Five Ways to Tackle Transportation Efficiencies

With long-haul trucking a mainstay in the grocery foods business, retailers and CPGs are looking for ways to drive savings by investing in more efficient transportation options.

For some, that means switching to energy-efficient trucks, including those operating on alternative fuels. Others are using technology to streamline routes or are partnering with other companies to maximize truckload volume.

Retail Leader interviewed industry experts and consolidated their advice into five ways to improve transportation efficiencies:

1. Boost Fuel Efficiencies

Freight services currently are among the most energy-intensive industries serving the U.S. food supply chain, according to the U.S. Department of Agriculture's Energy Research Service. And the distances traveled for many food commodities have increased during the past several decades. To the extent food companies can improve fuel efficiency through more aerodynamic truck designs or clean-engine technology, they will reap savings over the long term.

Cincinnati-based Kroger has been improving the aerodynamic design of its delivery fleet of 2,700 tractors and 10,000 trailers.

Cincinnati-based Kroger, which has a store delivery fleet of 2,700 tractors and 10,000 trailers that traveled about 297 million miles in 2011, has been striving to improve the aerodynamic design of its tractors and trailers to improve fuel economy, the company states in its annual sustainability report published in June.

The retailer, which owns about 80 percent of its trailers and 55 percent of its tractor fleet, also is using clean-engine technology to improve tractor fuel efficiency, installing automatic tire inflation systems and expanding the use of multitemperature trucks to enable them to transport frozen, refrigerated and dry goods in one vehicle.

Burris Logistics, an 88-year-old Milford, Del.-based company that offers refrigerated warehousing and custom retail distribution, has achieved about a 1.5-mile-per-gallon increase in fuel efficiencies during the past five years due partly to making its trucks as aerodynamic as possible, says Maria Wittmeyer, vice president of transportation. The company's grocery store customers include BJ's Wholesale Club on the East Coast and The Fresh Market in Texas, California and Midwestern states.

To boost fuel efficiencies, the company has installed fender skirts on its trucks, a move that has resulted in savings of about 4 cents a mile per gallon, corporate fleet manager Gary Quillen says.

Burris, which drives about 2,400 million miles per year, also saves fuel by installing auxiliary power units in sleeper tractors that stay out overnight. Those tractors usually burn one gallon per hour when the truck is sitting idle and its driver is sleeping, but with auxiliary power units, a truck uses just 0.2 to 0.3 gallons an hour when it idles. "All of our sleeper tractors have that option," Quillen says.

While trains require one-fourth the fuel per ton mile as trucks do, rail terminal times can result in longer delivery times.

2. Improve Routing

New information technology is allowing retailers to save time and energy by determining the most efficient routing.

Kroger has invested in network-based transportation management systems to improve the efficiency of its store delivery and inbound fleets. The new technology includes updated versions of Kroger's routing and dispatching tools and the addition of a GPS-based on-board computer system in all Kroger trucks, spokesman Keith Dailey said. "The addition of the on-board computers enables real-time decision-making and more efficient resolution of conflicts when they arise," Dailey says.

At Burris, efficient routes for outbound deliveries are determined on a daily basis using dynamic software located in dispatchers' offices, Wittmeyer says.

At the same time, "there is a lot of potential in information systems still not utilized" by logistics and other transportation companies, says Hani Mahmassani, director of the Northwestern University Transportation Center. "The industry is not where it could be yet."

Companies need more than current traffic patterns, says Mahmassani, who specializes in multimodal transportation systems analysis and dynamic network modeling and optimization. They "also need predictive information on how traffic is going to evolve."

Using predictive data, truckers can reroute vehicles, resulting in 3 percent to 20 percent improvement in real-time efficiency in the distribution process over the course of an operation, according to Transportation Center studies.

3. Fuel Up with Alternatives

Trucks still carry the majority of grocery shipments in the United States, and the high cost of fuel is encouraging more companies to seek out alternative-fuel vehicles, mostly for short deliveries.

Tesco, for instance, operates a zero-emissions fleet of electric delivery vans in the U.K. The vans, which debuted in 2007, cover 100 miles before they need recharging and have a maximum speed limit of 50 m.p.h., Tesco says. It aims to be a zero-carbon business globally by 2050.

Besides fuel savings, companies seek alternative-fuel vehicles out of a concern for long-term environmental sustainability, Mahmassani says. Still, alternative fuels aren't a panacea. At Burris, Quillen says he has looked into natural gas as an alternative fuel option to diesel, but many of his delivery routes are hilly and require greater engine torque.

A hybrid engine using both diesel and natural gas interests Burris, Quillen says, but the service infrastructure for those engines is not yet in place. "As soon as it becomes viable, we are definitely going to get into compressed natural gas trucks," he says. For now, "we order and spec out the most efficient" trucks and trailers.

Train transport represents another alternative, and train companies increasingly are having success with intermodal freight, a combination of rail and trucking, says Joseph Schwieterman, a contributor to the Transportation Research Board and a professor in the School of Public Service at DePaul University in Chicago.

Trains generally burn one-fourth the amount of fuel per ton mile as trucks do, he estimates, and they avoid urban traffic congestion. "With the uptick in the economy, we've seen an uptick in congestion this year," after a couple-year hiatus, Schwieterman says. "With retail food deliveries, that's a new variable."

However, most food companies haven't found intermodal train freight to be competitive with trucking, Schwieterman says. "When you factor in [rail] terminal times, it's tough to beat a truck" in terms of time-to-delivery, he says.

"Traditionally in the food industry, at least in the last mile of delivery, you're taking a product directly to the retail grocer, and they need that product delivered prior to their doors opening in the morning," Wittmeyer says.

As retailers extend store hours, off-hours stocking becomes more difficult, Wittmeyer says. Retailers that used to start at 8 a.m. now start at 5 a.m. or 6 a.m., and many also are open later than they used to be. When customers are 24/7, "that shortens up delivery time frames" and puts added stress on the supply chain, she says.

4. Offer PickUp Services

As customers change their shopping habits and increasingly want to order merchandise online, retailers face new challenges in meeting their new demands and in managing delivery. They often find logistical challenges in delivering perishable goods to consumers' homes.

"Customers have ready access to the Web and mobile devices, and this is changing how they want to connect with us and other retailers," says Peg Merzbacher, a Peapod spokeswoman in Quincy, Mass. "They want to be able to shop anytime, anywhere," she says.

To handle increased online orders, Peapod and other companies are encouraging customers to pick up their purchases by offering drive-thru pickup service at designated locations, reducing their need to deliver the goods to consumers' homes.

Peapod, a unit of Ahold USA, has partnered with sister company The Stop & Shop Supermarket Co. to roll out pickup services at the Stop & Shop store in Norwood, Mass., in May. It has extended the service to Stop & Shop and Giant stores in the greater Washington, D.C., area. The company also opened designated pickup locations in suburban Chicago in a pilot last year and has expanded the service to a corporate center in Lincolnshire, Ill. Customers order their groceries online from Peapod and pick up their orders between 4 p.m. and 7 p.m. Monday, Wednesday and Friday during certain hours from the corporate center, where Peapod associates greet customers at their cars and load their groceries.

Peapod's initiatives have been in response to customer needs, but Peapod also has achieved fuel savings by eliminating deliveries. Peapod plans to roll out more pickup services this year and in 2014, Merzbacher says.

5. Team Up to Fill Trucks

Other companies are seeking out partnerships to ensure their trucks are traveling with their truck beds at capacity. Wittmeyer estimates Burris' truckload volume at between 98 percent and 100 percent of capacity.

Making sure trucks are full at both ends of the delivery cycle, or backfilling, "is a real issue with time-sensitive freight," Schwieterman says.

That's an issue where partnerships, or "collaborative logistics" can bring benefits, Mahmassani says. Retailers often are reluctant to share information with their competitors, Mahmassani says, but providing that information indirectly, to an independent provider, can add options and help optimize distribution efficiency.

"It allows you to keep trucks full at both ends," he says. That means "serving more customers and allowing for more loads."

Suzanne Cosgrove has covered commodities for Thomson Reuters and Knight-Ridder Financial News and has served as a real estate editor for the Chicago Tribune and as the Chicago bureau chief for Market News International.