I had a conversation with Andrew Lynch, the President and Cofounder of Zipline Logistics, yesterday. Zipline Logistics is a fast-growing multimodal transportation provider that specializes in the movement of packaged food and beverage products in North America. They provide spot shipment services, managed transportation, and consulting services to both large manufacturers and emerging brands. In fact, providing consulting on transportation strategies for emerging brands is a distinct niche for them.
Service Excellence is Imperative for Emerging Brands
When it comes to managed transportation services (MTS), Mr. Lynch argues that most MTS providers promise potential clients freight savings. Freight savings are important, Mr. Lynch argued, but when it comes to meeting the expectations of big box retailers service is critical. Freight savings can be illusory if service targets are not hit.
First, large retailers often have penalties for goods that are not on-time in full (OTIF). These programs are not getting any easier. August, for example, marked the start of Walmart’s initiative to tighten deadlines for vendor deliveries. Secondly, if goods are not delivered in a timely manner, large brands risk losing shelf space and emerging brands may lose their chance to do any business with that retailer at all.
Zipline has organized itself to prioritize service. Their teams are not incentivized based on gross profit. There are metrics on service, and “our guys are motivated to choose the best load and not the most profitable one.” That focus means paying attention not just to retailers, but their carrier base. “We spend half our time trying to convince a carrier not to take shipments that are not good for them.”
Further, “our carrier capacity teams are broken out into 6 inbound regions ensuring long-term relationships with carrier partners are maintained, region-specific seasonality and capacity issues are respected and freight is never, ever, left on the dock. As specialists in consumer products our entire organization is familiar with the unique requirements of every major retailer DC (distribution center), carrier, and their ever-changing compliance standards.” Knowledge of what big retailers want at their warehouse docks is particularly critical. “We know when they want us to come in and when don’t.”
Consumer Pick-up Versus Delivered Pricing
The company is emerging as a subject matter expert in food & beverage logistics. They sent me over a White Paper I found interesting called “Customer Pick-up Vs. Delivered Pricing.” Growing manufacturers of food and beverage products face an important decision when working with retailers; how to arrange for product delivery. “There are two scenarios. First, retailers will offer to pick up the product, providing ‘Customer Pick-Up (CPU) Pricing.’ Second, the brand will handle their own transportation into the receiver/retailer and charge a slightly higher price.”
The most beneficial option isn’t always the most obvious choice. Many growing companies assume that letting retailers manage the process will be the best choice because it is seemingly less work and pricing is more predictable. “However, taking control of transportation can equate to immediate operational savings, more control, and an increase in product margin.”
For very young companies who deliver orders that are less than one pallet, infrequently, or to locations that are far apart, it does make sense to allow the retailers to do the pickups.
But for somewhat larger brands, there can be problems when retailers begin to dictate pick-up times. “Manufacturers can lose control and retailers can indirectly make decisions about a brand’s production schedule and operations. And, what happens if production misses a customer-scheduled pick up? Most often the brand ends up becoming responsible for delivering the order at its own expense.” Rush orders are more expensive, and growing manufacturing lack relationships with carriers that are both economical and dependable. Delivered pricing helps maintain control of production processes while giving manufactures the chance to negotiate better freight rates for their entire business and uncover consolidation opportunities.
I’ve come across many transportation service providers with distinctive expertise. But serving emerging brands is the most focused niche I’ve come across.