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Matt Stekier
March 25, 2019 Podcast 26 min listen

The food and beverage industry moves quickly, notably customer demand, rising transportation costs, data, and technology. Hear Matt Stekier, senior manager of Plante Moran and Brian Winshall, executive vice president of GlobalTranz, discuss industry challenges and the strategies you need to thrive.

Shifting customer expectations and overcoming the profitability challenges of rising transportation costs are significantly reshaping the food and beverage industry. New regulations and technologies, such as ELD mandate and blockchain are turning traditional business models upside down and forcing organizations to improve data visibility to manage, track, and optimize every aspect of their logistics and supply chain operations.

With organizations looking for more effective ways to collaborate with shippers and 3PLs, it’s more important than ever that industry leaders understand market drivers and how to create strategies that provide differentiation and competitive advantage.

Listen to Matt Stekier and Brian Winshall discuss:

  • Expanding industry opportunities for strategic collaboration and data capture.
  • How blockchain can help overcome traceability and food safety challenges.
  • Controlling the “Amazon effect” by addressing the truck driver shortage, rising transportation costs, and profitability.

Continue reading below for the complete podcast transcription.

Food for thought: Leverage data & technology to close supply chain capability gaps

Matt Stekier: Hi, I’m Matt Stekier, senior manager in Plante Moran’s supply chain and operations improvement consulting practice. Today, I’m joined by Brian Winshall, executive vice president of sales at GlobalTranz. How are you doing today, Brian?

Brian Winshall: Wonderful, Matt. Thank you very much for having me.

Matt Stekier: Why don’t you tell us a little bit about GlobalTranz before we get started today?

Brian Winshall: At the core, GlobalTranz is a technology company that moves freight. We started originally with a product that was innovative in the less-than-truckload market and have expanded now to all modes: truckload, expedited, small parcel, intermodal, and even managed transportation services, where clients are working with us on a collaborative outsource for all of their supply chain and logistics or portions of their supply chain and logistics, where we’re implementing technology and people and process and our partnerships to really create value for their overall organization and strategic objectives. Today, we’re a top 10 3PL, third-party logistics, company that specializes again in leveraging our resources to create supply chain and logistics solutions for our clients, carriers, agents, and partners.

Matt Stekier: Let’s get right to it. What are some of the key issues we’re seeing today with the shippers in the food and beverage industry?

Brian Winshall: Well, I think a lot of it, when we come back and we look at what’s happened over the last couple years, a lot comes around to rising transportation costs and those creating challenges really in profitability for a lot of organizations. I liken a lot back to ... One, first and foremost, is that, historically, we haven’t seen all modes be up. If we look at each mode offering a small parcel, less-than-truckload, truckload, intermodal, you usually get some markets going up and some markets going down. The last couple years we’ve seen all markets go up. The second factor with that is also probably the e-commerce effect. This goes well beyond and just looking at what has changed, and we’ve all seen that in terms of the retail and e-commerce effect, but it’s really from a B2C world. It’s really correlated back to a B2B world as well.

So, there are new demands and new needs being placed on organizations and how they really need to execute through their supply chain and logistics in order to meet those needs and to be able to facilitate those new needs and also the growth for organizations. It’s created a very dynamic and challenging landscape for a lot of shippers and customers. As that change has occurred, those needs are really, really strong. Even in food and beverage, I guess specifically, we could look at there are a lot of warehouses that are starting to impose more fines associated with trucks not showing up on time or order fulfillment — obviously OTIF and Walmart being one of larger ones — but even the food-grade warehouses, they’re starting to place a lot more and more stringent requirements and expectations on shippers today. Those are creating challenges within the market and the landscape.

Matt Stekier: With all the changes in the landscape out there, are you finding a knowledge gap of understanding within the transportation marketplace at some shippers?

Brian Winshall: There’s a lot of hyperbolic conversations that go around at the truckload market. If we think about it, just to put it in perspective, the LTL or less-than-truckload market, which is about a $35 billion market, is very concentrated. There are, let’s say, 200 LTL common carriers that are governed by the NMFTA. Of those and that 35 billion, the top 20 control 90 percent of that market, so it’s fairly concentrated. Truckload is the complete opposite, where 90 percent of the capacity in the market is thousands and thousands of carriers, that 90percent is fleets and owners that average 20 trucks or less. Within this truckload market, which their estimates say around for higher market being around $350 billion, 10 to 15 percent is in the spot market or transactional market, not the contracted market.

That 10 to 15 percent has way more volatility and swings with a free market with supply and demand. And so, as we see that kind of rising over the last couple of years, and there’s been more challenges with driver shortage and ELD mandate, the hurricanes and weather effects that have kind of caused the market to swing, we forget a little bit of perspective or there’s lack of knowledge around the perspective associated to those markets. I think, the more that shippers understand the markets and what’s going on within those markets and the drivers behind them, it helps them create strategies and play those markets to their advantage. It takes a decent amount of knowledge and reading. Hopefully, organizations have supply chain experts and logistics experts within their industry. And part of the thing, what we’ve seen a lot more is clients understand where they maybe have some gaps and they look to create relationships to help fill those gaps.

Matt Stekier: How can a strategic approach help in today’s landscape?

Brian Winshall: We have somebody that joined from a shipper side that has their MBA in supply chain and help with a large shipper. When they came over to GlobalTranz in a 3PL, one of the things they said is they were amazed at how few clients were really collaborating and getting strategic. I think that’s going to be a change that we see. As the ability to capture data, new technologies, cloud-based, APIs, all of that have created an environment where we all have access to data that we didn’t have before in an easier fashion. I think what we’re going to see more over the next couple of years are more data-driven conversations that are more collaborative and strategic in nature. You have this top-level strategy, which is how do you want to ... what are your strategic goals or business needs and how do you want to create a strategy to accomplish those and to achieve those goals?

Then it starts to break down into smaller segments. You could even have, for instance, a truckload strategy. We’ve helped clients where they’ve said, “I’m using 100 providers today and I want to narrow that down.” Maybe of those 100 providers if, let’s say, a shipper has $100-million truckload spend, then maybe they look at that and say 50 of them are asset-based partners that they’ve worked with for a long time, and 50 of those are third-party logistics organizations or truckload brokers that they’ve worked with for a little bit of time. They look at it and say, “How can we get more strategic with that?” Maybe it makes sense to bring those 50 3PLs down to five 3PLs and to do more with less. Maybe they can get a little bit better pricing. Maybe they can create efficiencies in their processes and the way that they’re trading — I guess, information and business today — and maybe the same holds on the asset-based side.

Maybe there are 10 of those providers that are only doing something very niche for them. I advise clients to take a strategic look at your business and to understand where you have strengths, understand where you have weaknesses or challenges, and then again, create relationships. Either you need to hire in and build or create relationships to close some of those gaps. I think that puts an organization in an improved position for both profitability and success as they go forward.

Matt Stekier: You touched on a very interesting point and that is collecting data. One of the things we find with our clients is some either don’t have the data available to them or they have a lot of data but they’re not sure what to do with it. It makes me think of that saying, “You’re data rich, but information poor.” Could you give us some examples of what data is important?

Brian Winshall: It’s interesting that you bring that up. This is where we’ve seen a huge amount of traction in our managed transportation solutions and that is where we are really partnering with shippers and clients to help drive strategies. It could be anything from, some of them are just saying, “We want to capture data,” and that might be the first step is getting that visibility and that control.

Areas that we see, oftentimes, again, this is where it breaks down to those modes’ specifics, so if you’re looking to drive something around LTL, or less-than-truckload, starting to get into understanding what is your cost per pound or what is your cost per unit metric, or what is your cost, transportation cost, or supply chain cost as a percent of sales? Whatever your primary metric is that you’re looking to drive that supply chain logistics, you have a few that are real high-level that drive the performance of your business.

For instance, a client that wanted to focus on service and the customer experience, they might place that a little bit above transportation costs. Within each of these modes or within each maybe of a client’s business units or products, there can become data that help empower them and drive that conversation or make, I should say, strategic management of their business so they can enhance that. One would be if we were talking about food and beverage. Two would be, I would say, retail, or we mentioned about the food warehouses. The compliance charge backs we see are very significant. We’ve experienced where a lot of clients are ... maybe you might have somebody where there’s a transportation manager and they’re being told that they have to get 10 percent cost out this year. That transportation manager might not even get visibility into the compliance charge backs that are maybe going in the customer sales. Sometimes, we see them making decisions that might be penny-wise and dollar-foolish. That’s where if you look at it as a whole, then you can really understand it better and make the right changes that are optimal for the business.

Matt Stekier: If we want to look at one piece of advice or one key trend that you would like to point out to your customers, what would that be?Brian Winshall:The big item there is to make strategic decisions and to be careful about short term or commoditized wins. That gets down ultimately to knowing your supply chain capabilities and the strengths and the weaknesses and then looking to close those gaps. Leverage the data and technology. Make those data-driven conversations that are collaborative and strategic. I think, ultimately, at the end of the day, when we look at this market changing and evolving and those demands, we all want to do it profitably. We want to grow profitably and responsibly. And I’m not pretending that it’s easy.

Brian Winshall: Ironically, I’ll share with you at CSCMP last year, at their annual conference, more shippers admitted that their supply chains are more inefficient today than they were three to five years ago. It was a very telling experience for me in hearing the shipper community be open about that. I think that really starts that need for change. We want to grow profitably, but in order to do that, you have to understand your cost to serve. It does take a decent amount of effort to really start to get to understand that cost to serve, and you need the systems and the process in order to be able to do that.

Matt Stekier: Absolutely. Speaking of changing and evolving, let’s get into the topic of food safety traceability and the different technology solutions that are out there and some of these emerging technologies that could potentially provide a large impact into this area in the future.

Brian Winshall: Sure. One of them, obviously blockchain is a huge topic of conversation. It has been for a few years. I heard somebody explain it interesting from BiTA, which is the Blockchain in Transportation Alliance. The way they explained it is, it’s like doing a crossword puzzle with somebody else and doing it in pen. If you can think about that conceptually, it’s permanent and you can’t go modify it. In order to modify it, there would have to be a whole process, but when you get all these right inputs, it creates it where it’s locked in ink, in essence. If you think about it, it helps from a financial ledgers standpoint, but importantly, back to your question, it helps also from a sourcing and a food safety and traceability standpoint because if you think about it, if everything is going through the blockchain system and process, and all of the suppliers are having to put in where exactly they got that product or commodity that goes into that product from, it’s all recorded and, important, traceable and accessible in a very quick and easy fashion.

I believe there was an example between, I think it was Walmart and BiTA and IBM where they were creating this ecosystem, small ecosystem within blockchain where they were tracing mangoes and they were looking where they came from. There was an issue with the mangoes and they found it out and within seconds they were able to locate exactly that source of mangoes and where that came from, where that would have taken weeks maybe for them or months. Obviously, when we talk about food and consumption goods, obviously that could be a life-or -death situation for a lot of people. Not going to devalue, this is a very important item. I think a lot of organizations are challenged with the ROI and the value proposition associated to this: it’s large, it’s complex, and trying to figure out how do they implement and integrate it into their operations.

I think the larger organizations are creating these microecosystems that they’re doing pilots and they’re understanding the value and how it works and how to integrate it within their business. Then, you get others that are kind of hanging around to see how blockchain plays out. For those that are curious, I would suggest that they potentially join BiTA, that transportation alliance for blockchain and/or they follow them. I’m sure there’s local events that you can attend to see if that’s something that you want to do, but I do think that companies should be aware of what’s going on. It’s been talked about a lot, but there hasn’t been quite as much movement from a large perspective within the market.

Matt Stekier: Yeah. When I was at the 2018 APICS annual conference in Chicago this past September, end of September-October, there were two trains of thought on blockchain and one was blockchain is going to be as common as email. The other was blockchain is great for the examples you just provided and could be very useful for complex supply chains, but other than that, not sure if it really adds the value. It’s going to be interesting to see which way we go in the future. Brian, we’ve talked today a little bit about the change in an evolving landscape in the transportation industry and how the Amazon effect is impacting the way shippers are having to provide transportation solutions to their end consumers. Can you talk a little bit about that, the challenges that it presents and the different solutions that we’re able to provide them?

Brian Winshall: I would say it’s the customer or consumer demands that you see in a B2C world, those really start to trickle over to a B2B world. The, I-want-things-faster: I don’t necessarily want to say they’re going to be received between today. I don’t want to say that those are going to be received within a two-hour window. I want to say those are going to be received at one o’clock today. You start to get very specific on the demand at the time and the expectation. Clients can definitely look at how can they get the products closer to a customer and how can they shorten that transit time.

We have seen a lot of clients go through and look at network optimizations where they can get a better understanding of where should they put DCs, where do they have factories today, and importantly, what is the cost of inbound transportation as well, procurement of whatever their materials are inbound to their process, and really starting to understand and look at a omnichannel fulfillment in order to get product faster to their customers and to be able to do it again responsibly and profitably. This is where I think some clients we’ve seen don’t understand necessarily what the cost to serve is associated to that. It takes a lot when we talk what a, I guess, new supply chain and logistics model looks like to be able to meet those needs versus what the old or typical, just a manufacturing DC to a truckload or intermodal or rail, to distribution centers and then those distribution centers to whoever the end customers are, or retailers.

What’s going on today in a supply chain between that omnichannel and the reverse logistics, having the right inventory in the right locations, being able to fulfill smaller and more frequent orders and/or demand volatility, and to do it responsibly and profitably is a big ask. That’s where it really takes a combination of all of these tools, the technology, for visibility and control, and then to be able to understand those KPIs and those metrics for strategic management, that’s where it really starts to all come together, and the ability to look at moving between different modes or how do you want to drive change. I’ll bring it back around too. As we’ve seen a lot of clients get value from, for instance, looking at their order size quantities, in creating a min order and a max order associated to make sure that they’re driving that cost per pound or cost as a percent of sales. That’s where you really start to get movement, I think, within the strategic management and driving responsible and profitable growth.

Matt Stekier: That’s a great point because it’s amazing how often if you adjust your order quantities, you may be able to increase the amount of incoming goods at virtually zero-added transportation costs. On the flip side, if you adjust your orders down, you may hit that price point where you’ve cut your price per pound down significantly.

Brian Winshall: That is a huge value point with managed transportation or having, I think, a strategic and collaborative partner. That’s where we’ve seen, while managed transportation, I think ARC Advisory Group actually did their most recent study on this. They said that 56 percent of respondents reported greater than 6 percent savings associated to freight and 32 percent saw over 12 percent, but that doesn't get into necessarily these other factors. We’ve seen some really strong results from those in general.

Matt Stekier: Absolutely. So far today, we’ve focused specifically on food and beverage. However, there’s some industry trends right now in terms of transportation industry that would be industry-agnostic to food and beverage, to manufacturing, to healthcare. That’s the ELD mandate that went into effect last year and the ongoing driver shortage in the transportation industry. Could you just touch a little bit on those two topics?

Brian Winshall: Sure. If we bring this back around again and think truckload market, when we speak of truckload market, I think it’s clear to delineate that you start to get in the for-hire, typically the for-hire truckload market versus what might be as dedicated or private fleet or contractual and short haul. When you look at that market, the ELD mandate definitely had an effect. I mentioned before around that 90 percent of the for-hire truck market is with fleets that are with 20 trucks or less. A lot of the larger trucking companies, truckload organizations, had already implemented ELDs a long time before the mandate. They had already kind of normalized their networks. The smaller fleets weren’t necessarily as aggressive prior to the mandate. Therefore, when the mandate occurred, there were changes. They had to figure out how to use these systems. Those systems that have maybe some kind of a suck on productivity, which goes into supply. Again, think of truckload, supply and demand in any free market. When you lose productivity on a vehicle or utilization, then obviously that takes a little bit of supply out of the market.

I think that’s been normalized. Any productivity has come out, has come out. The hurricanes obviously amplified that effect last year, but I think that’s kind of normalized. What hasn’t normalized or is the new trend is that the ELD mandate and visibility to ELDs and logging devices, it takes some flexibility out of the system and process for what used to be. A driver that might’ve been close to a warehouse that had 15 or 20 minutes to go might have pushed it to get to that warehouse. Today, they don’t have that flexibility and they have to shut down and they look at shutting down immediately. They don’t want to be in violations on that.

One is that it’s normalized, but the system is way more rigid than it is today. The driver shortage is very real. We have a labor shortage in the world and North America in general. What we have to think about from the driver shortage and a driver perspective is that truck drivers are shared labor supply. When you get this overall labor shortage and you have truck drivers, they oftentimes will bounce between working in a warehouse or working construction or working oil and gas. And when the market’s going very well as a whole or those industries are going well, then they’re all kind of taking from the same labor pool and that has a cumulative effect. There is something that I will point out as well that I found interesting, Matt. That was at CSCMP last year, again where they were talking about the truckload market and what to expect going forward, wait-time at facilities is a very big item while everybody in the market’s kind of tapering a little bit on the demand and there’s been recent additions to supply both from a driver and assets, buying trailers or tractors.

Matt Stekier: Although logistics is often looked at as a standalone cost, it’s important for the operations to be in lockstep with the logistics group so that when the trucks are scheduled in for pickup, that there is a door open and that there is labor there ready to either unload and/or load the truck and get them on their way so they’re not spending wasted time at the facilities, waiting to be loaded and taking up that precious time that is being electronically logged nowadays.

Brian Winshall: Bob Costello, who is the chief economist for the ATA, the truckers association, he stood up in front of a room and said the statistic that if all shippers were to ensure that they load trucks within two hours, which is the general allowance before detention starts, if all shippers did that, then they would create 30 percent more capacity in the truckload market. When you think about when there’s challenges from a capacity standpoint or, I guess, what happens with supply and demand, 30 percent on a large market is very significant.

Most recently, I’ve seen some of the organizations start to offer new products that actually create a community where drivers can rate their experience at a shipper for their last pickup. And there’s no question that carriers are starting to become more selective and knowledgeable really with what facilities they go into. It’s not just that a shipment pays $1,000 to go from point A to point B. They are actually looking at who is at point A and who is at point B. If they take longer or it’s not as clean of a process, then do I want to take that or would I be better off taking $980 from another shipper in that area and to a different company. They can definitely be more selective and they are, because it’s having more of an effect on their profitability and their operating ratios.

Matt Stekier:Yeah. In relations to the driver shortage, it will be interesting to see how the push for autonomous vehicles makes its way into the commercial truck industry. Thanks, Brian. I really enjoyed our conversation today.

Brian Winshall: Matt, thank you very much for having me today.

Matt Stekier: Thanks for joining us. Remember to check out additional food and beverage resources.