Posts Tagged “Keeping It Fresh”
By Matt Fyten, Operations Manager, ALC San Francisco
Everyone is familiar with the phone call, the Monday after a hectic holiday pull, “Hey it’s Never There Trucking, remember me? I have four empty reefer teams ready to go anywhere, can you help me out?”
As brokers, we have to make a choice on which carriers we give our business to in an effort to support our customers. While it might be tempting to give our business to that truck that is ready to haul our loads at a low rate, experienced brokers know that is not always the best long term solution.
What about the carriers that gave you trucks all year and even took on extra loads during that holiday? Are we really going to pass on those options for a truck even if it’s 100 dollars cheaper? These are the questions that are fiercely debated among brokers every day. Managing a carrier’s load volume as well as their relationship expectations has never been more important as we navigate this time of uncertainty.
The largest challenge for produce transportation brokers was that midway through 2020 dry van rates surpassed refrigerated truck rates. There is significantly less liability for a carrier to haul a dry van load compared to a refrigerated load. Refrigerated trucks hauling fresh produce know that they are going to get paid more money because they must wait for extended periods of time to get loaded, use more fuel in their reefer units, maintain a continuous cold chain, and are dealing with a product that has a short expiration date.
We spoke to one of our carriers who stated, “we are getting over $3.50 a mile, having zero claims with flexible loading and delivery dates, along with being able to use 80% of my reefers without having to buy new equipment made dry a profitable option for us.”
They know any breakdown or issue could cause a very expensive problem, constricting an already volatile truck market as our country was entering various stages of pandemic responses.
The rate discrepancy has made many refrigerated trucks that specialize in produce hesitant to commit to a year-long contract rate in 2021. I reached out to some of our highest volume carriers to get their thoughts on the upcoming year. Another of our larger carriers stated that contracts this year are “very risky and a gamble he is not willing to take.”
One solution is to work out mini contracts. These are locked in rates that can last for six months, a season, a month, or even a week. Having carriers sign up for programs like our own RIGS, will ensure we keep their trucks loading with ALC. Carriers take comfort in knowing that a single company can provide them round trips and they don’t need to search the load boards for freight. That same carrier also informed us that they avoid the posting boards because in times like this they need to be assured that they will receive payment from a reputable company like ALC.
Coming off of a very challenging year in 2020 it might be tempting to give business to the less expensive truck that shows up as the market softens. Last year showed us a market shift can come at any moment not just during the summer months or before the holidays. We have to treat carrier relationships like a long-term investment and continue to educate our carriers on the value of repeat business with ALC.
Matt Fyten joined the Allen Lund Company in August of 2014 as a broker in training. Over the years he has held the roles of broker, senior broker and now Operations Manager in the San Francisco office. Matt holds a degree in Liberal Studies from San Francisco State University and has 12 years of experience in sales/customer relations.
By Iyer Amruthur, Business Development Specialist, ALC San Antonio
The Legend of Topo Chico has a near and dear place in every Texan’s heart as the premier choice for natural sparkling mineral water. From an ancient story of an ailing Aztec princess whose father, Movtezum I Ilhuicamina, searched far and wide for a cure; wise priests told the king his daughter must bathe in the mystical waters to the north of them. The tribe embarked on a search, for health.
The king took his daughter to the springs by a mole-shaped hill called Topo Chico. After bathing in, and drinking the waters, legend has it that she was immediately cured. Now we see this same spring as one of the most popular sources of beverages in the world! Topo-Chico began selling its mineral water to the U.S. in the 1980s, with its primary market being the Mexican-American communities.
Texas was the biggest consumer of the Topo Beverage, and soon it developed a cult following which exploded in 2010. With retro-green-tinted bottles, and a mythical location in one of Monterrey, Mexico’s inactive volcanoes, they took the market by storm. That is until they closed one of the biggest deals in their history.
In 2017 Coca-Cola, the world’s largest soft drink company acquired Topo Chico for 220 Million Dollars. With the added supply chain, marketing, and business expertise they were able to expand their sales by 25% in the first quarter. Before the acquisition, 70% of all Topo Chico sales were in Texas but with Coke’s distribution network, they were able to easily reach areas they were unable to before. Soon they started to pop up in convenience stores, additional Walmart’s, and even Costco.
Coke understands the effect the supply chain can have on companies. One thing that the company recognized about Topo-Chico is that the following was cult-like, it was based in certain demographics, and it had a certain image people loved. As Kellam Mattier, a VP of innovation at Coke said, “It’s important for us to maintain the relevance with the core Topo Chico fan base while introducing the brand to new people.” This helps the original company, traditionally regional, to bring that same company feel to the whole nation.
Now with 2021 on the horizon, Coke will debut Topo Chico’s first Hard Alcoholic Seltzer in Latin American cities and will be launching in the U.S. in 2021. This shows the perfect synergy, and what happens between a loved brand, and an expert distributor. Logistics has a lot of the focus on trucks, but before trucks even hit the road, someone needs to make routes, orders, and deals. This is what Coke brings to the table, and why you may see Topo Chico in a store near you soon.
With the bottled-water industry booming to $16 billion in 2017, the market was shifting slightly away from soda. In this gap today, Topo-Chico fits perfectly and is growing just like the legend from long ago.
Iyer Amruthur is a business development specialist in the ALC San Antonio office and has two years of logistics experience. Iyer attended The University of Georgia where he obtained a Bachelor’s Degree in Marketing, with a minor in Communications.
By Braden Goodere
Business Development Manager, ALC San Francisco
Resilience is an important part of this industry and this year is no exception.
I believe this quote by John Rockefeller perfectly describes the current state of our industry. “If you want to succeed, you should strike out on new paths, rather than travel the work paths of accepted success.”
The way growers, shippers, retailers, and transportation providers deal with ever constant change, have determined their success in the new “norm” we live in today.
Sales obviously has had to adapt, as well. The conventions that take place throughout the year have all taken place virtually and the in-person handshakes have been replaced by video chat requests. The most common word used to describe this year’s market is “uncertain” and with many clients working from home they depend on us more than ever to not just provide fair rates but to educate them about what we are seeing and hearing in the market.
Although rates started out lower than expected for summer, freight rates increased quickly and the usual decrease after the 4th of July never happened. This left many clients scrambling, looking to secure capacity for their supply chain.
Our team at Allen Lund Company stood by our clients, growing year-over-year and absorbing costs on a percentage of our freight. Much of the success in expanding our base over the past seven months is due to the hardworking, essential employees throughout our offices working diligently with our clients to navigate the road ahead.
As we prepare for the holidays, our industry and companies’ resilience will once again be put to the test. California outbound freight is now seeing dry van rates surpass the refrigerated freight market. Many of the large cultural festivals that occur during this time are not taking place in person, however, we still anticipate drivers continuing to take time off to spend time with family.
Keeping an open dialogue with the companies we work with allows them to keep surprises to a minimum and in turn, help them service their own customers and consumers. While the upcoming holidays will be different for everyone, we know that our customers depend on and appreciate the resilience of our team.
Braden Goodere began working for the Allen Lund Company in September of 2013 as a business development specialist. In September 2019, he was promoted to business development manager. Goodere joined the company with many years of experience in agriculture, having grown up on a ranch. He attended Cal Poly-SLO and received a BS in agribusiness finance.
By Steve Hull, Manager, ALC, Portland
What a strange year it’s been so far in 2020, with so many changes and challenges in the perishables space! One item, that could greatly affect the business models and proprietary information of grower/shippers, has gone under the radar.
In a nutshell, a minority of motor carriers and carrier trade associations (such as OOIDA) are pushing the Federal Motor Carrier Safety Administration (FMCSA) to update the terms and enforcement of an existing section of federal code relating to freight costs paid between grower/shippers, brokers, and carriers. 49 CFR 371.3(c) was initially written back in the days of deregulation in 1980, and requires brokers to allow carriers to view the rates paid by the transportation buyer to the broker.
In practical terms, however, carriers have rarely asked to view that information. The majority of renewed interest in the regulation came about in Q2 of this year. Coinciding with historically low shipping volumes nationwide, normal supply and demand market forces caused a sharp fall in freight rates to carriers. Basically, a lack of supply (not as many available loads) caused a decrease in demand (lower freight rates). Carriers in turn, wrongly accused brokers of price gouging and other unscrupulous business tactics.
How does this all apply to grower/shippers? Just like forklifts, pallets, and packing material – the linehaul freight cost of getting your goods to your customer is something you purchase out of your operational budget. When the code was written back in the 80’s, it was more normal for carriers to pay a ‘commission’ to the broker. But now, the way most freight transactions occur has changed.
Per an article about this topic on Overdrive Online, Jason Craig, of C.H. Robinson stated on a recent listening session with the FMCSA, many brokers treat the contracts with shippers and carriers, as “separate transactions” and that “the price paid by the shipper does not affect the price paid to the carrier any longer.”
If changes are made to the code, the proprietary pricing you pay to a broker could be mandated to be given to a motor carrier. For every load. In essence, your buying power and negotiated pricing would be laid bare for all to see.
An important point as well, you could be barred from inserting language into any shipper-broker contract to keep your pricing from being disclosed. A dire scenario would be one that causes you to change your business practices.
You could even decide to end yearly, or quarterly, RFPs to brokers! All because a few carriers didn’t like the rates they were being offered by some brokers for a few weeks in early 2020. (And to get you up to speed on rates in Q3 and Q4, per DAT, there are many lanes that are seeing record high truck rates being paid to carriers.)
What can you do? You can read up on these broker carrier issues here. And more importantly, FMCSA is still accepting comments from anyone interested in voicing their opinion. The comment period is open until November 18, 2020.
You can use this link to submit your thoughts, comments, and concerns. You can also reach out to your freight broker, to discuss how any changes would affect your specific business.
Steve Hull is manager of the Portland office and has been with the Allen Lund Company for 24 years. Hull is a graduate of the University of Southern California completing a dual major in political science and U.S. history.
By Kelly Miller, Assistant Manager, ALC Los Angeles
There is so much uncertainty surrounding this pandemic, we are bound to see impacts on our food system and the supply and demand of fresh produce. Growers, packers, processors, transportation and shipping are some of the industries that have been affected. Halts and delays due to insufficient labor in the fields will cause dwell times to increase for drivers and ultimately delay transportation to stores as well as price hikes and availability of products. Tom Stenzel, CEO of The United Fresh Produce Association, estimates that the produce industry will take a $5 billion dollar hit from the Covid-19 outbreak. Stenzel stated that “restaurants and other foodservice outlets account for as much as 40% of fresh fruit and vegetable sales” and it’s unfathomable to be shifting that amount to retail outlets.
So far, we have not seen a shortage of produce in our stores which is great for consumers. Many people are looking to increase their consumption of fresh fruits and vegetables hoping to boost their immune systems in order to stay healthy and combat this virus. Behind the scenes, industry members are dealing with logistical complications like making sure the labor force in the fields, packing houses and stores are safe and employees are able to work.
In the transportation industry, there is a growing concern for driver shortages due to health issues as well as limited resources out on the road. Many rest stops have been closed which means limited bathroom or shower availability. These are just a few challenges that drivers are facing and some have even decided to retire early due to the pandemic. I don’t know about you, but I would not want to work without these necessities.
I would personally like to take the time to thank all the essential workers. Drivers, growers, manufacturers, grocery store employees and the healthcare workers for they are the heroes in this pandemic!
Kelly Miller began working for the Allen Lund Company in October of 2001. She started her career as a transportation broker, was promoted to operations manager and now is the assistant manager of the Los Angeles Sales office.
By Nora Trueblood
We have been inundated with information, some mostly correct, some not, specific to COVID-19. I don’t know about you, but I am quite exhausted by it all. Every one of us is on a different journey because of the pandemic, and I personally continue to recognize that a person’s opinion is just that…their opinion. I do think it is safe to say, that we are all trying to manage and figure out our own journey through life as we deal with COVID-19.
Keeping it Fresh is distributed to many of our perishable/produce customers, and I wanted to take the opportunity in this issue to bring to your attention some of the great philanthropy that is taking place during this crazy time. Many of these growers/shippers work with the Allen Lund Company in everyday business, but many also donate food to Navidad en el Barrio, a project that has existed since 1972, and one that ALC has supported since 2004.
So, a hearty thank you from the Allen Lund Company and the recipients of these generous donations to:
- The Wonderful Company Donates 1.6 Million Halos Mandarins
- Grimmway Donates Truckloads of Carrots During Pandemic
- Rainier Fruit, with T&G Global, Donate Apples to Local Schools Amid Quarantine
- Tanimura & Antle Supplies HarvestSelect Boxes to Retailers
- Dole Food Company gives 2.2 Million Pounds of Fresh Produce to Communities in Need
We still have quite a road ahead, and we wish all of our industry friends the best as we maneuver through our current challenges.
Nora Trueblood is Director of Marketing and Communications, Allen Lund Company Corporate of La Canada, CA. She began her career with ALC in 2002 as Director of Marketing & Communications. Prior to joining the company, Trueblood worked as the event manager with the Montrose Arts Council and Alpine Dance in Montrose, CO, had her own production and event planning company and spent 7 years with Lorimar Television.