Taylor Collins, co-founder of Roam Ranch, used to ship products from his Texas ranch to retail customers across the country with two weeks’ notice. But in recent months, that timeline has been lengthening.
Shippers have faced a difficult-to-navigate trucking market in recent quarters as a deluge of cargo raise the prices. Manufacturing issues have only worsened the situation, with shortages of tractors, trailers and parts.
“Loads are increasing. That’s just the reality of where we live today,” said Sarela Herrada, co-founder of Simpli, an ingredients company focused on vertical integration and ethical sourcing.
Passenger point rates have topped $3 per mile, with contract rates skyrocketing. Meanwhile, LTL prices are higher than historical levels and growing demand has led some carriers to turn customers away.
TL and LTL prices are increasing
Producer price index, where 100 is June 1992
It’s not just pricing and capacity issues that are straining supply chains, but reliability as well. Distribution center appointments can be elusive to book, and labor restrictions have slowed loading and unloading at some warehouses.
“The issues we’ve had with LTL loads have been more about delays,” said Justin Marx, CEO of Marx Imports, which imports specialty and premium meats. “Trucks are late.”
Delays bring the potential for spoilage and can create a ripple effect where if a trailer is not unloaded on time, the truck may be late delivering its next shipment. Making matters worse, poor data and visibility of shipment status makes it difficult to know the extent of delays.
Traceability problems are particularly acute in LTL, where products may stop at multiple distribution centers and change trucks several times during their journey.
“We know it’s on the way,” Collins said. “We can’t say exactly where it is. The trucking company can’t even say for sure, but it’s in one of their warehouses waiting to be picked up.”
3 strategies to soften the blow
For many farmers and ranchers like Collins, there is almost no viable alternative to over-the-road transportation — which means they pay the price or don’t ship.
While food suppliers and distributors cannot avoid the truck market, there are some strategies businesses can adopt to reduce the impact of market forces.
Go where there is less congestion
Limoneiraan agribusiness focused on citrus, “probably will err on the side of bringing more deliveries to East Coast markets and using the trucks to bring it west to avoid congestion,” CEO Harold Edwards he said on an earnings call this month.
It’s a shift for many businesses that historically relied on the nation’s largest ports in Southern California and New York. Traditionally, transit times have been shorter than major ports, said Herrada of Simpli.
But in this day and age, it’s faster to bring the product to places like Baltimore and truck it to larger port areas like New York.
“You really have to look at the whole picture to get your hands on the product,” Herrada said.
Develop internal logistics
Wisconsin-based Johnsonville Sausage plans to expand its private fleet to handle the capacity crunch.
While it is not uncommon for large food producers, dairies and grocers to operate private fleets of trucks, it is not usually a business undertaken by farmers and ranchers.
“They are born and bred to live with what they have and to minimize unnecessary equipment,” said Curt Covington, senior director of institutional credit at AgAmerica.
Customer service is the main reason for having a private fleet
% of survey respondents reporting their main reason
Johnsonville will increase its stable of trucks from about 30 to 50 or 60 this year, said Curt Reynolds, director of logistics. It also launched a new logistics business last year, which opens up backhaul aircraft capacity on its routes for use by other food and beverage manufacturers.
Owning trucks is asset intensive and supply chain issues with parts and manufacturing have only compounded the challenges of having a private fleet. But the volatility of the freight market led Collins to bring some logistics to Roam Ranch.
The company is investing in refrigerated trucks and refrigerated trucks, along with hiring its own delivery team, Collins said. It also does some distribution in Central Texas.
“This is something we never envisioned going into,” Collins said. “But this is our home and we want to have a very strong presence here. We just can’t have that by relying on third parties.”
Communicate with vendors and customers
Like any obstacle in the supply chain, shippers don’t have to face the challenges alone.
Johnsonville has worked with its grocery customers to map processes and understand various pain points associated with on-time, complete deliveries.
“What can we do as partners to solve the problem? As opposed to beating each other over the head with fines,” Reynolds said.
“You really have to look at the whole picture to get your hands on the product.”
Sarela Herrada
Co-founder of Simpli
Marx described a partnership his business has with Silver Fern Farms in New Zealand, which supplies beef and venison. Over the years, the two entities have developed a strong relationship, and Marx makes it a priority to bring the farm’s product to the customer.
It is a similar situation on the customer side and gaining the trust of restaurant buyers when transportation is delayed and supply may be disrupted.
“This is one of the biggest solutions to this mess in the supply chain,” Marx said. “Having a relationship mindset rather than a transactional mindset.”