September 27, 2018
Our friends over at the Freight Project Podcast recently had Zipline’s President, Andrew Lynch, on as a guest to talk about how in an Amazon-driven retail and logistics world, shippers who find the right carrier mix and focus on logistics fundamentals can find capacity and compete.
CPG logistics managers are facing one of the toughest capacity crunches in the history of transportation, on top of increasingly stringent retail compliance and vendor chargeback programs. On the podcast episode, Andrew talks with Adam Robinson of Cerasis about how CPG shippers can adjust to the market and find success.
If you don’t have time to listen to the entire podcast episode, here’s a breakdown of key points and a written transcript.
Key Points and Advice for CPG Logistics Managers
- Shoppers experience out-of-stocks in 1 out of 3 store visits. 32 percent of those out of stocks happened when a shopper went to go get a product at a store and the product just wasn’t there. This means a trillion dollars in lost sales to physical retailers. This is one of the major drivers behind enforcement of retailer compliance programs and steep vendor chargebacks.
- Small and mid-sized companies have the opportunity to “weaponize” their logistics function and put themselves in a better position to ship efficiently, to ship low cost, and to really shine against their competition when it comes to replenishment and store stocking.
- For retail and grocery shippers, it’s not just about having a broad carrier base, it’s really about having the RIGHT carrier base.
- Having open, honest, transparent communication with carriers does a lot when it comes to having continuous reliable capacity available.
- Operations, production, procurement, sales, marketing, and logistics are all having to come together to meet the retailer demands that are getting more and more stringent.
- Conflict between shippers and their retail customers most often comes from misaligned expectations and miscommunication.
- Talk of autonomous trucks and robots is drawing attention away from the other impactful technology and behavior solutions that could be making things better right now, not 10 years from now. Don’t fall victim to the shiny-object syndrome.
Podcast Transcript – Why Shippers Who Want to Find Capacity and Keep Service Levels High Must Have the Right Carrier Mix and Focus on the Logistics Fundamentals
Adam: Can you tell us, Andrew, a little more about who you are, what you do at Zipline on the day to day, and what Zipline Logistics’ focus is in the marketplace?
Andrew: Sure, thanks for having me. So Zipline was started about 11 years ago. My partners and I started our careers at a large, big-box Fortune 100 3PL and we just felt that the marketplace had room for a specialized operator. So, we chose to focus our efforts on customers who shipped consumer products, so finished goods, and folks that deal with retail. So, on one end, we serve the retailers, we manage their inbound transportation. On the other end, we serve folks that sell through retail channels. At the time we just felt that there was a gap in the service space in the market and that someone really focusing on that niche could really add some value. And 11 years later we’ve been one of the fastest-growing 3PLs in the country for eight straight years and continue to have our business model validated by the marketplace.
Adam: Well, hey, that’s some staying power! That’s pretty exciting. And you know it’s obviously a big industry and there are a lot of players, and a lot of specialized players. I think you and I can appreciate when the word “logistics” is bandied about, how many different meanings that can have from so many different perspectives.
You mentioned focusing in the CPG space, you’re working with shippers who are keenly aware of making sure freight gets to their customers on time. Retailers, they are, you know, really obsessed with that customer experience mantra, and rightly so. Marketers are collaborating with their supply chain folks and they’re doing all they can to combat what is known as the Amazon effect and to stay relevant.
And so, at the executive level when we speak about collaboration between those department heads to achieve these shared goals of consistent logistics at a customer level as well as at a good shopping experience level in the store or online, how are you seeing those entities and those departments come together more and more? And how related are the marketing promise and the logistics promise today?
Andrew: Yeah, that’s a great question. I really think that we’re still sort of in that nascent phase where organizations are starting to really recognize the importance of collaboration across these functions.
I think when we opened our doors 11 years ago, logistics was very much siloed. It was a cost center. It was a place where people just thought, you know, this is a line item on my budget that I need to make as small as I possibly can. And so everything was sort of commoditized and a big part of our marketing efforts in our first eight or nine years were really, really uphill because we had to educate folks that trucks aren’t really a commodity, transportation services aren’t really a commodity, and we may be in a low point in this marketplace, but soon enough it’s going to be harder for you to meet those retailer demands.
So, the Amazon effect has been strangely positive for us because it’s really helping to educate our customers on the importance of reliable logistics operations.
As far as marketing and logistics come together, we’re really seeing it as more than just those two departments. Operations, production, procurement, sales, marketing and logistics are all having to come together to put themselves in the optimum position to meet those retailer demands that are getting more and more stringent.
We saw a recent study that showed that customers experienced out-of-stocks in 1 out of 3 store visits. Those out of stocks can include just not being able to find a person in the store to help them. All different categories. But 32 percent of those out of stocks literally meant that they went to go get a product at a store and the product just wasn’t there. A trillion dollars in lost sales, to physical retailers. Sometimes that means that they just went down the street to another physical retailer. But a lot of times it means that the customer picked up their phone and ordered what they were looking for from Amazon. Twenty-four percent of Amazon’s retail revenue was attributed to that exact thing.
Adam: Gosh. And you know, if they just had their stuff on the shelves stocked properly, it could have been a different situation. Wow. What an easy, nice win for Amazon, but a lot of opportunity for the clients at Zipline.
Andrew: Yeah, a ton. We work with so many emerging brands and yeah, that’s one of the points that we’re really trying to get across, that these large food and beverage manufacturers – General Mills and Kellogg’s and Coca-Cola – they’re getting their butts kicked by small emerging brands because that’s what the consumer’s buying, right? Zero-sugar, all-natural, non-GMO, organic, clean label… those brands are taking up shelf space. And so, there’s a ton of competition within that space as well.
But imagine how much pressure these retailers are under right now to make sure that whatever they promised to be on the shelves is actually on the shelves. That pressure is causing them to look at these emerging brands and say, “Look, your product may be great, but if you can’t get on my shelf, I don’t have time for you. I can’t have customers walking in here, not getting the product, trying out Amazon Fresh, realizing that it’s fine for them and then never coming back.” So, it’s huge. It’s just a pressure cooker for both retailers and vendors right now.
GREAT opportunity for small and mid-sized companies to kind of weaponized their transportation, their logistics operations, put themselves in a better position to ship efficiently, to ship at low cost, and to really shine against their competition when it comes to replenishment and store stocking.
Adam: Yeah. I mean if I was a retailer, especially a big brand name that’s hopefully banking on my brand name to carry me through, and as an executive, I wouldn’t be able to sleep at night. Because the reality is that the future of commerce seems less dependent upon what brand you’re buying and more dependent upon how easy it is to get it and what’s the experience to get it. So, it sounds like that collaboration between the execs, the marketing, the supply chain and ops people is super, super important.
So, let’s get down to some shipping strategies and specific carrier conversations. We’re kind of similar companies, where you’re focused on CPG, Cerasis is more in the industrial space. But at Cerasis, we do provide a Transportation Management System to help those industrial shippers with things like parcel, LTL, and full truckload, and one of the things that we noticed when we first engage with a customer is that they, one, don’t have any technology or standard operating procedures, and that’s scary. But they’re getting by they’re doing what they have to do. They’re there, they’re trying to get the job done. But it’s getting harder without a strategy or process.
And two, they don’t really have a great carrier database. Either they just use the same carrier over and over because the guy gets back to them or gets them free tickets to the game, or they just don’t have the time to fair it out and find the right carriers.
From your perspective, why is having a broad carrier database important for a shipper, especially in today’s environment as you described?
Andrew: So, we as a broker carry a very broad carrier database. At Zipline, we have 25,000 carriers under contract that we leverage on behalf of our shippers. But for our shippers, what we really try to emphasize to them is it’s not just about having a broad carrier base, it’s really about having the RIGHT carrier base.
In our space, a broken promise, late deliveries, or sales tactics that undercut relationships really can be devastating to the performance of folks shipping into retail. Especially grocery retail and perishable items. You just really can’t have a misaligned set of expectations.
So, we really, really focus our customers – for each different customer of theirs, each different retailer, each different distributor – really focus on selecting the right group of carriers that are going to provide the best service first, and then we can turn around and use the buying power that we have to drill down costs a little bit.
But, what we’re really measuring is how many partnerships do you have, and real partnerships. By real partnerships, we mean how transparent are those partnerships? Are you seeing the good, the bad and the ugly? Are you being given opportunities to make changes that will help you spend less money with those partners?
I think it’s almost an oxymoron to say that, for us, a great customer, a great sales relationship, is one where we’re really pointing out to our clients how they can do less business with us because ideally, we’re helping them find ways to spend less money on transportation while still meeting those demands.
Adam: Yeah, yeah. If you’re doing your job right, and it sounds like, you know, broad carrier database is important, the ability to have to tap into different, broad set of players. But the key and ultimately where you want to go to, is how are you grading those carriers? What does that relationship look like? Do you have a carrier scorecard? Are you getting the data you need to effectively grade them? Those are really important things to mention to a shipper. They might get mired down in everything they have to accomplish. They’re like, “Really, Andrew, I need to now grade them? I can’t even find good ones! We’re in the middle of a freaking capacity, crunch here!” And, you know, we get that it’s tough. We’ve been hearing about this capacity crunch and I know I’ve seen coverage in previous capacity crunches and, there’s never been the coverage in this one because there’s just so many factors. The driver shortage, the economy’s better, carriers are consolidating. It’s a different landscape. And so, you know, you’re hearing that obviously working at a 3PL, and it can really sting some shippers who aren’t prepared for it.
So, what are some not so commonly known tips as it relates to being more carrier friendly that maybe shippers should focus on in order to find that capacity that they’re struggling to find today?
Andrew: Yeah, it’s a really important topic right now. For us, specifically and the way that we position ourselves with our clients, we really, really try to spend our time helping them create those cross-functional dynamics that we talked about earlier, right? So, you know, using the tools that we provide – a kind of a shipper intelligence tool that gives people the opportunity to look into their data – it helps to show them what behaviors are affecting their costs and their service performance. And you know, we really think it’s critical to start building flexibility into your distribution network. So, you know, when, when you talk about a capacity crunch, there’s a, there’s an enormous amount of competition for every single truck and the best way for customers to be able to capture that capacity is to allow themselves the opportunity to be flexible based on the best matches for their service needs.
What we always tell our customers is that real conflict between you and your customers, your retail customers, comes from misaligned expectations. So, sales and customer service teams can do a ton of work on the front end in order to mitigate that conflict before it happens.
So, work with retailers and explain, from their perspective, that we do have a really, really challenging capacity environment right now. We need to be able to hold our costs down so that we don’t have to turn around and put price increases through to you at our next pricing opportunity. I mean everyone’s aware of this capacity coach so it’s not like you have to convince anybody that it’s going on.
And once you have that alignment across your customers, you can start to optimize your shipping schedules and really managing your logistics and transportation operations to try to still hit those internal price goals.
Right now, we also hear a lot of folks talking about being a shipper of choice. And this may be something that is more specific to consumer products. It’s probably less specific to industrial products, but on the CPG side, most of our customers – even huge brands – most of them don’t actually own the facilities were their product’s being manufactured. A ton of consumer products, a ton of food and bev products… these are being made by co-manufacturers, private label manufacturers, that really specialize on the operations of running a lean manufacturing function, as opposed to these branded products that are really more branding and marketing organizations and they are operations.
And the issue that we have is that if you’re a potato chip company, say ABC potato chips, and your manufacturing at three or four different co-manufacturers across the country, you’re really not in control of being positioned as a shipper of choice.
Adam: That’s a lot of trust!
Andrew: Exactly. Yeah. And so, you know, we try to influence our clients to, when they’re making selections around new manufacturers or new co-packers, to do a little bit of that research within their due diligence. It’s certainly not going to be the primary factor, but it should certainly be something that is considered. And then really focusing on letting your logistics partners smooth out some of those bumps.
We have plenty of, of CPG clients that have very difficult to work with co-manufacturers and co-packers. And I would imagine that you guys do a lot of the same work… the logistics operator can do a ton of work to affect being that shipper of choice by just clearly communicating the parameters of a shipment or clearly communicating how a shipper operates. The worst thing you can have are misaligned expectations. I mean, that’s where all the conflict in this space comes from. And so, open and honest and transparent communication does the most towards having continuous reliable capacity available.
Adam: Yeah. And I think that’s why you’re starting to see more shippers turn to 3PLs. It just gives you that strategic partner who can kind of have a holistic view of your operations, keep it honest and make sure you’re thinking about things that maybe you hadn’t considered because the 3PL has that knowledge base of thousands of other similar experiences with other companies. So, you can kind of proactively avoid any of those clogs that might come up along the way.
But that’s the key. And it’s a soft skill, maybe, and I think it’s an important one. And it’s great to see executives and even from an educational standpoint, some of these grads kind of have more of this business and strategy mindset applied towards logistics and transportation. Executives are really starting to see that as a competitive advantage – just as you said it previously – they’re having that conversation finally with their logistics managers or even the transportation coordinators who are lower down in that hierarchy on the importance of communication, the importance of proper expectations, the importance of strategy.
So, it’s good to see companies lean on things like technology or data or partnerships to bring them out of that process, the weeds of process, to get that strategic mindset. And so, you know, when it comes to that, it involves carrier relations, that involves data, freight, and of course technology.
I really love to talk to executives like yourself who are helping shippers become more efficient in their supply chain and their processes and logistics and transportation. What do you think from a technology perspective that the industry really needs to look at over the next few years to make a difference and stay as efficient as possible?
Andrew: So, to me, I think the thing that I probably would lament the most as someone that spends a lot of time thinking big-picture transportation and logistics, is just that, the attention, the shiny objects that pull everyone’s attention away from actual solutions to today’s problems. You hear so much. Over the last two years, when did you not hear about autonomous trucks and how the autonomous trucks were going to be taking over the world.
I’m going to trade shows and you know, there are food shippers out there that are just saying, “Yeah, what do I need a 3PL for? Everything is going to be done by robots and a couple of years anyway.” And it’s like, Gosh, you couldn’t be further from the truth on that. And it’s doing really nothing for us.
Being a truck driver is one of the most stressful jobs in America. It’s one of the most dangerous jobs in America. I recently read that a truck driver is something like eight times more likely to be killed or injured on the job than being a law enforcement officer. It’s an extremely dangerous job.
And you know, there’s a lot of technology being applied right now that you see in today’s cars that are being applied to today’s trucks that make the job safer, that make it less stressful. Things that keep them in their lanes or keep them at a certain distance from the cars ahead and behind them. Things that make it easier to back into docks. All these things are coming into play to make it a better job.
And no one seems to be talking about that. Right? And here we are struggling to find 60,000 not just truck drivers, but 60,000 long-haul truck drivers. Because the driver population has all trickled into the best positions, which are those that are local and regional delivery positions that get them home every night. So we need to fill 60,000 of the toughest jobs in America and instead of doing anything to make it look more attractive we’re explaining to this generation of high school grads that 1) you can’t drive a truck till you’re 21 and, 2) by the time you get there it’s probably going to be done by a robot anyway. So, don’t bother.
Adam: That’s real motivating!
Andrew: Exactly. Who doesn’t want to be a truck driver? I mean we’re just really narrowing the labor pool.
Adam: So, what you’re saying Andrew is that you’re going to run in 2020 for President. Andrew for President! Plan to save the trucker.
Andrew: That’s going to be more like 2024, 2028…
Adam: The truck driver candidate. I love it.
Andrew: Yes. Trucking hasn’t made all my hair turn gray yet. And I think that I would do better as a candidate if I were a silver fox.
Adam: There you go. So, give us a couple of years, a little few more gray hairs will get a couple of weeks.
Andrew: It’s not going to take that long at this rate!
We see the same thing with environmental impacts and green transportation. I just spoke at a clean fuels event down in Southern Ohio a couple of months ago and you know, a lot of what I talked about there is that there are so many small changes that we can make to the behavior of drivers and to the actual equipment that can bring that truck from the five and a half miles per gallon all the way to 10 miles per gallon and make huge impacts on how much C02 we’re putting into the air.
And instead of being focused on that, you just see pictures of Tesla’s space-age-looking electric truck that probably will never be in production. I just feel like people don’t act when they think there’s some magic pill coming down the pipe for them. So instead of taking some of those little steps that may add up to a more challenging work environment, we wait around for some sort of miracle from above.
Adam: Well, I like it. You said you said pragmatism and realism and you’re not distracted by shiny objects. That sounds like a great partner to have in a 3PL.
Andrew: Thanks, man.
Adam: Well, hey Andrew, man, I really appreciate the time and being a guest here on the Freight Project Podcast. We definitely learned a lot of good stuff today. Some good tips for shippers out there. Hope to have you on in the near future. And thanks for being a guest today.
Andrew: I’d love to. Thanks for having me.
Adam: All right, take care. And for all our listeners on the Freight Project Podcast, make sure you tune in next week for another episode. Take care.