these issues to position your own company for success. You can register for The Global Trade Symposium and the broader New York Produce Show and Conference right here.
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