Should grocery chains bring transportation in-house?
Through a special arrangement, presented here for discussion is an excerpt of a current article from Frozen & Refrigerated Buyer magazine.
While the Walmarts of the world have owned their supply chain for decades, many smaller chains got out of the logistics business years ago in order to focus on core competencies. Since 2017, however, surging demand combined with a shortage of carriers has led some to rethink that decision.
In 2019, for example, Ahold Delhaize announced a plan to bring 85 percent of its U.S. supply chain under company control by 2023 (though it’s poised to meet that goal a year early).
When the pandemic hit, leaving many supermarkets scrambling to fill shelves, many others got on board as well. This past January, BJ’s Wholesale Club joined the shift, acquiring four refrigerated distribution centers and their private transportation fleets from longtime partner Burris Logistics to bring its perishable supply chain in-house.
The National Private Truck Council (NPTC) reports the percentage of outbound and inbound shipments handled by private fleets has grown every year for the past several years. NPTC president Gary Petty said, “For companies that sell products, taking control over how and when they get to the store — and how much it costs — is really a seismic shift … and a repudiation of outsourcing as ‘best practice.’”
While guaranteed capacity is the primary driver of the change, cost is an important consideration as well with freight rates escalating. Improved customer service is another potential benefit.
That’s not to say retailers operating their own fleets aren’t looking to maximize efficiency.
For example, says Marc Wulfraat, founder and president of logistics consulting firm MWPVL, instead of sending empty trucks back to the DC after a delivery, many retailers with private fleets are able to generate backhaul revenue.
In addition, even companies with their own fleets often hire outside carriers for deliveries to specific geographic regions when a third party can do it more cost effectively.
Mr. Perry admits that “success requires major investment” by retailers looking to take control over at least a portion of their supply chain. And on the trucking side at least, “The organization must be committed to transportation as a core priority and competency.”
DISCUSSION QUESTIONS: Do you see more benefits than drawbacks to food retailers bringing transportation in house? Do you see signs that give you hope that trucking capacity shortages will ease?