Shifting consumption demographics, e-commerce platforms, and evolving retail fundamentals are changing the way consumer products companies reach their customers. Stores are requiring smaller quantity shipments, but more frequent delivery, and CPG companies are on the hunt for cost-effective ways to optimize the new pace of product fulfillment.
With strategies being turned on their heads, the need for coordination between sales and logistics functions has never been greater. Unfortunately, fulfillment and transportation departments are often at the mercy of sales and customer service representatives. When an order comes in, they must prep and send the product as soon as possible. This reactionary relationship equates to extra costs and lost efficiencies.
Leveraging data, logistics professionals can better illustrate the need for new strategies that include cross-departmental collaboration. Transportation no longer needs to be a cost center; it is evolving into an innovation hub, driving positive change throughout organizations.
Here are specific examples on how better alignment between sales and transportation can help companies develop strategies that propel them forward and reduce operational costs:
- Lead Time – Optimal lead time for orders can be uncovered by evaluating costs vs. notice days. With simple data aggregation, you can look at costs for orders where transportation had one or fewer days’ notice vs. those for which they had more time.Typically, the more lead time, the better pricing and service and the easier it is for providers to find the best carrier and optimal transit schedule. Data can help illustrate that shipping costs decrease by a substantial amount for each additional day’s lead time allowed.
Without digging into the numbers, and then educating sales departments about the potential savings available with advanced lead time, they would never know their true impact. With enhanced collaboration and a few tweaks in operations, the two teams can automatically cut thousands from the annual transportation spend.
- Fulfillment Optimization – As mentioned above, brands often fill orders as soon as they receive them, wanting to get goods to buyers as soon as possible. But operating in this reactive manner can cause supply chain prices to soar.For example, an order for five skids is received on Monday for delivery in New Jersey and it is immediately processed, packed, and put on the road via a less-than-truckload shipment. But the following day, a second order for four skids going to a nearby facility in New York is received. These two orders could have been combined for a consolidated, multi-drop order, and the company could have secured a full truckload, seeing immediate savings.
- Order Minimums – Especially in an environment where orders are shrinking and margins being compressed, when someone wants to buy a product, brands are inclined to fill those orders. But at what point does the order size change and its effect on profitability warrant a re-evaluation on fulfillment processes?Looking deep into data, shippers can create volume and distance tipping points to identify instances where filling or shipping individual orders actually loses money for the company. For example, sending less than four skids more than 400 miles could end up costing a shipper more than they make on the sale depending on product density, consignee requirements, and product value. Facilitating communication between sales reps and transportation departments and establishing order minimums based on location can help shippers avoid such instances.
- Consolidation and Sailing – On the opposite side of identifying unprofitable shipments, leveraging logistics data can also showcase when it’s possible to turn those smaller orders into revenue, gaining new market share on the back of existing delivery footprints through consolidation and/or sailing schedules.For example, holding all west coast orders until an optimal level is reached, and then deploying a batched shipment means you can still sell to a region without losing profit. Or if there is a potential sale a few hundred miles from a regular delivery, you may be able to explore multi-drop truckload solutions.
- Customer Pick-Up or Self Delivery – When does it become more profitable for a vendor to handle their own transportation or give control to retail buyers? It’s hard to determine without a deep look into data and performance.Transportation departments can leverage data to run landed cost/pricing opportunity models to continually allow sales to evaluate and optimize customer pricing agreements.
Facilitating open communication between departments should fall to transportation leadership. They can best illustrate the need for change and what opportunities exist. Once the case for collaboration has been made and won, the next step is to facilitate real and ongoing action.
Here are tips for how to move these theories into action and maintain a productive relationship between sales and transportation teams:
- Align on Similar Goals – As illustrated above, setting common parameters can be enormously beneficial. Rather than blaming other departments for inefficiencies, it is far more advantageous to work together to reach specific revenue and growth goals.Too often there are conflicting directives – sales puts customer service first, while transportation is motivated to focus on cost and speed. Marrying these two goals isn’t easy, but changing behavior is necessary if a company wants to see positive change.
- Host Monthly or Quarterly Presentations – Get teams together on a regular basis. Leaders of each department can share their unique data points to the group and collectively touch base on goals, identifying any opportunities for improvement.
- Engage a Third Party – Even when sales and transportation departments operate effectively on their own, there are likely hidden opportunities for savings that are most easily identified by an unbiased, outside party. Bring in non-stakeholders to evaluate operations and identify potential enhancements.
Without exploration of data to find operational enhancements between sales and transportation departments, CPG companies risk rising costs, unhappy customers, and lost sales opportunities.
Technologies for data capture and analysis are available through independent software providers as well as third party logistics (3PL) providers. A knowledgeable and capable 3PL partner can aid the transportation department to not only capture and understand their data, but identify opportunities, properly present findings, and move new strategies into action.
Andrew Lynch is co-founder and president of the Zipline Logistics, an award-winning North American 3PL that specializes exclusively in the transportation of retail consumer goods and food and beverage products. Starting his career in carrier procurement and management within a Fortune 100 logistics company, Lynch has held positions of responsibility in all areas of third party logistics. He is currently responsible for relationship management, data analysis, organizational alignment, and overall strategic direction for his company and its client base.
