Raising the bar(code?): real-time tracking and communication technologies help carriers and...

They say life is what happens to you while you're making other plans.

It's a fitting summary of life in the food industry's logistics sector. On one hand there's the ongoing quest of consumer packaged goods companies to realize a 10-year-old vision of Efficient Consumer Response (ECR).

Where to start? How about with a look at the more concrete details of warehousing and distribution.

Released in 2002, the latest biennial report from USDA's National Agricultural Statistics Service show the nation's gross refrigerated space increased 4.8 percent to 3.04 billion cubic feet in 2001. Moreover, both the public and private warehousing sectors are literally gaining ground. Industry officials say public refrigerated warehouse space continues to grow at an annual rate of more than 10 percent and now exceeds 2.25 billion cubic feet. Privately owned warehousing also is growing and now accounts for a combined estimated 789 million cubic feet of space.

Using construction industry revenues to track activity, market tracker McGraw-Hill Construction Dodge said the nation's robust transportation sector generated $25.8 billion in contracted work during 2002. That amount -- representing 13.3 percent of total construction contract revenues -- was up significantly from the year before.

Logistics observers sound one cautionary note. They point out that the nation's building boom comes while many manufacturers strive to reduce inventories and increase turns. As a result, there probably is a temporary glut of capacity with so many new private, public and dedicated warehouses and mixing centers. Meanwhile, there's reason to believe warehouse and distribution center operators - private and public -- will work to shutter outdated storage sites.

The nation's transportation sector offers a similar story of growth, slightly offset by the hard realities of business. Refrigerated Transporter magazine Editor-in-Chief Gary Macklin says demand for trucking continues to be strong and indications are that truck carrier revenues will be up during 2003. However, most carriers will continue to experience weak performance with narrower margins for many.

Says Mackim, "High insurance premiums and fuel costs -- particularly during the first half of this year -- have contributed to higher operating ratios for even those carriers with the strongest profit margins. As freight volume increases, carriers also need more drivers and the money for all these things has to come from somewhere."

During such a capacity crunch, Macklin suggests that carriers try to raise rates, walk away from unprofitable business and address inefficient practices. To the last point, the editor endorses a new technology.

"Carriers keep a certain number of extra trailers because shippers and receivers require it," he says. "New remote monitoring and tracking systems for un-tethered trailers now help boost efficiency. That's because carriers now can know exactly what [assets] they have tied up at any one time.

For a similar look at warehousing trends, Refrigerated & Frozen Foods spoke with Jack Ampuja and Greg Sargis, two officials with Equity Partners, a logistics consulting firm.

Sargis starts the discussion with a reference to ECR.

"ECR's focus on specific areas of the supply chain has produced significant improvements. However, there is also a lot of unfulfilled promise," he says. "Some ECR promoters have gone as far as proposing specific targets for inventory turns and levels and supply chain ratios for the entire grocery manufacturers industry. Many of these areas are the ones that haven't been 'achieved.' I believe the establishment of these specific targets for general industry is naive at best.

"Too many market factors affect the broad industry for specific factors to be applicable even to a minority of manufacturers," he continues. "These factors include commodity cost fluctuations, excess capacity, the impact of manufacturing overhead on standard cost, transportation costs and mode, shelf life, competition, etc."

Ampuja agrees and suggests that the retail industry's various segments still make isolated and disjointed decisions that affect logistics. Meanwhile -- like Macklin -- Ampuja says those organizations optimizing technology are showing the most progress.

"There isn't a single new technology that appears to be a silver bullet,' he says. "On the other hand, leading retailers and processors are using four or five different technologies for one- to two-percent increases here and there. Those add up because they help you control inventory costs. You also can improve your reliability and service levels."

A CPG and food industry veteran, Ampuja recommends those technologies that promote real-time tracking, analysis, communication and synchronization. These range from bar code scanning to inventory planning that's tied to cash register activity.

Echoing these sentiments are supply chain studies from Roland Berger Strategy Consultants; and the trio of Cap Gemini Ernst & Young, the University of Tennessee and Georgia Southern University.

In the first piece -- prepared for the Grocery Manufacturers Association -- Roland Berger writes, "While important strides have been made to 'clean up' untidy supply chain practices by improving order-cycle times and customer service, the industry still faces daunting challenges.''

Released this April, GMA's study compared 1999 data to 2002 and found that (1) logistics costs are rising, (2) the CPG supply chain is more responsive, (3) inventory levels are slowly decreasing, (4) more CPG companies are embracing "perfect order" service metrics, (5) use of supply chain services is limited and (6) forecasting accuracy remains low.

GMA then identified emerging supply chain challenges. These include the need to:

* Improve on-shelf availability of products

* Synchronize data between trading partners

* Increase flexibility in ordering, delivering

* Improve forecasting accuracy

* Improve manufacturers' internal cross-functional collaboration (i.e., communication between logistics and sales/marketing functions).

For their part, researchers at Cap Gemini, the University of Tennessee and Georgia Southern identified what they considered to be six "drivers" necessary for achieving supply chain management excellence.

Compiled in 2000, this list included collaboration, the sharing of real-time data with key customers, suppliers and partners; optimization, the implementation of new tools and processes; connectivity, the standardization of applications of platforms; execution, meaning real improvement in transportation, distribution, inventory and order management; speed, the ability to increase responsiveness; and visibility, the ability to track inventory flow, update order status in real time and manage incidents.

Updating their report last year, the authors note, "the one question that seemed to arise continuously since the introduction of the six drivers was, 'Is any one particular driver more important than the others?' The findings of our 2002 research suggests that visibility is the driver that enables a business to create new and dynamic capabilities that -- in concert with its supply chain partners -- allows them to operate as a single 'virtual' entity."

How organizations view logistics, supply chain management


Cost center            52%
Service center         15%
Strategic component    25%
Profit/revenue center   6%
Other                   2%

Note: Table made from bar graph

Organizational strategy: 2002


Leadership through customer service    31%
Leadership through product innovation  25%
Be all things to all people            20%
Low cost leader                        23%

Source: Year 2002 Report on Trends and Issues in Logistics and
Transportation; Cap Gemini Ernst & Young, Georgia Southern University
and the University of Tennessee.

Note: Table made from bar graph

United States refrigerated space operated by public and private
refrigerated warehouses

(Millions cubic feet)


Public   2252
Private   789

Source: USDA

Note: Table made from line graph