Consumer packaged goods (CPG) companies continue to fight for market share and retail shelf space — whether they have a brick-and-mortar store or function online. Price points are always the key weapon, and manufacturers rely on lean logistics operations to provide a cost advantage and help them be more profitable.
We’ve compiled three fundamental strategies CPG companies can harness to save money and give themselves a competitive advantage, especially when competing with more prominent, experienced brands. These strategies can also help manufacturers strengthen their relationships with their retail customers.
1. Perform Packaging and Configuration in the Distribution Center
Many CPG companies still ship products from a distribution center to outside packaging firms to return the product to the same distribution center. This inefficiency increases transportation costs and adds more risk because the CPG company loses product visibility during the packaging process.
These issues can be eliminated by performing packaging and other product configuration functions right at the distribution center. This reduces freight costs and product damage since the product moves faster through the distribution cycle.
2. Dropship E-Commerce Orders on Behalf of Your Retail Customers
Because your retail customers most likely ship e-commerce orders for your products from their current distribution networks, it is difficult for them to turn a profit.
Instead, consider fulfilling your retail customers’ e-commerce orders directly from your distribution centers. This “factory direct” strategy increases efficiency and helps both sides preserve revenue by lowering freight costs.
Of course, the retailer would want to maintain and control its branding. As a way around this, your distribution center can provide necessary labeling and packaging requirements to mimic the retailer’s current branding and shipping methods. (If you’re already performing the first strategy, this should be no problem.)
3. Collaborate with Retailers and 3PL Partners to Consolidate Freight
Load consolidation combines freight from different companies moving to the same place to leverage lower-cost truckload rates. Unfortunately, this ad hoc activity occurs only if a third-party logistics provider (3PL) or carrier recognizes consolidation opportunities.
CPG companies can realize cost savings by collaborating with retailers and 3PLs on a different process for replenishment — one based on a retailer combining its orders to multiple smaller vendors into a single purchase order. CPG companies benefit by sharing storage costs and reducing outbound freight costs.
To explore this strategy, look for a 3PL that handles product distribution for many brands that ship to grocery chains and mass retailers.
Consider a 3PLprovider like Taylored Services to help take advantage of these cost-effective distribution strategies. You can outsource some or all of your operations to a 3PL.
Why Taylored Services
Taylored Services is a fully integrated 3PL provider specializing in wholesale, retail, and direct-to-consumer unit fulfillment. The company operates 1.5 million square feet of warehouse and distribution space close to the Gateway Ports of Los Angeles/Long Beach and Newark, NJ.
E-commerce businesses need a partner with significant investments in systems and technology along with established, long-term relationships with other interim suppliers along a product’s “shipping journey.” Using Taylored, clients can track their merchandise at every step through and from the warehouse to multiple destination points.
Services include:
- Warehousing and Distribution
- E-Commerce
- Supply Chain Management
- Value-Added Services and Merchandise Rework
- Transportation Management Services
Working with a full-service, integrated logistics provider like Taylored Services helps e-commerce businesses of all sizes serve customers more efficiently and allows such companies to scale when needed without significant investment.
Sources
https://www.kanelogistics.com/blog/10-strategies-reduce-cpg-logistics-costs
Jake Wengroff writes about technology and financial services. A former technology reporter for CBS Radio, he covers security, mobility, e-commerce and IoT.
