Two Big Cost Drivers That Many Brands Don’t Think About

 

Contributed by: Nicole Vilegi-Sandage

 

I had the pleasure of sitting down with Dan Smith, Senior Logistics Manager, to learn more about the world of logistics. Dan has over 30 years of warehousing experience and has distributed everything (all temperatures and sizes) from beer to baby shoes. Prior to joining Fresca, Dan worked as the Director of Distribution for Whole Foods Market – Rocky Mountain Region.

 

Dan shares his insights on the importance of warehousing and transportation considerations when launching a new brand.

 

Warehousing
Dan highly encourages all new brands to standardize their pallet configurations from day one, which is typically 48”x40” and around 6’ tall.  It’s important to consider the unnecessary costs associated with breaking down pallets from one warehouse to conform to another warehouse’s standards. While one warehouse may accept a variety of pallet sizes, large distributors such as UNFI will not accept those that are outside of the optimal pallet configuration.

 

“Limit your case touches from production to retailer and you WILL save money.” – Dan Smith

 

In addition, the best warehousing models work toward the goal of eliminating the days of inventory on-hand while still fulfilling orders. Days in inventory translates into the potential of aged out products, not to mention tied up dollars and we all know what that means.

 

Transportation
Movement of finished goods is one of the biggest aspects of a product’s distribution costs.  It is also an area where cost savings can be found with the right amount of focus and effort.  Dan has a few recommendations to successfully accomplish this:

 

1. Implement a minimum order size from day one with customers that is based on your cost of distribution.  You can always make exceptions for smaller orders, but having a reasonable minimum allows brands to keep shipping costs down.

 

2. Research the difference between your customer’s shipping allowance and your own shipping costs.  Many brands assume it is more expensive to arrange shipping themselves than for customers to pick up their orders.  In fact, distributors can sometimes mark up the cost of their transportation costs, leading to higher rates than if brands arrange freight themselves.  This must also be weighed against the availability of resources on the brand team to manage the shipping process.

 

3. Ship full truckloads whenever possible.  Most shipping lines offer best pricing on full truckloads versus LTL (less than truckload) quantities.  The cost difference can be up to 300%.  If a brand’s retail customers are located far away from where the products are manufactured, a brand should consider warehousing their products near those customers to avoid the costs of LTL shipping over long distances.

 

4. Consider the fact that dry truckloads are the cheapest distribution option while refrigerated and frozen products incur substantial costs to transportation and warehousing. This should factor into your business case if you choose to make a refrigerated or frozen product.

 

5. Reduce your packaging to reduce the weight and volume of your shipments.  Not only will this reduce cost, but it will also be more favorable to the environment. From a cost of distribution standpoint, less is more.

 

Take a look at this recent Food Navigator article describing Boulder Brands promise to increase shelf efficiency by 50% and warehouse efficiency by 30-60% by redesigning their packaging.

 

 

 

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