for coffee and tea is often a daunting challenge. In this economy, its time to take a diligent look at ways to best maximize your dollars in the supply chain. Each cost you cut can impact your bottom line. And with the increased awareness of sustainable business practices, many suppliers have opted to add “green” functionality while still keeping supply chain costs down.
Cooling Off Costs
The complexity of your supply chain is determined by the size of your business, number of SKUs in your standard inventory and characteristics of your product. Jennifer Hensley, the customer care supervisor at Two Leaves and a Bud, a tea company that has found incredible growth as a SMB, finds the company’s tea products to be near ideal products to ship. Even with packaging, their product is incredibly lightweight, maintains a long shelf life and does not need any refrigeration or cool temperature controls. While other, more sensitive teas thrive in cooler temperature; a non-temp controlled product will save you thousands in additional storage, freight or handling costs.
Though you cannot change your product, you can certainly alter other aspects of your supply chain strategy. Smart packaging planning and design can help you minimize your temp control costs. Consider more temperature resistance materials for your master packs or less porous individual packaging. If you are protective of the packaging but still want to cut costs, consider keeping inventory in larger warehouses, which will naturally maintain cooler temperatures. Or strategically request placement next to the cooler, refrigerated sections, but take moisture levels into account. Also, if you do plan on spending extra on freight, test out the total costs of shipping guaranteed delivery and expedited, versus refrigerated. Depending on the lane and your flexibility, you may be able to chip away at your costs.
Playing Musical Chairs with Providers
The experts at New Guinea Traders, a family-based tree-to-cup company, are also pleased with the conveniences of shipping their green coffees. “Every single shipment has the same freight class (55), and same NMFC number (72660), same instructions, etc. It makes setting up outbound forms fairly straightforward,” says Cole Arendt, sales manager. However their struggles come with the constant pursuit of the cheapest freight provider. Companies that manage customer shipment have traditionally shunned provider loyalty, instead wasting valuable time and money jumping around requesting new quotes with different companies every so often. And not until a negative shipment occurs, do the customers request a change. This shifts the buying power dramatically away from the shipper. Every provider will only see you as an occasional shipper with minimal orders, when in fact you could position your company as a major player with one single carrier.
Working with the right logistics provider can shorten the length of your supply chain as well. A supply chain expert with experience in customs and international shipping practices will make the difference between on time delivery or stalled pallets stuck waiting for clearance. For specialty companies like New Guinea Traders, that can require traveling more than half the world.
“If we are delivering to the east coast in the U.S., that means crossing a bit of the Pacific Ocean, the Indian Ocean, a canal transit, then the Mediterranean, then the Atlantic, brought into U.S. port, subject to customs clearance, Homeland Security clearance, import clearance and then released to a carrier to transport to a third-party warehouse. That is about as far away from the U.S. on this planet as you can get,” says Arendt. Situations like these demonstrate the importance of a cohesive provider relationship. Providers that are familiar with your business with allow for smoother transactions. Most suppliers have learned the hard way, from experience.
Ways to Go Green
Tea and coffee suppliers and manufacturers have long been at the forefront of sustainable business. At the Two Leaves and a Bud warehouse, their outer packaging or carton containers are saved and re-used for shipments out to customers. They have also spent extra care to source their tea sachets from a biodegradable, corn-based nylon. These small steps can push your business to become more “green,” but can also provide a great deal of cost savings, especially when you plan ahead.
Even though your freight shipment consumes the same amount of diesel each delivery, you can opt for more sustainable carriers that minimize consumption and emissions though modifications or corporate policies and practices. You have options, from packaging to pallets and warehousing to fuel. For example, CHEP (www.chep.com), a pallet provider, offers pallets in polling programs to maximize the life of each pallet used - making them sustainable by definition. While you do not own the trucks, there are options you can present to your carrier to help them become a greener and more efficient service. The standard staples include alternative fuel, smart idling policies, capped speed to maximize mpg and route optimization software - some are even integrated with alternative fuel station locators. Grow your revenue by choosing sustainable solution providers that cut costs.
In the Warehouse:
As mentioned in July’s article on packaging in the supply chain, your packaging choices can allow for more sustainable elements. The increased use in returnable and reusable totes, bins and boxes will push consumers to embrace the bulk mentality as commonplace. This translates to cost savings for packaging use as well as reverse logistics simplification. Collapsible and nesting packaging has also picked up usage, providing incredible space savings. This is especially easy to accommodate for the coffee and tea industry, since many products are sold bulk or “loose.”
A Total Solution: Consolidation Programs
Retailer-driven consolidation programs, offered by companies such as CaseStack (www.casestack.com), DSC Logistics (www.dsclogistics.com) and Prime Logistics (www.pdsindy.com) are the best ways for mid- to large businesses to hold a lean inventory and save on transportation costs. While other types of consolidation rely on timing and depend on outside orders, retailer-driven consolidation programs pool a group of manufacturers headed to the same retailer into one single purchase order, maximizing each truckload. By combining orders, the logistics provider can then deliver a full truckload headed to a single distribution center rather than shipping multiple LTLs, thereby reducing costs and delivery times.
Though this requires some coordination on the part of the retailer, they benefit as well through decreased dock congestion and managing one single delivery versus multiple. Retailer-driven consolidation, by-design, is a sustainable consideration as well; it takes trucks off the road, lowers carbon emissions and eliminates the wasteful practice of shipping partially empty trucks.
Finding the Perfect Fit
Much like steeping the perfect cup of tea (or coffee), tiny intricacies in your company’s characteristics will determine your perfect fit for a provider. Sometimes the lack of complexity is exactly what you need from your logistics provider, especially when you simply need to deliver from point A to point B. According to Hensley at Two Leaves and a Bud, the relationship with their freight provider, CaseStack has been easy going from the start. “Having an easy to understand website combined with good sales rep follow-up provides the level of service [we] need,” says Hensley. A drop in costs has been an added bonus for their bottom line. A good provider should lighten your load and simplify your business.
While the sales representatives often become like best friends when a customer demands updates, it is best to have up-to-the-minute information at your fingertips. A user-friendly online system delivers this necessity effectively; high performing providers will have the sophisticated technology to deliver it. Also make sure you can receive instant quotes online and gather information on delivery estimations. While a rep can work with you on details, you need the capability to estimate costs and on-time delivery to customers at any given time.
New Guinea Trader’s Arendt also agrees that technology can be a major differentiating factor between providers. “Access at all hours (web interfaces) is important. Everyone wants their coffee yesterday, and we receive orders in the evenings, in the middle of the night and on weekends.”
Just as shipping visibility is essential to delivery operations, your entire warehouse should also be at your fingertips. The technology accompanying the service should allow access to inventory levels, shipment dates, out-of-stock notices, lot code tracking, claims submission processing, etc, at anytime. More tech-savvy providers will give you the control to program email alerts to notify you when a self-determined shortage threshold has been reached. These notices allow sufficient reaction time to surges in demand and seamless replenishment with lean inventory. In the age of web 2.0, the savviest providers are software free and allow 24/7 secure access online - delivering information on the go. To ensure superior customer service, train across departments, from the logistics coordinator to the executive manager, to maximize the capabilities of the system.
New Sustainability Strategies
Staying up to date with the latest logistics technologies and innovations gives companies the ability to save by planning ahead. Being aware of what’s coming next can help you prepare for changes before they become required and costly.
As reported in DC Velocity in early 2009, a biotech company, Ls9 Inc in San Francisco, is developing a genetically engineered microbe that excretes diesel. It can be produced without depleting food sources, like soy or corn, and does not produce any carcinogens. The fuel is made to be pump-ready and it may be the way of the future for domestic heavy freight trucks.
While new technology often takes years before coming to market, keeping the dialogue open with your logistics provider will give them motivation to embrace new green developments. Providers are motivated by customers’ needs. If you make sustainability a priority, so will they.
Sum-Sum Chan is a marketing and communications consultant based in Los Angeles. She previously held the position as the director of marketing & communications at CaseStack, a sustainability-focused logistics innovator providing shipping and warehousing solutions. She oversaw the to-market strategy and brand building of the award-winning 3PL. She also previously held the position of marketing director at Hint Mint, a gourmet confectionary company.