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...
Heuch Pink Fizz_featured

March 2, 2015

Intergeneric Crosses Are A New Perennial Trend

Intergeneric crosses, oddities some botanists say are an impossibility, have made serious inroads in the perennial world.

Read More

March 2, 2015

Robots Grab Hold Of Growers’ Material Handling Needs

Harvest Automation’s HV-100 robots automate one of the hardest, most labor-intensive jobs at growing operations – plant spacing. With more technology coming, investing in robots could become even more realistic for growers of all sizes.

Read More

March 2, 2015

Smartpot Uses Sensors And Cartridges To Ensure Success In Growing

Click & Grow helps make it simple for consumers to grow their own herbs and spices at home, even if they have little experience with plants.

Read More
Latest Stories
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
Andy Higgins

February 3, 2015

MasterTag Names Andy Higgins As Its New President

Former CEO and president of Ecke Ranch, Andy Higgins, joins MasterTag as its new president. He brings more than two decades of industry experience to the position.

Read More
Syngenta Bioline Hires Ronald Valentin For Technical Lead Role

January 28, 2015

Syngenta Bioline Hires Ronald Valentin For Technical Le…

Ronald Valentin has been appointed technical lead for Syngenta Bioline, effective January 2015. He will be responsible for technical support of Bioline biological control agents and will be instrumental in helping growers develop integrated pest management (IPM) solutions.

Read More

January 27, 2015

Give Equal Time To The Number Crunchers

Before investing in a new business opportunity, check in with the financial gurus of your organization to make certain you have the cash flow to back up your efforts.

Read More
Plant Introductions, Inc. partners Mark Griffith, Dr. Michael Dirr and Jeff Beasley and Bailey Nurseries President Terri McEnaney.

January 20, 2015

Bailey Nurseries’ Purchase Of Plant Introductions Inc. …

When Bailey Nurseries purchased its long-time breeding partner, Plant Introductions, Inc. (PII), in early January 2015, it freed the PII team to concentrate on what they do best: develop new plants. Bailey Nurseries will take on the business management side of the partnership, but otherwise the relationship it has enjoyed with PII for years will be largely unchanged.

Read More
Plant Introductions, Inc. partners Mark Griffith, Dr. Michael Dirr and Jeff Beasley and Bailey Nurseries President Terri McEnaney.

January 13, 2015

Bailey Nurseries Acquires Plant Introductions

Bailey Nurseries has acquired Plant Introductions, Inc. (PII), effective January 1, 2015. PII has developed numerous innovative new varieties that have been marketed worldwide, many introduced by Bailey Nurseries.

Read More

January 7, 2015

How Inflation Affects Your Business And Why You Can’t I…

Awareness of the true increase in costs after inflation is a necessary part of good financial management for greenhouse operations.

Read More

December 4, 2014

New Developments In Shipping/Logistics Software

Improved shipping and logistics software from Picas Software and MapMechanics makes it easier for growers to plan loads efficiently and automate day-to-day distribution planning.

Read More
Fritz Dramm

December 2, 2014

Dramm Corporation Welcomes Back Fritz Dramm

Dramm Corp. recently welcomed Fritz Dramm as the new fertilizer production and compliance manager. Dramm previously worked at the company through high school and college, and is back after 20-plus years.

Read More
Sarah Harwood

November 24, 2014

Take Control Of Your Operation’s Succession Planning Pr…

Proper business and estate planning with your intentions clearly expressed can ensure your goals for the future of your business are fulfilled.

Read More

November 24, 2014

Succession Planning For Growers

Succession planning is a sensitive subject, but one that needs to be addressed when deciding on your operation's legacy. Greenhouse Grower caught up with two growers who shared their process and provided tips for a smooth transition.

Read More

November 24, 2014

BrightFarms Pioneers Hydroponic Greenhouses For Urban A…

BrightFarms brings fresh, local produce to underserved areas with hydroponic greenhouses located on neglected urban spaces.

Read More

November 10, 2014

NGB, AFE To Join In #GivingTuesday On December 2

The American Floral Endowment will participate in #GivingTuesday on December 2, a national movement to encourage charitable giving.

Read More

November 8, 2014

Amid Drought, Californians Talk Water

As extreme drought conditions continue, the state looks at how it manages its resources, while growers try to conserve and meet changing consumer needs.

Read More