Food distributors finding new ways to cut costs

Posted by James Ferre on 8th October 2008

Wholesalers and self-distributing retailers are taking aggressive measures to reduce fuel consumption trucking food from distribution centers to stores throughout North America, according to the Food Marketing Institute (FMI) Transportation Benchmarks 2008 report, which was released earlier this week. The chief reason is spiking diesel fuel prices, with these price increases driving up transportation costs to 1.84 per cent of sales for wholesalers in 2007, well above the 1.59 per cent figure in 2004 – the last time FMI gathered this information. Among self-distributing retailers, this figure increased to 2.06 per cent, up from 1.66.

“Distributors can’t control the price of fuel, but they are conserving it in virtually every way imaginable. This begins with planning the most efficient routes, limiting trips and loading trucks as full as possible,” said Jeff Rumachik, FMI vice president of wholesaler and member services. “On the road, drivers are limiting speeds and reducing idling time. On return trips, they are looking for opportunities for backhaul or contract freight. Nobody wants to haul air in rigs that burn more than $4 every six miles.”

Fleets log a median of 6.5 million miles a year, according to the report. With fuel prices doubling over the past four years, companies are seeking ways to take all unnecessary costs out of the transportation process.

These figures explain why the “cost of fuel” is cited among the top five issues by 99.1 per cent of the American transportation executives surveyed for this report. The other top issues mentioned were far behind: fleet costs (64.4 per cent), on-time deliveries (50.6 per cent), driver availability and retention (46.2 per cent) and compliance with government regulations (37.2 per cent).

The price of fuel has become an increasing burden for many companies around the world and more than nine in 10 American companies (91.7 per cent) have discovered ways to conserve fuel using a wide variety of practices. For example, distributors:

* Limit the number of miles traveled per trip, often using software to identify the shortest routes and heavy traffic areas to avoid. These programs can decrease miles traveled by as much as 15 per cent. More than two-thirds (68.1 per cent) use computer-assisted routing programs.
* Reduce road speeds and idling time and use fuel-saving shifting and braking techniques. Many companies are re-educating drivers to follow these practices; 86.0 percent equip trucks with on-board computers to help.
* Reward drivers who achieve optimum fuel economy with bonuses.
* Use the lightest truck that can carry the load to be delivered. This includes using aluminum wheels and low-resistance tires and eliminating personal items that add weight.
* Pack trailers as full as possible, consolidate loads and make fewer deliveries, minimizing less-than-load or LTL shipments.
* Reduce or eliminate empty miles and pick up backhaul or contract freight, on return trips whenever possible. Fleets report an average of 26.8 per cent empty miles as a percentage of total miles, according to the report. The 28 per cent of companies that set goals to decrease empty miles aim to achieve 12.5 per cent.
* Properly maintain engines, replacing air and fuel filters and changing oil when required. Fleets perform preventive maintenance on tractors every 24,000 miles and on trailers every 180 days.
* Consider shortening the truck replacement lifecycle to take advantage of innovations that improve fuel economy.