Refrigerated trailer customers enjoy improved performance, survey says

Jan. 1, 2003
BUCKING the effects of a down economy, key performance indicators for wholesale grocers and retail supermarket chains improved in 2002. This data is reported

BUCKING the effects of a down economy, key performance indicators for wholesale grocers and retail supermarket chains improved in 2002.

This data is reported in the Food Distributors International wholesale/retail transportation and fleet maintenance report prepared for the 2002 Food Industry Productivity Convention and Exposition.

The Food Industry Productivity Conference and Exposition is sponsored by the Food Distributors International and Food Marketing Institute. Food Distributors International is the umbrella organization for the National American Wholesale Grocers Association and the International Foodservice Distributors Association. The conference was held in October 2002 in Atlanta.

The cost per mile of fleet operation fell 17 cents to $2.12, and the cost per stop dropped $2 to $219, which in turn, helped drop the cost per route $28 to $501. These lower costs are reflected in a drop of six cents in the cost of a delivered case to 33 cents. With all these improvement, however, distribution costs as a percentage of sales remained at 1.72%, the same as it was in 2001.

Cost per mile, which had gone up through most of the decade of the 1990s, began falling in 1997 to $2.19 per mile after reaching a 10-year high of $2.23 in 1996. In the ensuing three years, cost per mile dropped to $2.14 in 1998, $2.04 in 1999, and $2.00 in 2000 before jumping sharply to $2.28 in 2001 mostly as a result of rising fuel costs.

Relative stability in the oil market seems to have allowed cost per mile to drop again to $2.12 for 2002. Data for this cost survey was collected and analyzed by Richard H Kochersperger, a consultant in private practice.

The survey also summarized what refrigerated fleets are looking for from their delivery equipment. Among the factors:

  • New trailers should be designed to run longer and to operate at significantly lower costs.

  • Many fleets are purchasing longer trailers to reduce the number of trips per day.

  • Distributors are adopting new technology such as global positioning to track equipment movement, radio frequency warehouse systems, and other sensors that help monitor equipment utilization and provide data for fleet forecasting.

  • Food safety concerns are finding their way into fleet design and purchasing decisions. Managers are facing the reality that proper temperature control for all products is necessary as retailers make stronger demands for order delivery condition. To meet these concerns, more fleets will begin to need multi-temperature refrigeration systems with positive temperature control in two to as many as four temperature zones.

  • Many fleets are shifting their maintenance strategy from repair during long service life to preventive maintenance with repairs performed by vendors for equipment covered by extended warranties.

Wholesalers vs retailers

The transportation and fleet maintenance report differentiates between wholesale grocery and retail chain operations. The data usually shows that retail chains operate with a significantly lower cost structure than wholesale grocers. Retail chains deliver larger orders at each stop, travel fewer miles per route, and spend less time handling merchandise at stores.

This tighter control of distribution is indicated by a lower cost per mile. Although the cost per mile for retail chains is lower than that for wholesale grocers in 2002, retailers actually experienced an increase of two cents per mile to $2.07, up from $2.05 in 2001 and $2.00 in 2000.

Benchmark data for wholesale grocers in 2002 shows decreased costs in all but one category. Cost per mile dropped 17 cents to $2.12 from $2.29 in 2001.

Delivery cost as a percent of sales for wholesale grocers remained stable at 1.72% for 2002 and 2001, remaining at the 10-year low and only marginally higher than cost as a percent of sales in 1980, the first year that FDI (then NAWGA) began recording delivery cost data.

Other findings

Among the other findings of the survey:

  • Fleet managers responding for the 2001 transportation report said that the sales department has the largest impact on transportation costs. This is because sales has the power to dictate delivery times and conditions.

  • The number of food distributors and retailers continues to shrink as the industry consolidates in search of economies of scale. In the past year, several large chains such as A&P, Albertsons, and Winn-Dixie have closed stores and divisions throughout their operations. In more serious moves, K Mart has filed for Chapter 11 bankruptcy and closed 285 stores with more closings likely to follow. Ames has shut down its business, which had 385 stores, and C B Ragland, a wholesaler with a 100-year history in Nashville, Tennessee, closed its distribution center, because it was unable to meet competitive pressures.

  • The growth of Wal-Mart remains the biggest influence on food distribution in North America. In only 12 years of selling food, Wal-Mart has become the largest food retailer in the US with food and consumable sales of $80 billion in a total sales package of $240 billion annually.

  • Wal-Mart continues to open supercenters as fast as they can be built and projects increasing their number by at least 180 per year for the next several years. These megastores impact the sales of every retail food outlet within 20 miles of the supercenter, the FDI report says. Every supercenter opening removes more than $400,000 in sales from traditional retailers in the competitive marketplace.

  • Fuel costs remain high and could go higher in the event of military action in the Middle East.

  • Although fuel economy gains have been made by equipment manufacturers, wholesale grocers and retail chain fleets have been unable to take full advantage of the increases in the face of urban traffic congestion. In fact, food fleet fuel economy fell to 6.3 miles per gallon in 2002, down from 6.39 mpg in 2001.

About the Author

Gary Macklin