“Ever since deregulation in the early 1980s allowed trucks to make multiple pickups and deliveries on the same round trip — so-called backhaul or customer pickup — the food industry has made enormous gains in distribution efficiency,” said FMI President and CEO Tim Hammonds. “In recent years, however, more companies have used their own carriers to reduce costs when greater collaboration could have allowed trading partners to share in the savings and increased the benefits for all.”
“The Fairness Statement presents significant cost-saving opportunities when you consider that the food industry spends $26 billion a year on transportation, equal to 4 cents out of every consumer food dollar,” said Manly Molpus, GMA president and CEO. “The Fairness Statement presents an excellent framework to help retailers, wholesalers and suppliers reduce those costs, benefiting both the industry and consumers.”
“The best practices in the Statement are especially useful to wholesalers and to the independent operators they serve,” said Jack Block, the president of FMI’s Wholesaler Division and former president and CEO of Food Distributors International, which merged with FMI in 2003. He noted, “Only 20 percent of the wholesaler trucks on the road today are backhauling,” according to FDI’s 2002 Fleet Industry Transportation and Fleet Maintenance Report. “The Statement suggests how the industry can make backhaul more cost effective for them.”
The FMI Distribution and GMA Logistics Committees crafted the Fairness Statement under the leadership of Dennis Donelon, director, customer services, at Quaker Foods and Beverages (now PepsiCo Beverages & Foods), and Mike Scott, vice president, logistics, at Ahold USA.
The statement recommends that trading partners form a joint team to manage backhaul, bringing together their experts in logistics and transportation, sales, category management and procurement. This will help ensure that backhaul discussions are not limited to rate information, but are elevated to transportation capabilities, and to meet the needs of all parties and consumer demand.
To ensure that all parties benefit, the Statement recommends that the team establish performance measures that all parties should meet. “Too often,” according to the Statement, “one or both parties become frustrated because of poor performance. Examples include trailers not being loaded on time or a trailer that does not meet the specifications to handle the entire load, requiring additional handling and time by the supplier.
“Likewise, suppliers are urged not to place any undue restrictions on the customer’s carrier. While the use of high-cube trailers from the supplier’s carrier may be a requirement, the supplier should take a more flexible approach toward the customer’s equipment.”
To address these and other concerns, the performance measures should cover pick-up and delivery issues, loading practices, equipment compliance and consistent participation. The statement suggests that these measures be built into a CPU/Backhaul Agreement. The Statement includes a template for such an agreement.
A section is devoted to backhaul allowances, encouraging suppliers to “unbundled supply chain cost components” such as transportation and unloading charges “to facilitate better collaboration between supplier and customer.”
To address allowance questions, the Statement recommends that trading partners adopt Open Book Transportation Management in which they share information about their respective costs for fuel, freight, hauling and other items. It also suggests that allowance discussions be held among all members of the joint backhaul team, rather than supplier representatives and buyers.
A copy of the Statement can be downloaded from the Web sites www.fmi.org and www.gmabrands.com.
Food Marketing Institute (FMI) conducts programs in research, education, industry relations and public affairs on behalf of its 2,300 member companies — food retailers and wholesalers — in the United States and around the world. FMI’s U.S. members operate approximately 26,000 retail food stores with a combined annual sales volume of $340 billion — three-quarters of all food retail store sales in the United States. FMI’s retail membership is composed of large multi-store chains, regional firms and independent supermarkets. Its international membership includes 200 companies from 60 countries.
GMA is the world’s largest association of food, beverage and consumer product companies. With U.S. sales of more than $500 billion, GMA members employ more than 2.5 million workers in all 50 states. The organization applies legal, scientific and political expertise from its member companies to vital food, nutrition and public policy issues affecting the industry. Led by a board of 42 Chief Executive Officers, GMA speaks for food and consumer product manufacturers and sales agencies at the state, federal and international levels on legislative and regulatory issues. The association also leads efforts to increase productivity, efficiency and growth in the food, beverage and consumer products industry.