Cutting Transportation Costs To The Bone

As I have written here many times over the years, transportation and distribution are among your greatest costs. Any cost decrease has an immediate effect on your bottom line, so cutting costs is a compelling proposition that translates to more money – right away!

I have heard from many growers over the years who have followed the advice in my columns, and they have had great success. What I don’t understand is why more growers don’t implement these cost-cutting measures. If growers would merely simplify the fundamental elements of their businesses, they would not only stop wasting money but could focus their time on growing. 

So, here is your chance to cut your transportation costs to the bone. These four things will immediately slice at least 20 percent off your entire distribution costs.

Bid Your Freight Today

The available truck capacity in the market is greater than ever. Freight volumes are down in all industries (over 20 percent year to date) and drivers are plentiful – begging for a load, any load. 
 
In the good old days, if freight volumes were light, a driver would get out of his cab and work construction. Today, that is not an option. This has created an excessive number of drivers and trucks in the market – and so, it is a great time to bid out your freight and to lock in the savings.
 
Doing this is easy. You can hire an experienced third party who will charge you a flat fee for the project. The third party collects your lane data and sends it to thousands of carriers to bid (including your existing carriers). You then get a list of carriers who bid on each lane, from the lowest cost to the highest. For example, you may be paying $1.50 per mile today from Dallas to Mobile, Ala. 
 
But a new carrier needs that back haul and will do it for $1.30 per mile, or 13.3 percent less. These numbers add up quickly. If you spend $1 million per year on distribution and save 10 percent (a realistic goal), then you just put $100,000 back in your bank account.
 
If you have never conducted a lane bid for your business, you can realistically expect savings of 10 to 15 percent in freight costs.

Use A Transportation Management System

Savvy growers must remain informed about technology options that are available for every part of their businesses. Too often, growers will buy complex chemicals to fight disease or promote plant growth and vitality, but resort to whiteboards and paper to run their distribution efforts.
 
Transportation Management System (TMS) technology is affordable, effective and easy to implement. The latest and greatest trend is a Web-based, “on-demand” system. All you need is a Web browser and Internet connection to run the system. The only commitment you have is to convince your staff to use it. Once they do, they will realize technology should have been implemented years ago, and you will realize a decrease in overall costs and human errors.
 
A properly-used TMS will save your staff time, improve accuracy, better your customer relationships, allow reporting for future review and analysis, reduce claims and reduce your seasonal aspirin intake. If you run at least 10 loads per week (or 500 per year) and have aspirations to be a better, bigger company, you need a TMS. 

Don’t Own Trucks If Possible

I have never, ever met a grower who was happy to be in the trucking business. Many are in it, but only out of necessity. The trick is knowing when to own a truck and when not to. 
 
You should own a truck/trailer if your runs are short (less than 200 miles) and regular. Yes, that’s it! Any other reason costs you money. 
 
I can tell you nightmare stories of growers who obtained trucks and trailers because they thought they needed them. Years later, the “trucking operation” is a money pit. It provides more headaches than it is worth, and it detracts attention away from the growing operation. Moreover, the liability associated with a trucking operation is immense and requires mitigation through a complete separation of the trucking and growing operations – a huge and ongoing administrative task. 
 
Yes, in season you could certainly call the shots if you own your own trucks and provide better customer service. However, in the long term, you will lose money. A better solution is to partner with a competent 3PL (third-party logistics company) that can provide trouble-free transportation when you need it.
 
For the record, a local trucking company is often a poor compromise because it has other, year-round clients to protect and its trucks will often be in the wrong locations at the time you need them. 
 
So, choose a 3PL with the expertise and technology to help – and let it be your transportation department. A good 3PL will even help with your cash flow by offering driver advances, settling balances quickly and extending you net 30 terms.

Let Software Route Loads

In the horticulture industry, it is rare to see a “one pick/one drop” load. More often, it is a “one pick/14 drop” load (or more). 
I am amazed at the methods most growers use to optimize the trucks (to be as full as possible) and route them using the fewest number of miles to get the job done. Typically, they plot the deliveries on a map, draw a circle around the drops that appear to be near each other, and count up the amount of freight to see if it makes up a full truck. This can take hours – and is never correct.
 
A simple software solution will run millions of permutations to get the balance “just right.” My own optimization and routing department runs deliveries to hundreds of locations nationwide each day, and it takes mere seconds for the system to spit out the most effective results.
 
One grower we worked with last year provided us with some historical data for a national retail promotion they ran. We took the same data regarding the orders that were delivered and ran it through our optimization system. The savings: $75,224.25 saved in total ($467.23 per load). 

The Bottom Line

The most successful growers truly “get it” and are reaping the rewards of a well-executed logistics plan. 
 
Saving money on your logistics requires a change of thinking. The numbers in the example above are real, not theory. To achieve these kinds of savings requires a little investment in time and money, but the rewards are great.

Tim Higham is the CEO and president of Interstate Transport, Inc., a logistics provider to the horticultural market. You can e-mail Tim at thigham@interstate-transport.com. Learn more at Interstate-Transport.com or call Tim toll free at 866-281-1281 x1323.

Leave a Reply

More From Finance/Operations...
PP&L CAST 2015 intros

April 22, 2015

6 Breeding Companies Serve Up New Varieties At Pacific Plug & Liner

Pacific Plug & Liner’s theme this year, Labyrinth, a conservatory of the world’s most captivating plants, was perfectly topped off (pun intended) with fascinators for the women and newsboy caps for the men. The PP&L team dressed their part to act out the gothic “conservatory of the world’s most captivating plants.” Truly, the displays looked like they practically popped out of a catalog, and the costumes were a nice touch. Retailers take heed, the fully merchandised displays at Pacific Plug & Liner are worthy of emulating. We’ll let the pictures tell the story of all the fabulous variety introductions presented at  Pacific Plug & Liner’s 2015 California Spring Trials, where Cultivaris, Cohen Nurseries, Histil Nurseries, Jaldety Nurseries, Southern Living/Sunset Collection and Pacific Plug & Liner all highlighted their 2016 introductions.  

Read More
Speedling 2015 CAST intros

April 22, 2015

Speedling Inc. Presents New Varieties From ABZ Seeds, Hem Genetics, Thompson & Morgan, Vista Farms & PSI

You name it, we saw it at Speedling's California Spring Trials location in San Juan Bautista, where five companies showed off their new introductions for 2016.

Read More
PittMoss on Shark Tank

April 22, 2015

PittMoss Wins On Shark Tank

Mont Handley, president and CEO of PittMoss, appeared on ABC’s Shark Tank on April 17 to try to get the “sharks” to invest in his peat moss alternative. Three investors from the TV show contributed $600,000 to PittMoss for a 35 percent stake in the company. Check out this clip from ABC’s website in which Mark Cuban, Kevin O’Leary and Robert Herjavec discuss getting on board with the product. PittMoss is an alternative to sphagnum peat moss, made up of a mix of proprietary additives and recycled paper rescued from landfill space. Handley founded the Pittsburgh-based company in 1994. What started as a small experiment grew into a full-fledged business with the help of funding provided by an EPA SBIR grant and Pittsburgh’s Idea Foundry. Today, PittMoss is available to commercial greenhouses and nurseries from Michigan to Maine to North Carolina, with plans to grow. To learn more, visit PittMoss’ website, or check it […]

Read More
Latest Stories
PittMoss on Shark Tank

April 22, 2015

PittMoss Wins On Shark Tank

Mont Handley, president and CEO of PittMoss, appeared on ABC’s Shark Tank on April 17 to try to get the “sharks” to invest in his peat moss alternative. Three investors from the TV show contributed $600,000 to PittMoss for a 35 percent stake in the company. Check out this clip from ABC’s website in which Mark Cuban, Kevin O’Leary and Robert Herjavec discuss getting on board with the product. PittMoss is an alternative to sphagnum peat moss, made up of a mix of proprietary additives and recycled paper rescued from landfill space. Handley founded the Pittsburgh-based company in 1994. What started as a small experiment grew into a full-fledged business with the help of funding provided by an EPA SBIR grant and Pittsburgh’s Idea Foundry. Today, PittMoss is available to commercial greenhouses and nurseries from Michigan to Maine to North Carolina, with plans to grow. To learn more, visit PittMoss’ website, or check it […]

Read More
Syngenta logo

April 15, 2015

Syngenta Names Chris Freeman Senior Key Account Manager…

Chris Freeman is the new senior key account manager for Syngenta Flowers, Home & Garden's Commercial Sales business in the Americas, effective March 2015. Freeman, who joined Syngenta in 2006, carries more than 25 years of experience in the agriculture and floriculture business.

Read More
Lake Buchanan_LCRA

April 10, 2015

USDA Designates Areas Of West And Southwest As Drought …

The ongoing drought has resulted in disaster area designations in counties across nine Western and Southwestern states, including Texas, where some reservoirs are at or near historically low levels.

Read More

April 9, 2015

Altman Plants’ Online Cactus Shop Shows Strong Sa…

Altman Plants recently opened its new Cactus Shop, an online retail store that sells a variety of cactus and succulents. The store is a take-off of Altman’s original wholesale business, as the company started as a mail order catalog.

Read More
Dummen

April 8, 2015

Dümmen Group Welcomes Jim Devereux And Andrew Konicki T…

Dümmen group recently announced the addition of Jim Devereux and Andrew Konicki to its team. They are the newest members of the Key Account and Broker Support team for Dümmen, and will be responsible for building, developing and maintaining current broker and grower customer relationships.

Read More
Gov._Jerry_Brown_California

April 8, 2015

California Institutes First Ever Statewide Mandatory Wa…

California Gov. Jerry Brown announced April 1 that, for the first time in state history, action will be taken to implement mandatory water restrictions, with the ultimate goal of reducing water usage by 25 percent. As Californians are pushed to conserve more, growers will need to think about how demand for products will be affected.

Read More
DNA-logo

March 31, 2015

DNA Green Group Will Acquire Rijnplant

DNA Green Group and Riknplant have finalized DNA Green Group's acquisition of Rijnplant, meaning that the breeding and propagation activities in pot and cut anthurium, bougainvillea and heliconia will transfer to DNA Green Group.

Read More
AFE scholarship_Ryan Dickson

March 25, 2015

AFE Educational Grant And Scholarship Application Deadl…

Apply now for American Floral Endowment (AFE) scholarships or educational grants. Applications can be found online. For educational grants for 2015-2016, applications must be submitted no later than June 1. Scholarship applications are due May 1. AFE will award $40,000 in scholarships for 2015.

Read More

March 23, 2015

UF/IFAS Appoints Joseph Albano As Director Of Mid-Flori…

The University of Florida's Institute of Food and Agricultural Sciences (UF/IFAS) has a new directors for its Mid-Florida Research and Education Center (REC) on Apopka, Fla. The role has been filled by Joseph Albano, a research horticulturist from the U.S. Department of Agriculture with more than 25 years of experience.

Read More

March 17, 2015

Pike Nurseries Implements Employee Stock Ownership Plan

Independent garden retailer Pike Nurseries has announced it will become an employee-owned company. Pike Nurseries management has combined with its sister corporation in California, Armstrong Garden Centers, to operate under an established Employee Stock Ownership Plan (ESOP).

Read More
GrowIt! App Wins Gold At Design100 2014 US Mobile & App Design Awards

March 10, 2015

GrowIt! Mobile App Now Available For Android

The mobile app GrowIt! Garden Socially can now be used by gardeners with Android-based smartphones. Now available on the Google Play Market, GrowIt! helps users find plants to fit their lifestyle and connect them with other local gardeners.

Read More

March 4, 2015

Second Annual GreenhouseConnect Will Bring Growers and …

Following a successful inaugural event in Tampa last fall, Greenhouse Grower has announced the dates of its second annual GreenhouseConnect: October 26-29, 2015. Representatives of an expected two dozen leading greenhouse operations from across the U.S. will join senior-level suppliers at Rancho Bernardo Inn in San Diego for several days of one-on-one strategic meetings, a growers-only roundtable, informational sessions and a variety of networking events.

Read More

March 4, 2015

Maryland Green Industry Associations Unite

The Maryland Nursery and Landscape Association recently announced that it is expanding its reach to include the greenhouse industry, meaning it has become The Maryland Nursery, Landscape and Greenhouse Association (MNLGA). The change comes as a result of the planned dissolution of the former Maryland Greenhouse Growers Association and the invitation for those members to join the existing and renamed association.

Read More
IPPS Sharing Plant Production Knowledge Globally Logo

February 25, 2015

International Plant Propagators Western Region Sets Ann…

The annual meet for the International Plant Propagators' Society (IPPS) Western Region has been set for this September. It will take place September 23 to 26 in Modesto, Calif., and will include learning sessions, tours to local nurseries, a research poster display and poster presentations, various networking opportunities and an awards banquet to close the event.

Read More
myers industries Lawn and Garden Logo

February 24, 2015

Myers Industries, Inc. Lawn And Garden Business Sold, N…

The management of Myers Lawn and Garden Group, along with Wingate Partners V, L.P. have recently acquired the Myers Industries, Inc. Lawn and Garden business. The new company is named The HC Companies, and will continue as a North American leading provider of horticulture containers supplying the greenhouse, nursery and retail markets.

Read More
american-hort-logo

February 17, 2015

AmericanHort Announces New Board Members

AmericanHort recently announced the election of new officers and members to the board of directors. Each will assume their positions on the board during Cultivate’15, July 11 to 14 in Columbus, Ohio.

Read More
All American Selections

February 17, 2015

All-America Selections Elects New Officers, Names New J…

While meeting during the Flower and Vegetable Seed Conference in Tampa, Fla., hosted by the American Seed Trade Association, All-America Selections elected new officers for a two-year term. Read on to learn about the new officers, as well as all of the new judges that were added in 2014.

Read More
Greenhouse Grower.com on your desktop, on your phone, on your tablet

February 11, 2015

GreenhouseGrower.com Relaunches With Responsive Design …

Greenhouse Grower magazine, the nation’s leader in profits, production and education for greenhouse growers, announces the launch of its completely redesigned website, GreenhouseGrower.com. The new design is the product of direct user feedback and GreenhouseGrower.com analytics, and includes responsive design for ease of mobile use.

Read More