More and more wholesalers are outsourcing part or all of their transportation, because the process can cut costs and improve operating efficiency without compromising retailer support.
Access to newer, more technologically advanced fleets and the opportunity to share backhaul revenues are also key reasons transportation outsourcing is on the rise.
Support for the store is a major issue. Wholesalers emphasized that no part of transportation would be outsourced without 100% certainty of proper support for retailers.
Associated Grocers of Maine, Gardner, Maine, outsources half of its fleet, and all the maintenance, primarily "because there is no negative effect on our customers by doing so," said Richard Houdlette, director of operations.
Associated Grocers of Florida, Miami, leases 80 tractors and trailers at its Miami division and outsources all transportation at its Tampa, Fla., division.
"Cutting costs is a big reason wholesalers are outsourcing, but they only move in this direction if they can still take care of the No. 1 goal, and that's the service part," said Jack Hunter, vice president of operations, distribution and warehouse at Associated Grocers of Florida, which services more than 450 stores.
Many wholesalers, including Fleming Cos., Oklahoma City, said cost savings and operational efficiencies are key advantages of outsourcing.
Since Fleming began outsourcing in 1994, it has achieved a substantial reduction in operating expenses, according to John Boultier, director of transportation and traffic at Fleming.
Fleming currently outsources all transportation functions, including drivers, equipment, management and logistics, at 10 of its 42 distribution centers. Third-party providers now run more than 15 million miles a year for Fleming, servicing more than 1,000 stores throughout the country.
By its outsourcing efforts, Fleming has reduced the number of tractors it owns from 2,300 in 1994 to 1,000 in 1997, and cut its number of drivers by 2,000. Boultier noted that all those 2,000 people were offered employment by the third-party providers.
Fleming has achieved operational efficiencies because its outsourcing agreements with third-party providers allow them to haul non-Fleming goods during slow times, with Fleming sharing in the revenues generated.
"The utilization of assets is one of the biggest advantages they bring," Boultier said.
"That equipment is being paid for 24 hours a day."
Associated Grocers of Florida's Hunter said a third-party firm began handling all its transportation needs in Tampa five months ago. The Tampa division now has access to a fleet of 20 new trailers, and drivers who are owner-operators of their own trucks.
By doing so, Associated Grocers of Florida is able to better manage its costs, which are established on a flat-rate basis based on a range of miles traveled.
"If I know I'm going to pick up a new customer somewhere in Florida, I can put an exact cost to the delivery and be accurate," Hunter said.
Previously, Associated Wholesale Grocers of Florida had to make assumptions on how long the driver would be at the store making the delivery, and what route the driver would take to get there.
Other wholesalers, such as Affiliated Food Stores, Tulsa, Okla., and Associated Grocers of Maine, outsource only a portion of their transportation, leasing equipment from third-party companies that specialize in transportation. Access to more sophisticated equipment is another major advantage of outsourcing, they told SN.
Affiliated Food Stores leases 14 tractors and 20 trailers at its Abilene, Texas, division, which services 300 stores, and leases 43 tractors and 95 trailers at its Tulsa, Okla., division, which services 1,100 stores.
Associated Grocers of Maine, which services about 500 stores, also outsources maintenance but only leases half its fleet of 30 tractors and 30 trailers.
Associated Grocers of Maine is in the process of updating its fleet so no piece of equipment is more than five years old, Houdlette said. Some of the latest vehicles feature computerized engines and air ride trailers that absorb shocks better, which helps keep freight in better condition.
Affiliated also has the advantage of moving the fleet back and forth as needed. "A driver from Abilene might bring in a backhaul to Tulsa, where he picks up another trailer that goes back to Abilene," Rippley said. "We'll use the trailer for something else until we get it back down there."
Both wholesalers do not outsource employment, preferring to hire their own drivers. "We use our own drivers to maintain that service aspect with our customers, and also the control over what takes place in that transaction," Rippley said. "We also still believe it's more economical to handle it in this way."
Using drivers who are not directly employed by a wholesaler appears to work just as well for some distributors.
"The benefit we've gotten from outsourcing at our Tampa division is cream-of-the-crop over-the-road drivers who are mostly seasoned grocery delivery drivers at that," said Hunter of Associated Grocers of Florida. "And we've had lots of feedback from our customers that the driver is the best they ever had."
