The desire for fresher produce makes for greater demand of less-than-truckload shipments.
The new age of moving produce from field to fork involves working out the logistical complexities of shipping amounts that are less than a truckload (LTL). The consumer desire for fresher produce means many retailers are looking for smaller inventories with a quicker turnover, which usually means shipping smaller amounts.
For retailers, the smaller shipments can pay off with reduced shrink and happy customers. “This model limits risk, shrink, spoilage, and inventory; theoretically, it increases quality for the end user,” says Sam Coombs, vice president of sales at Tom Lange Company and Lange Logistics, Springfield, IL. “Whether it’s a pallet of avocados out of McAllen, three pallets of lettuce from Salinas, or two pallets of Clementines in New Jersey, we feel we have the capability to get it to our customers in the Northeast, in an extremely cost-effective way.”
Retailer interest in smaller produce shipments has made LTL a major growth area for Lange Logistics.
“Our LTL business in the Northeast is increasing rapidly from all major shipping points,” says Coombs. “I’d say at least 60 percent or more is now LTL. This is significantly much more than in the past, as retailers, wholesalers, and foodservice see added value in more frequent, smaller deliveries.”
LTLs have become so important that C.H. Robinson of Eden Prairie, MN, produced a white paper on how to use them most efficiently: Assessing the 5 Biggest LTL Savings Opportunities, which is available online.
“Some stores have a greater focus on quality and freshness,” says Mark Petersen, director of global transportation at C.H. Robinson. “That means the inventory turns are smaller, and you have more LTLs.”
Although the white paper was written with dry freight in mind, many of the recommendations also apply to produce.
Because these smaller loads can wreak havoc with traditional shipping rates and increase the risk of produce going bad due to schedule delays, some trucking firms are reluctant to jump into this increasingly important business.
There are numerous challenges carrying less-than-truckload shipments of products, like perishable produce, that are not forgiving when the schedule is not met.
“It involves multiple pickups and multiple drops,” says Ben Batten, vice president for sales at Des Moines Trucking, Des Moines, IA. “The nature of the product makes it more difficult. The timing of the pickups and drops can be difficult if you have customers who want drop off or pick up on different days.”
Des Moines Trucking is one of the firms waiting to see if it is comfortable with the complex logistics before jumping into LTL produce shipping.
Transport becomes even more complex when you have numerous loads on a truck, coming from multiple packing houses and headed toward different distribution centers. It is further complicated when much of the trip is made by rail.
“In order to use the rails, it becomes even more complicated, because we have to meet their schedules,” says Tom Finkbiner, chief executive of Tiger Cool Express, Overland Park, KS. “It’s more complicated for the packing shed, and for us.”
Tiger Cool Express has to work this complexity out regularly, because the company specializes in medium- to long-distance shipments done, in part, by rail.
“The extra cost depends on how far apart the stops are, and how many there are,” says Finkbiner. “It’s a difficult and complicated problem.”
The Higher Cost Of Better Produce
The bottomline question of how much added transportation cost is too much ultimately comes down to how much money consumers are willing to pay.
“The break-even point for the cost of LTL is a consumer-driven decision,” says Petersen. “If someone is selling a high-value produce item to a boutique-type consumer, they can go higher. In California, you would have a pretty low percentage increase in transportation cost with LTL, because the density supports a more consistent pattern.”
Many consumers are more than willing to pay a little more for this mode of transportation if that’s what it takes to buy fresher fruits and vegetables. “A lot of people aren’t looking to have as much inventory as they used to,” says Evan Kazan, director of business development at Target Interstate Systems, Bronx, NY. “I think there is more LTL in produce. The full loads, with one pickup, are going on the trains.”
The growing interest in locally grown produce also, ironically, means transportation logistics from nearby farms is more complex, with more fruits and vegetables shipped LTL.
In many cases, however, the economic benefits of reduced shrink and quicker turnover cover the increased cost of shipping LTL.
“Pricing may be a little higher on occasion, due to additional picks and drops, but the risk is much lower for the customer,” says Coombs. “The market swings become less of a factor when inventory turns quicker and more efficiently. So in essence, the benefits far outweigh a very minor increase in costs.”
The “logistics art” of LTL is figuring out which produce items, carried to a specific location, work best as partial-truck shipments.
“We have been able to identify, by location and destination, which partial shipments work best, as to not price the delivered product out of the market,” says Coombs. “We try our best to strategically plan our LTL shipments to maximize value. Our retail sales are increasing due to our ability to deliver pallet volume from anywhere within the country.”
The Logistical Challenge
There is a tremendous logistical challenge in using LTLs to move a product as unforgiving as perishable produce.
“There’s more work to it,” says Kazan. “You have to load the truck in the right order. It can be complicated if there are delays at some of the earlier stops. In dry freight it’s a lot easier; they don’t need it on a specific day. You can warehouse it if you need to, or get it there a day or two later. They may even ask for delivery any time within a couple weeks.”
For transportation companies, the logistical difficulties of moving perishable produce LTL is the price to pay for more business.
“You have to simply be willing to do the work,” says Kazan. “It’s like working with a difficult customer. Everybody wants the easy customer. There’s money to be made in LTL, and there’s demand. If you’re good at it, you can add more to your business.”
Some carriers are taking a wait-and-see approach as they decide whether or not to jump into the complexities of LTL produce.
“We don’t do any LTL,” says Nick Jensen, sales manager at Loadsmart, New York City. “We’re a newer company, and we want to focus on one thing, so we do full loads but may take a look at LTLs later.”
Even established carriers are taking a very close look before taking the plunge into LTL produce.
“Less-than-trailer loads is something we want to do eventually,” says Batten from Des Moines Trucking. “It seems like there is quite a bit of it. We have to work out a lot of the problems. It can become complicated if you have three customers on a truck and one of them, who usually does eight pallets, wants 10. You might have a problem.”
There are shipping firms that regularly handle the logistics of moving dry products in LTL lots, but draw the line when it comes to perishable produce.
“All LTL is dry LTL at our company,” says Mike Terry, director of ALC Logistics at Allen Lund Company, La Canada, CA. “We do not handle any produce on an LTL basis for our managed LTL customers or our brokerage side.”
Terry is responsible for both the group that manages LTL for the customer base, as well as brokerage LTL for the Allen Lund Company.
“While Allen Lund Company has 40 years of produce experience and is one of the premier 3PL brokerages in the country, we do not specialize in or handle a lot of produce LTL,” says Terry. “All of our produce is handled on a truckload, contract and spot-market basis.”
There are some situations in which combining a number of loads can accommodate LTL produce orders.
“We do get occasional requests from our produce customers for LTL, but we do not have the carrier capacity to meet those requests,” says Terry. “The way we manage to move some partials is by combining with other similar produce loads, but this is not done in a traditional LTL sense, nor is it statistically significant to our core business.”
Some shippers are able to move the smaller loads necessary to supply fresher produce by making numerous stops.
“There are certainly more multiple-stop loads than ever,” says Finkbiner of Tiger Cool Express. “We are getting a higher percentage of multiple stops.”
Produce shippers are generally able to provide a range of LTL, full load, and mixed transportation modes.
“We do lots of straight loads and lots of LTL business,” says Lee Anne Oxford, marketing director at L&M Companies, Inc., Raleigh, NC. “It differs with the customer’s particular goals as well as by customer size and commodity.”
Some shippers are able to use multi-stop loads from their larger growing areas, and LTLs out of the more local, mid-sized production regions.
“With the emergence of regional growing areas, we’re seeing more growth of LTL,” says Petersen. “We’re also seeing more use of regional distribution centers. It’s hard to define what LTL means. Something with multiple stops could be considered LTL.”
There are still shippers handling enough volume that they are able to bring in full truckloads from major growing regions, like California, and then ship out multi-stop loads to retail customers.
“In our business, we don’t utilize LTLs all that much,” says Rick Feighery, vice president for sales at Procacci Brothers, Philadelphia. “We basically buy full loads. We have quite a large operation here. It doesn’t affect us that much. We ship out full trucks. It may have two or three stops, but it is a full truck.”
There are large retailers able to minimize their use of LTLs, because they can ship full loads into their regional distribution centers.
“You have the national retailers (like Wal-Mart), the regional retailers, and the local retailers,” says Finkbiner of Tiger Cool Express. “The smaller the company, the more multiple stops because they don’t have the volume. We tend to like the middle-sized market, the big regionals.”
Carriers who are able to meet the logistical challenges that come with LTL produce shipments are enjoying steady to robust growth.
“We are seeing a huge growth in LTL produce sales, and it looks as though this will continue into the future,” says Coombs. “We are seeing an increase in all aspects of the business. With the development of our LTL transportation services out of the East Coast piers, we are increasingly providing not only LTL produce sales, we are also selling our transportation services to other shippers and importers.”
Questions When Considering LTL
C.H. Robinson recommends retailers or shippers using LTL on a regular basis evaluate annually whether they are using this more expensive mode of transportation in a cost-
“The potential savings from doing a review of your transportation depends on how inefficient it was when you last addressed it,” says Petersen. “If you are very efficient and your consumer demographics haven’t changed, the savings might not be that much.”
On the other hand, if transportation was inefficient to begin with, or customer demographics or produce preferences have changed significantly, the savings might be considerable, and C.H. Robinson’s white paper, Assessing the 5 Biggest LTL Savings Opportunities, suggests where to look. First is whether volume has changed enough so a lower-cost mode of transportation is feasible.
“If you have grown your volume from California to New Jersey, which used to be low-volume LTL, now you can ship a full truckload,” says Petersen. “You switch it to the most cost-efficient mode.”
Second, for potential savings is aggregation, which is less applicable to perishable produce because it cannot often be held until there is enough for a full truckload. However, scheduling shipments so the truck leaves a relatively low-volume area just once a day may be a solution.
Third, for potential savings is having the largest and most expensive-to-operate vehicle make as few stops as possible by consolidating pickup locations.
“You always want to do the least efficient thing over the shortest distance possible,” says Petersen. “You don’t want to have a big truck making five stops in Salinas. You want to aggregate the produce so the truck can make a single stop.”
This efficiency can be enhanced when a number of shippers in a local area all take their produce to the same spot for pickup.
“You can take all of my produce, and my three buddies’ produce in Salinas, and ship it from one spot,” says Petersen.