Many food and beverage companies are totally reliant on transport and logistics, meaning an inflation surge sparked by higher fuel prices is the last thing they need. It also makes now the perfect time to re-assess their logistics for efficiency and resilience.
Not every food and beverage business can easily pass inflation increases on to their customers, so there’s an opportunity to be smart about outgoings.
Transport and logistics is often a huge investment, and an area where costs can blow out relatively quickly.
While it’s hard to avoid some negative impact from higher fuel costs, food and beverage companies with efficient transport and logistics can avoid the worst of these increases, and are best placed to thrive when we come out the other side.
What are some steps food and drink companies can take to limit potential cost blowouts in supply chain and logistics?
I think sky high fuel is an opportunity to look at your transport and logistics holistically, because every improvement will count to a more cost-effective, resilient solution. These steps can put you on the right path:
Understand your true transport costs: Many companies underestimate their delivery transport costs and are beset by many ‘hidden costs’, such as wasted management time, which can be hard to measure but can be a drag on performance.
A full, honest assessment of your true costs provides the right foundation for you to make good decisions toward a more efficient solution.
Know your key metrics: Do you measure efficiency performance such as your cost per delivery? Or your DIFOT (delivered in full on time) score? The latter is important for controlling costs because the more accurate you are in delivering items in full, on time, the less likely you will be dealing with customer complaints and incurring extra costs from re-delivering items.
Know your limits: It’s always good to stress-test your logistics capabilities to know where your resources reach their natural limit. This is important preparation for dealing with spikes in demand, and an essential step towards creating a more flexible fleet.
Prioritise flexibility: A more flexible, responsive delivery solution helps to control costs and make the most of business opportunities. On the other hand, an inflexible arrangement can be a drain on profitability – consider an in-house fleet with limited resources and large fixed costs. These are often the most vulnerable to unexpected cost blowouts.
The ability to scale delivery resources up or down at short notice is good at any time, but has greater impact in a high inflation environment when the need to control costs is more acute.
Take advantage of telematics tracking technology: Telematics technology is your best friend for maintaining efficiency, and improving accuracy of deliveries by optimising your delivery resources.
This technology includes route optimisation and vehicle monitoring. The best systems offer total transparency, where your customers can monitor their deliveries and receive real-time updates. Fleets which aren’t optimised waste valuable time and money taking inefficient routes, and have a higher incidence of lost or misplaced deliveries.
Technology also provides information on fuel use, including data on excessive idling in vehicles and the inappropriate use of vehicles (such as vehicles being used out-of-hours, drivers going off-schedule). The technology has benefits for business intelligence, to track parcels, assist with proof-of-delivery, and to track vehicles and machinery to ensure they are being used properly.
Consider renegotiating with third party providers: If your solution is fully optimised, you may skip this step. But if there is room for improvement then a renegotiation with third party transport providers could be an opportunity – just make sure you do your homework and understand what you are trying to achieve beforehand.
Walter Scremin is CEO of Ontime Delivery Solutions
