Logistics are becoming a bigger percentage of the final cost of food and beverage products. Unfortunately, consumers and customers will never pay more just because the product gets where it is supposed to be. Producers and processors need to find opportunities to reduce these costs. Backhaul should be a consideration. This year we are helping you define different industry terms. We share insights into the terms and how they are important to suppliers in the industry.
Backhaul is the process of working with your retail partners to ship your products on their trucks, as they return to their warehouse empty after servicing stores. Backhaul should provide lower rates because the retailer must go to the store with product and return to the warehouse.
This should make sense
The word ‘should’ is an interesting word. When dealing with retailers it does not always translate into ‘does’. With so many trucks going to stores every day and the desire to reduce costs, or offset expenses one would think this should happen with every truck. Reality is there are many trucks that return to the warehouse empty.
Trucks and drivers are assets and retailers try to make the best use of them. Sometimes it is more efficient to head right back to the warehouse after making a delivery. The people who work in the transportation department spend a lot of time trying to make the best use of the assets. After labour, transportation is one of the biggest costs for retailers so they focus on it.
It is worth talking to the transportation department to assess the viability of backhaul. When you are talking to these people, remember they are not retailers, they are logistics people. Yes they might work for Sobeys or Loblaw but they are focused on efficient use of transportation assets, not selling food.
Understand your situation
Before you talk to retailers about backhaul, you should know what it will cost you to deliver to their warehouse. Obviously there has been a lot of volatility in logistics. Rates are up for several reasons and it seems like it will get worse before it gets better.
If you have your own truck or use a third-party carrier you should have a good sense of your costs. You can use these to compare to the backhaul rates you get from your customers. If you are using a third-party carrier your volume will impact your rates. If you do engage in backhaul with one customer your volume with the third-party carrier will decrease. This could impact rates.
Some carriers charge you for hundred weight and others charge you for pallet space. Retailers are the same, they will have different methods of charging suppliers. If you are shipping fresh strawberries hundred weight is great, if you are shipping cans of beans it can add up quickly.
What this means for suppliers
Backhaul should be a better solution for suppliers and retailers. Even if your freight costs about the same it can be a good thing. It does provide one more component of your relationship with your customers. Whether they admit it or not when you participate in backhaul you do contribute to their success.
You might have to ship at times you would not normally ship. Retailers usually try to deliver to stores late in the day or after hours so stores can be re-stocked at night. This is much more efficient and keeps clutter out of the aisles when consumers are shopping. Trucks are empty at night returning to warehouses.
Mention this to your merchandising contacts. In big retailers they are very removed from this part of the business so they might not even know you are on backhaul programs.
You can try to negotiate these rates. If it works for your business, negotiating with logistics people in retailers should not impact your relationship with the merchants.
If you have any questions or require help figuring out if backhaul is right for you, you can always send me an email firstname.lastname@example.org or call me at (902) 489-2900.
Inflation impacts Amazon Prime day
You know inflation is everywhere when it impacts Amazon Prime Day. The growth this business has experienced in recent years seemed to be a runaway freight train. The recent price increases are having an impact everywhere and Amazon is not immune.
The consideration of a second Prime Day is interesting. Suppliers will be asked or encouraged to offer discounts to fund this huge day of online shopping.
More inflation news in Canada
The increase in dairy prices will be visible in stores in the fall. We do see more companies struggling with increased costs. Perhaps they were slow to initially look for increases or their costs continue to climb.
Consumer behaviour will change as interest rates increase and people feel they have less money to spend. Watch for them to trade down in the category and perhaps buy less. This is why it is so important to talk to your customers about expectations for sales.
When is Peter speaking?
Ontario Produce Marketing Association - Aug 11th
There are options for you to consider when you determine where to sell your product. Some suppliers see their job is to produce great products, which is true. This is not your only job, if you want to be successful. Part of your job is also to assess the different channels where you can sell your products. To maximize your opportunity, it is worth the time and energy to understand the different options you have.
There are a number of considerations such as logistics, food safety requirements, product specs and just finding the right fit. We will explore these considerations and others as we help you figure out how to find the right shelf.
During the pandemic we experienced huge shifts in where food was being purchased. You have choices!
You will be much happier in your job and your results should be better when you find the right shelf for your products.
Learnsphere Supply chain 123- Sept. 28th
Alberta/Manitoba Consumers & Customers – Satisfying Both
Learnsphere Supply chain 123- Oct. 12th
Alberta/Manitoba Getting on the Shelf: Building Relationships with Customers
Learnsphere Supply chain 123- Oct. 26th
Alberta/Manitoba Getting off the Shelf: Consumer Marketing
FCC Peer groups in fall of 2022
It has been a real privilege to work with FCC in 2021/22 to launch the pilot program for their food and beverage industry peer groups. We had some incredible discussions with processors about our industry and they really did learn some very valuable insights from each other. We discussed so many topics from customers to ecommerce to distributors to co-packers and so much more.
We are excited to let you know FCC plan to continue with the program and if you are interested this could be a great program for you in the fall of 2022. Check out the details and if you have any questions just let me know!