The challenges in current supply chain run deep and broad. From semiconductor chips to swimming pool liners, to fresh chicken, and baby formula… the new word is “disruption”. We hear many experts quoting the reason for shortages as production, which is often true, but just one facet of the supply chain. For instance, what happens if extra production comes online? Product still needs to make it to market. There are a lot of touches before product winds up in retailer distribution ready for deployment and eventual sale.
This article looks to explore the supply chain challenge apart from production, particularly in cold chain. The steamship line must ship the aforementioned surge in new production. The port still must unload the mega-vessel carrying some 2,000 to 2,400 shipping containers. The containers still must clear inspection and be transported by a driver to a retailer’s warehouse, or in many cases to a third-party logistics warehouse. It must be palletized if floor loaded, tagged, counted, checked for shortages and damages, and put into inventory to await release from title holder to their customer, or to a driver who will transfer product to another property. Each step of the process is challenged for labor. Port laborers, drivers, warehouse laborers, inspectors, etc.… must orchestrate each and every pallet. Imagine if each of these points of touches were operating at 98% capacity. What happens when a surge of product enters the supply chain?
Here are suggestions to optimize your 3PL cold chain network during a stressed supply chain:
Carriers and 3PL cold storages are operating at full labor capacity. Even if there is space on the trailers or in the cold storage freezers, there may not be enough labor to orchestrate the loading, transport, unloading, and verification of freight. Any new program being bid out should have considerable conversation about the needs of the program. Beware of carriers and cold storages who are not asking specific details about your potential program. Managing labor means understanding new program distribution, turn rates, pallet heights, pallet weights, release methods, inventory rotation methods, even down to the average lot size within the program.
Once a program launches, the detail work must be ongoing. The carriers and cold storages should be provided forecasts on at least a quarterly detail- preferably by week. Understanding surges in both load velocity, as well as standing inventory seasonality, should be communicated to your 3rd party logistics partners. Ideally, the forecasting should expose surges on an annual basis. The high water and low water marks should be addressed well in advance. You do not want to hear that your carrier can’t cover loads, or your cold storage has run out of room. Your partners should be addressing your inventory anomalies and how they dovetail into their other customer forecasts. In the current labor climate, no one is “holding” space or has drivers on standby.
It’s common to hear of cold storages being full in certain geographical regions. While somewhat true, it’s probably more accurate to say cold storages are not taking on complicated programs in many areas because of labor and dock efficiency challenges. A program that surges by 60% in Q3 or Q4, the traditional heavy shipping periods, may struggle to find facilities that can handle the extra space and labor. In the past, seasonal labor was less challenging to onboard. Another example of complicating standard SOP would be if your expectation is to have the cold storage rotate your product by expiration date. First, are you sure the expiration date is plainly visible on the pallet? Is it encrypted? More and more producers are providing a scannable tag right off the production line. This tag saves unloading time and prevents the potential for handwritten dates to be written wrong or worse, deciphered wrong if cryptic (Julian date comes to mind). If you don’t currently provide such a tag, it may be time to get your team to launch a labeling process that provides non-proprietary scanners to pull data with an RF gun. Maybe your program can be run first in first out? Make it simple and you will find more facilities have capacity for your program. In today’s language capacity means both space for your freight, and the labor to perform unloading, racking, release, and timely loading of your pallets to your company’s standards.
The US ports have been stressed for both space and drivers for several years now. Dredging of ports, vying for the larger vessels has meant much more “bunching” of container work at ports. This has only been exacerbated as we have seen more importing of goods due to domestic production struggles. We expect to see surges in products as overseas products become available again. Cold storages at the ports are often full for inbound scheduling weeks in advance. Additionally, the port-based cold storages often are multiple weeks to get an outbound shipping appointment. Q3 and Q4 may get to 30+ days to get an outbound appointment this coming shipping season. It’s wise to get as much of your inventory out of port, and close to your customer, as possible. If your goal is to reduce out of stocks, take the time to set up local inventory hubs closer to your main customer distribution points. Get product out of port areas, further inland, where your product releases are a week instead of 4 weeks. Work with your large customers to get input on geographically advantageous areas to create hubs where they can pick up.
Placarding/labeling pallets: While simple, this act can really mess up a delivery. It takes time for customer service to get the right shipping information, print up labels and convey to the loaders what labels go on what. It slows down the outbound dock considerably. If you customer insists on pallet labeling, see if your production has the capacity to affix these labels at production and save everyone time.
Case picking: In cold storage, product is in racking and often forty to seventy feet up in the air. Case picking cannot be performed this high. So, each and every pallet picked from must be pulled down from the racks, film cut, hand stacked to a new pallet. The original pallet may need rewrapping and must be put back into location, with the inventory amount on that original pallet adjusted to reflect the new inventory. This is very labor intensive. Can your team order full pallets and case pick at your facility? If so, you may find more partners willing to bid your program. If SKU's aren’t selling a full pallet, are they integral to your program? Choices have not been the challenge since the pandemic, out of stock product has better fill rates and might require eliminating slow movers from your inventory.
Re-boxing: This service of changing a box of 20 items to a box of say 5 items, or 50 items has been a staple request for items that can be sold through both foodservice and retail channels. Traditionally, these “line workers” who re-box has been a specific type of labor like “lumping service”. Re-box labor has largely been gobbled up by the producers specifically. Bid any re-boxing program out early, and don’t assume a cold storage can provide such services before asking. Even if you know they performed it in the past.
Quick freezing/blast freezing: This is another high labor activity. If your team has the labor to put the inserts between the layers of product, then do so. It will save you money and you will find more facilities have capacity to handle your blast business. There is a lot of labor (and cost) in cutting pallet film, then restacking each pallet with inserts in each layer. It requires much area in the freezer staging area or possibly the inbound dock, where it slows up driver turn time. Once the product is frozen solid, those inserts still need to be pulled from each pallet and then the pallet must be secured for transport with new stretch wrap. A facility must have excess labor to perform any sort of blast or quick freeze. Lowering the labor constraints on your quick freeze program will increase the number of facilities willing to perform this service.
Cross docking: Cross docking services are very “handling-centric” in terms of revenue generation. On an annual basis, a 1,000-pallet program turning 6 times per year utilizes the same labor to unload and load as a 50-pallet cross docking program turning every 3 days. However, it will generate far less storage revenue. Avoid cross docking if possible. Investigate if you should move your inventory to a facility that can help you avoid the need for cross-docking. Step back in your supply chain model and see if it needs re-engineering.
To sum up, services that were often offered by third-party partners are drying up as a result of both labor shortage, and increased throughput in the facilities. The quick response you may be hearing is “we are out of capacity” for both more inventory and more service. Dive deeper with your partners and establish if the objection is space or labor. Develop solutions with your partners that allow them to perform to your standards and forecast so that they can provide ongoing excellence.