5 ways consumer products companies can help carriers improve efficiency
"Shipper of choice" and "sustainability" are trending terms among supply chain managers, but for consumer packaged goods (CPG) companies, they’re both connected to a broader theme: efficiency.
"In our experience, the best carriers want to work with shippers who can help them be more productive, especially regarding driver hours of service and fuel economy," said Michael McDowell, Johnson & Johnson’s transportation sourcing lead for North America.
In the CPG business, where products tend to be low-priced and fast-moving, scale no longer confers the same supply chain advantage it once did, according to a report from Boston Consulting Group and the Grocery Manufacturers Association (GMA). The survey of 30 CPG companies found that CPG suppliers carry 60 percent of the cost of logistics and hold roughly 50 percent of inventory in the grocery supply chain.
With trucking capacity in short supply, CPG companies are looking for any edge to attract quality carriers and keep goods moving efficiently — and sustainably — through their distribution channels. McDowell and his colleagues outlined five initiatives that use fuel- and emissions-savings strategies to help Johnson & Johnson cultivate a "shipper of choice" reputation:
1. Logistics incentive order program: Johnson & Johnson rewards customers for placing orders in quantities that optimize the use of space on trailers, which reduces the number of deliveries and makes it more efficient to schedule, load and unload goods. These financial and service-oriented incentives are available to all customers that meet a certain order and volume threshold.
"Asset utilization benefits shippers and customers, reduces both truck and driver demand and can enable our customers to handle their inventory more effectively," said Lindsay Gauthier, director of customer logistics for Johnson & Johnson’s North America Consumer business.
For the carrier, the incentive order program has the added benefits of improved asset use and less time spent waiting at loading docks.
2. Idle-reduction programs: Johnson & Johnson promotes idle reduction and faster turnaround times at distribution centers by scheduling deliveries, allowing dropped trailers and, where available, offering shore-power electrical connections for trucks.
"We’re asking customers who their preferred carriers are so they can realize the same positive environmental impact of dropped trailers," McDowell said. "For example, by allowing these preferred carriers to drop trailers on delivery, we can reduce idling and free up capacity for our customers."
3. Dedicated trucks: Johnson & Johnson operates a regional dedicated fleet for a distribution center in the Northeast. The company precisely matched its truck spec to the characteristics of the load, using day cabs instead of sleepers. This saves about 5,000 pounds of tare weight per truck and allows four to five more pallets of payload per trip compared to the tractor-trailers the company used previously. "The customer gets more reliable service, and we estimate that it reduces overall truck usage by 10 percent," McDowell said.
4. Mode shifting: In North America, Johnson & Johnson has shifted about 700 shipments on five lanes from truckload to intermodal and improved intermodal use from 69 percent to 78 percent in the past 12 months. The company estimated that its mode-shifting initiative has doubled its miles-per-gallon fuel savings (6.3 mpg for truckload vs. 12 mpg for intermodal) and removed 420 trucks from the road. It also keeps truckload capacity free for other lanes.
5. Measure carrier fuel and emissions performance: Johnson & Johnson uses 50 carriers in its North American logistics operations; all participate in the U.S. EPA SmartWay Transport Partnership, a public-private initiative between EPA and the freight transportation industry aimed at improving efficiency and sustainability within the supply chain.
SmartWay carriers measure, benchmark and share their fuel use and emissions, which gives Johnson & Johnson new ways to evaluate this aspect of carrier performance. It also gives the company opportunities to collaborate with carriers and customers on more efficient and sustainable transportation practices.
Johnson & Johnson has been a SmartWay partner since 2005 and works exclusively with freight carriers that participate in the program.
"All of these initiatives are good for the environment and for Johnson & Johnson and our customers," said Eric Stone, the company’s senior manager of sourcing and supplier performance. "Moving from trucks to intermodal has a favorable effect on costs. Drop-and-hook at our distribution and customer distribution center locations is a ‘shipper-of-choice’ win in terms of carrier relations. The good news here is that strategies to improve sustainability have a wide range of benefits for everyone."