The lede from a recent Wall Street Journal article blares, “Some of the biggest food suppliers are struggling to manage soaring logistics costs in a fast-changing consumer market. General Mills Inc. is the latest big company to succumb to tight capacity and rising prices in shipping markets, saying its freight costs neared 20-year highs in February while spending for its ingredients was also on the upswing.” Some perspective on this troubling trend and a concrete step all shippers can take right now to offset booming logistics costs.
In their article, the WSJ’s Annie Gasparro reports “the maker of Cheerios cereal and Yoplait yogurt plans to raise prices on its packaged foods, but the company is pulling back its earnings outlook on the thinner profit margins brought on by its supply-chain woes. General Mills and other suppliers to grocery chains are struggling to preserve profits in a tumultuous transport market.” The pain isn’t localized to cereal and yogurt either. Food shippers of all varieties and shippers in most other industries as well are grappling with unprecedented capacity issues driving unsustainable cost pressures.
Payables processing outsourcing firm Cass Information Systems told the WSJ that its index for truckload demand rose 6.5% year-over-year in February. This represents the fourth consecutive month of growth at or above 6%. No surprise carriers have responded to this by hiking rates on their customers. Similar to the General Mills comments reported in the WSJ, UltraShipTMS customers in the food industry say they’ll also have to pass along higher costs to their customers. Add to the capacity challenges the imminent cost increases either through fuel tax hikes or new/additional roadway tolls being proposed in Congress and it is clear food is about to get more expensive for consumers.
There is good news for food producers and other industry groups feeling this pain. A two-fold competitive advantage can be achieved by implementing and adopting the right transportation management system (TMS) solution. Begin by simply identifying what levels of savings your organization can achieve in each specific facet of supply chain logistics process using this online TMS Savings Calculator. The typical shipping organization can save anywhere from 2% to 15% on transportation spend by implementing a TMS and enforcing best practices via automation.
Add to the savings by reducing or even eliminating product shrinkage during transportation with the latest breakthrough in food shipment tracking: Real Time Temperature Tracking in TMS. New technology via partnership with shipment tracking solution provider FourKites, delivers exceptional visibility and ensures cold chain integrity from pickup to delivery. Not only does this reduce spoilage/waste, but also protects food shippers against costly litigation and reputational damage that follows instances of contamination.
Put these solutions in place and capture savings via improved operational efficiency, better time/resource management, stronger financial visibility and controls, and more. These improvements may even be enough to help offset the need to hike prices on consumers which helps keep a food producer more competitive.