June 19, 2008
Grocery Rivals Share Rides
The consumer products business is pretty competitive and you don’t expect to see rivals working together today. Over in the U.K., it would appear to be “expect the unexpected” time as the largest CPG manufacturers and retailers are looking to “share rides” to move product through the supply chain while reducing fuel costs and carbon emissions at the same time.
According to a report by the Telegraph, companies including Asda, Coca-Cola, Coors, Nestlé, Northern Foods, Pepsi, Unilever and United Biscuits are sharing lorries (aka trucks) on common routes to save “fuel miles.”
Nestlé and United Biscuits (UB) took part in a pilot. Both companies were transporting products from their factories and often returning with empty trucks. By sharing routes, fewer trips were made with empty trucks and the total number of journeys was also cut.
“We are determined as an industry to reduce our impact on the environment,” Alastair Sykes, Nestlé UK chief executive and president of IGD, which drove the project, told the Telegraph. “At a time when we are dealing with the highest fuel costs in Europe, it is particularly apposite.”
By sharing trucks, IGD expects to be able to take about one percent of the U.K.’s heavy vehicles off the road.
Getting companies to cooperate has been a challenge, Mr. Sykes admits. “The grocery industry is one of the most competitive around. We are competing for the air we breathe,” he said. “It is all about choosing the right things to collaborate on. I see an enormous amount of agreement for getting on the front foot on the environment.”
Discussion Question: Do you know if U.S. companies are exploring a similar truck-sharing program to that in the U.K.? Would such a program be workable here?
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The cost of diesel fuel and gasoline in the UK is roughly double the cost in the U.S. at the pump. With diesel, which the trucks run on, at about $6 gallon in the U.S….imagine if it was near-double that here like in the UK?
The fuel costs are just killing the industry, both in UK and U.S. The saving grace (if there is one) thus far in the UK is the shorter traveling distances compared to the U.S. The “grace robber” is the double-digit cost of diesel fuel.
Creative solutions like this partnering up–and many more–are now essential because the cost of fuel is just playing havoc with all aspects of the supply chain. Tesco is even starting to use waterways in the UK to transport some goods as a way to save on fuel, for example.
If $6-plus diesel fuel remains the status quo (or it goes higher as an average, which is likely), the entire industry supply chain really needs to be reworked because the present system is really predicated on cheap fuel, and can’t be sustained without severe price increases at retail over the long term in the era of no longer cheap fuel.
Bravo to the companies for putting aside their natural competitive urges to save fuel, reduce congestion and reduce their carbon footprints. If it is not being done already, we need similarly innovative solutions in the US.
This just makes sense on so many levels. Saves money and saves the environment. This is win win for all involved. In this business climate, we need to look at transportation as a commodity, as opposed to a marketing device.
There is no quick answer to this question because I don’t understand the British transportation environment. In the US, with many third party truckers, there are public auction sites on the Internet where individual truckers can literally grab a return load while they making their outbound delivery. The sites are often displayed in the driver lounge and an individual trucker can bid and receive a confirmation while sipping a cup of coffee.
Having said that, I think the bigger factor in the US will be the ever expanding role of the rails. Years ago, most warehouses converted any rail sidings they had left to truck receiving. The piggyback trailers (don’t know if that is the right term) that go directly on the rail flatbeds and then can be unloaded at a local rail yard make it possible to carry out the long haul portion on rail cars.
I think what you will see in the US is an expanded use of consolidation operations, where manufacturers share local distribution facilities that can accept rail deliveries and put them on outgoing short haul truck loads. This will require retailers to utilize inventory management and ordering applications that can handle merchandise from multiple suppliers during the review, load building, and receiving processes.
Unless shipping provides you with a competitive advantage, why would one not either look at sharing or the possibility of outsourcing to someone else? If you happen to share with a competitor, you will not loose anything against that competitor but you may gain some cost saving against another competitor.
The real point here is not the shipping but the continual looking at ways to save.
Here is a thought: if you are a retailer, why not set up car pooling programs with other retailers who are near you? (Only key is, you better be a great place to work or you may find all of your employees working for someone else….)
If it isn’t being done, it should. It just makes so much sense for everyone.
This is being done to a great extent in some cases with what can be referred to as ‘cross-docking’ with distribution from the general supplier, by adding what would have been otherwise DSD deliveries to their stores. This is, and has been in place with larger secondary suppliers like Candy, Cigarettes, and Tobacco, as well as specialty foods suppliers. This is also being done by smaller DSD companies by partnering with similar products and delivering three to four DSD deliveries in one, especially true in outlying areas.
It doesn’t make a lot of practical sense for regular grocery distribution as many operate regionally as it is already. For one supplier to combine with another is then a ticket to lose the business. In that case, the distribution company has to ask the overall question as to whether or not it can afford to travel into areas where it doesn’t have density based on the cost of fuel. As it is, fuel surcharges are already in place and it becomes merely a cost decision to switch to the other supplier that is providing the majority of the region in the first place.
The only difficulties that are incurred to my knowledge in any of these cases is timeliness of delivery and invoicing issues. However, with these suppliers–for the most part–those issues existed already.
These solutions were cost effective and more efficient prior to the most recent and dramatic rises in fuel costs and they remain even more valuable in the current environment.
This has never been high profile here, but it’s worked successfully with DSD ice cream and I expect more is being done along these lines than is commonly known. There is sufficient incentive now with fuel prices and all to drive more of this in the marketplace.
The largest energy saving: close more stores and open fewer new ones. Maybe the NRF should start a Green Location Pledge: chains that will open half the number of new locations they opened last year and close double the number of locations they closed last year.
As for increased rail usage, don’t hold your breath. Rail tonnage increases mainly from commodities like coal, not general merchandise or processed packaged foods. Railroads believe that “marketing” means “having a telephone number.”
Actually, rail usage, especially short haul, is growing significantly. For example, there is a massive project in the works which will ship agricultural commodities from California’s Central Valley to the Port of Oakland by rail rather than truck, which currently is the case. The project is part of a massive mixed-use project in the Northern San Joaquin Valley.
Additionally, in the west, most rail lines are currently fully-booked. With diesel fuel so high, numerous food and ag processors are switching to rail.
Rail is practical from the field to the processor and from suppliers to manufacturing plants–and is growing in these sectors.
As diesel increases, this will only continue. There are also the green issues combined with the economic; and that is “fueling” rail as well. Much is needed to improve U.S. rail, but it’s far from dead.
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The cost of diesel fuel and gasoline in the UK is roughly double the cost in the U.S. at the pump. With diesel, which the trucks run on, at about $6 gallon in the U.S….imagine if it was near-double that here like in the UK?
The fuel costs are just killing the industry, both in UK and U.S. The saving grace (if there is one) thus far in the UK is the shorter traveling distances compared to the U.S. The “grace robber” is the double-digit cost of diesel fuel.
Creative solutions like this partnering up–and many more–are now essential because the cost of fuel is just playing havoc with all aspects of the supply chain. Tesco is even starting to use waterways in the UK to transport some goods as a way to save on fuel, for example.
If $6-plus diesel fuel remains the status quo (or it goes higher as an average, which is likely), the entire industry supply chain really needs to be reworked because the present system is really predicated on cheap fuel, and can’t be sustained without severe price increases at retail over the long term in the era of no longer cheap fuel.
Bravo to the companies for putting aside their natural competitive urges to save fuel, reduce congestion and reduce their carbon footprints. If it is not being done already, we need similarly innovative solutions in the US.
This just makes sense on so many levels. Saves money and saves the environment. This is win win for all involved. In this business climate, we need to look at transportation as a commodity, as opposed to a marketing device.
There is no quick answer to this question because I don’t understand the British transportation environment. In the US, with many third party truckers, there are public auction sites on the Internet where individual truckers can literally grab a return load while they making their outbound delivery. The sites are often displayed in the driver lounge and an individual trucker can bid and receive a confirmation while sipping a cup of coffee.
Having said that, I think the bigger factor in the US will be the ever expanding role of the rails. Years ago, most warehouses converted any rail sidings they had left to truck receiving. The piggyback trailers (don’t know if that is the right term) that go directly on the rail flatbeds and then can be unloaded at a local rail yard make it possible to carry out the long haul portion on rail cars.
I think what you will see in the US is an expanded use of consolidation operations, where manufacturers share local distribution facilities that can accept rail deliveries and put them on outgoing short haul truck loads. This will require retailers to utilize inventory management and ordering applications that can handle merchandise from multiple suppliers during the review, load building, and receiving processes.
Unless shipping provides you with a competitive advantage, why would one not either look at sharing or the possibility of outsourcing to someone else? If you happen to share with a competitor, you will not loose anything against that competitor but you may gain some cost saving against another competitor.
The real point here is not the shipping but the continual looking at ways to save.
Here is a thought: if you are a retailer, why not set up car pooling programs with other retailers who are near you? (Only key is, you better be a great place to work or you may find all of your employees working for someone else….)
If it isn’t being done, it should. It just makes so much sense for everyone.
This is being done to a great extent in some cases with what can be referred to as ‘cross-docking’ with distribution from the general supplier, by adding what would have been otherwise DSD deliveries to their stores. This is, and has been in place with larger secondary suppliers like Candy, Cigarettes, and Tobacco, as well as specialty foods suppliers. This is also being done by smaller DSD companies by partnering with similar products and delivering three to four DSD deliveries in one, especially true in outlying areas.
It doesn’t make a lot of practical sense for regular grocery distribution as many operate regionally as it is already. For one supplier to combine with another is then a ticket to lose the business. In that case, the distribution company has to ask the overall question as to whether or not it can afford to travel into areas where it doesn’t have density based on the cost of fuel. As it is, fuel surcharges are already in place and it becomes merely a cost decision to switch to the other supplier that is providing the majority of the region in the first place.
The only difficulties that are incurred to my knowledge in any of these cases is timeliness of delivery and invoicing issues. However, with these suppliers–for the most part–those issues existed already.
These solutions were cost effective and more efficient prior to the most recent and dramatic rises in fuel costs and they remain even more valuable in the current environment.
This has never been high profile here, but it’s worked successfully with DSD ice cream and I expect more is being done along these lines than is commonly known. There is sufficient incentive now with fuel prices and all to drive more of this in the marketplace.
The largest energy saving: close more stores and open fewer new ones. Maybe the NRF should start a Green Location Pledge: chains that will open half the number of new locations they opened last year and close double the number of locations they closed last year.
As for increased rail usage, don’t hold your breath. Rail tonnage increases mainly from commodities like coal, not general merchandise or processed packaged foods. Railroads believe that “marketing” means “having a telephone number.”
Actually, rail usage, especially short haul, is growing significantly. For example, there is a massive project in the works which will ship agricultural commodities from California’s Central Valley to the Port of Oakland by rail rather than truck, which currently is the case. The project is part of a massive mixed-use project in the Northern San Joaquin Valley.
Additionally, in the west, most rail lines are currently fully-booked. With diesel fuel so high, numerous food and ag processors are switching to rail.
Rail is practical from the field to the processor and from suppliers to manufacturing plants–and is growing in these sectors.
As diesel increases, this will only continue. There are also the green issues combined with the economic; and that is “fueling” rail as well. Much is needed to improve U.S. rail, but it’s far from dead.