Everybody is looking to shave costs and improve profit margins. Executives find themselves answering tough questions about layoffs, product discontinuation and whether to tighten ad spends and PR budgets. But before enacting a last-resort tactic, retailers should think about improving the efficiency of their supply chain and logistics.

Lora Cecere, vice president, consumer products at Boston-based AMR Research, says small and large companies are relying on third-party logistics companies (3PLs) like Ryder System, RMX Global Logistics and Penske Logistics to move cargo via truck or freight. These companies are helping retailers work from the shelf back, sensing demand and changing supply based upon what people are really buying.

“We used to have push-based supply chains where a merchandiser or some smart person said, ‘This is what we think people are going to buy and we’re going to buy it and we’re going to send it to the stores,’” Cecere says. “Demand-driven supply chains sense what people are actually buying and configure the supply chain to be more responsive to actual buying patterns.”

Third-party providers have helped retailers bridge the gap between supply and logistics, Cecere says. “We’re now able to see by item/store cluster based upon demographics of what people are buying and to transmit that quicker into the supply chain for replenishment.”

To get products to stores, “the 3PLs are using network design tools to plan routes better; they’re looking at how they can pull or combine freight from other clients to cut down the cost of freight for everybody,” she says. “And because of the aggregate freight spend that they have they’re able to get cheaper carrier rates.”

Supply strategies cut costs
St. Louis-based Save-A-Lot is a wholly owned subsidiary of SUPERVALU that operates 15 distribution centers from Florida to New York. The company buys and sells grocery commodities in full pallet quantities and limits the number of SKUs to generate efficiencies in operations.

“Our business model drives efficiency in both warehousing and transportation, which is so critical with the cost structures that we’re faced with today,” says Save-A-Lot director of transportation Donald Smith.

Save-A-Lot depends on Ryder System to provide all the dedicated transportation for four distribution centers. Whenever a Ryder truck carries a Save-A-Lot load, Smith says, Ryder looks for additional hauling opportunities to offset costs. So a Ryder truck may be carrying five pallets of tomatoes for Save-A-Lot as well as crates of lettuce for a regional burger chain; both companies get their products on time and split the fees.

“With a partner the size of Ryder, the organization has a lot of bench strength as well as technology and we’re able to leverage those advantages to get the products to our stores in the way the customers desire,” Smith says.

Save-A-Lot’s Colorado stores are serviced by a DC in Fort Worth, Texas. That’s a long and expensive route, so “Ryder has arranged for consistent back hauls for us into the Fort Worth marketplace, which has made a drastic reduction in our overall cost [as a result of] the revenues that we’ve been able to gain,” Smith says.

That’s about 25 trips a week where Save-A-Lot would otherwise be sending back empty trucks. If it were not for Ryder System, the supermarket chain would have to pass the transportation costs on to the consumer and franchise owners.

“As we open more distribution centers, we always look at Ryder as a potential [partner] for managing the dedicated transportation for those operations,” Smith says. “They’ve really helped us hold the line on costs so we always look to them.”

What the doctor ordered
Dr Pepper Snapple (DPS) Group also works with Ryder to manage costs and improve customer service. “It’s on time and in full,” says Brad Womack, senior director of logistics and transportation for Plano, Texas-based DPS, and it “allows us to bring, within the regional concept, all of our products within a regional distribution network.”

Many DPS retail customers are within regional proximity of the supplier’s DCs, passing the facilities as they make their own deliveries. The company has tapped Ryder for a light solution, where the 3PL has committed knowledge capital and technology in collaboration with the beverage provider to design, procure and execute the company’s transportation network with a focus on continuous service and cost improvement, says Dave Belter, group director of transportation management for Ryder.

DPS has a sizeable fleet that is managed through the bottler network. It executes bulk deliveries to larger customers on a more regional scale, and “we utilize Ryder’s own internal dedicated fleets for some of those activities as well,” Womack says. “In addition, Ryder manages our transportation and our procurement arrangements with our carriers, so they also utilize the assets of those carriers.”

Among the challenges that the 3PL helps DPS face, managing fuel is at the top of the list, Womack says.

“While the complexity of the fuel application differs across different modes, we’re able to leverage the Ryder technology to assist in making the correct modal decision based on the total cost to serve the customer,” he says. “We’re utilizing the fuel programs that Ryder has been able to procure [as well as] the technology they have.”

And as costs continue to escalate at a rate faster than inflation, Ryder maximizes assets to complement flows, reducing the carriers’ empty miles. The 3PL also manages truckload capacity, an area that “is absolutely diminishing within the industry, so we’re working in collaboration with Ryder to develop a core portfolio of carriers to service our customers,” Womack says.

“We’re constantly [working] with Ryder engineers, as well as our own internal analysts and engineers, to really develop a balanced network for inbound and outbound activity.”