Today, ten smaller manufacturers likely have ten separate supply chains within a region, with ten or more warehouses shipping to the exact same customers using costly, less-than-truckload (LTL) shipments
Scranton, PA (PRWEB) September 2, 2009
Kane is Able, Inc. (KANE -- http://www.kaneisable.com) today introduced its Code Green Collaborative Distribution program as an invitation to small and mid-sized CPG manufacturers and retailers to collaborate in revolutionizing their distribution models, making them more efficient and environmentally responsible. The program rewards both manufacturers and their retail customers for collaborating to ship and receive products from multiple vendors as part of a single shipment.
The program will start with a super-regional collaborative distribution center in the Northeast and expand nationally as the newer, more efficient model takes hold.
According to Chris Kane, KANE's vice president of marketing and sales, the program was developed to reduce logistics costs in the CPG sector and to respond to the global drive toward energy-efficient supply chains. Kane explains the need for a new CPG distribution model in his new e-Book, "Collaborative Distribution: How CPG Manufacturers and Retailers Can Save Millions and Embrace the Green Revolution."
"Today, ten smaller manufacturers likely have ten separate supply chains within a region, with ten or more warehouses shipping to the exact same customers using costly, less-than-truckload (LTL) shipments," says Kane. "Under this arrangement, each supplier is interested only in its own line of supply. It's like taking a taxi to the airport, only to discover that five of your friends were going at the same time and you could have paid less, and burned less fuel, to ride a shared shuttle bus."
According to Kane, the Code Green Collaborative Distribution program offers small and mid-sized CPG companies the volume-based efficiencies enjoyed by their larger competitors. "These companies will co-locate their inventory in our Northeast collaborative distribution center and we will consolidate outbound freight moving to common retailer delivery destinations," he says. "Savings will be shared with both manufactures and their retail customers."
KANE will establish a set freight rate of $55 per pallet for deliveries anywhere within a 500-mile radius of the company's Northeast distribution hub in Scranton, PA, saving participating CPG manufacturers 30% to 40% on their current outbound freight costs. For retailers, KANE will offer a rebate of $5 for every pallet they receive under the program. The company has dedicated 1 million square feet of space at its Scranton campus to collaborative distribution. Nationally, KANE operates 8.5 million square feet of distribution space. Storage rates at this collaborative warehouse will be lower and monthly charges will vary based on the actual volume of goods stored.
Collaborative distribution requires new ways of thinking, doing
To capitalize on financial incentives, all parties will be required to rethink their processes:
Retailers. Buying groups within the same retailer that now order goods separately and receive goods on different days must coordinate and agree to receive goods on specific days. In exchange, they will receive the $5 per pallet rebate from KANE. Additional benefits include efficiency in receiving operations. Retailers will receive the same volume of goods in fewer shipments, and they can have pallets built to their specified dimensions.
CPG manufacturers. These companies may need to move their inventory to co-locate with like vendors shipping to the same customer base. Also, they must allow their goods to be shipped with other companies, even competitors. In exchange, they will receive discounted freight and storage rates. Another significant benefit is inventory reduction. Because replenishments will be made on a predictable schedule agreed to by the retailer, manufacturers with multiple warehouses in the Northeast can consolidate into KANE's super-regional distribution center.
Third-party logistics providers (3PLs). Code Green will require KANE to change from being simply a provider of warehousing and freight services to an orchestrator of the new collaborative model. To enable this shift, KANE has invested in technology systems that allow real-time sharing of supply and demand data and Web visibility into orders and inventory for all parties. Until December 31, 2009 KANE will, at no charge, relocate inventory for any manufacturer within a 500-mile radius of its Scranton collaborative distribution center using KANE's truck fleet.
"3PLs are in the best position to enable collaborative distribution because they work with many companies moving goods to the same customers," says Kane. "But implementing this new model requires a different 3PL pricing approach and some risk. Our pricing for Code Green reflects the efficiencies of collaborative distribution. Clearly, we are confident the model will be embraced."
New collaborative model is green-friendly
CPG manufacturers and their retailer customers are being squeezed to reduce both their operations costs and their carbon footprint. Code Green supports sustainability goals in key ways:
KANE's collaborative centers will have Silver Certification from the Leadership in Energy and Environmental Design (LEED) Green Building Rating System.™ KANE has led the way in green building practices with energy efficient off-peak electric (radiant) heat, Orion compact modular energy efficient lighting, water runoff, and insulated buildings.
All deliveries will be via retailer backhaul or will be handled by a carrier approved by SmartWaySM -- a U.S. Environmental Protection Agency program that fosters fuel efficient transportation options. KANE, a SmartWay-approved carrier, operates 250 power units and 900 trailers.
According to Kane, backhauls are not only green-friendly, since they take trucks off the road, they also can be a source of profit for the retailer within the Code Green program.
"We'll contact retailers with requests to pick up goods at the KANE collaborative distribution center after they make a store delivery," he says. "We can offer the retailer a backhaul allowance, which means the retailer has the option of handling the backhaul or farming it out to a separate carrier for less and earning a small profit."
Code Green builds on prior success
KANE is not new to collaborative distribution. Topps, DeMet's, Sun-Maid and other manufacturers co-locate their goods in a KANE collaborative distribution center and ship together in consolidated truckload shipments. The load consolidation program has cut 35% off LTL freight costs for program participants.
According to Chris Kane, "With Code Green we want to build on our small-scale success in collaborative distribution to create a large-scale solution for the Northeast that will expand nationally."
KANE is Able, Inc. is a third-party logistics provider that helps consumer packaged goods (CPG) companies warehouse and distribute goods throughout the U.S. Its CPG logistics services include transportation, distribution, packaging, cross-docking, load consolidation, and inventory management. KANE manages 8.5 million square feet of warehouse space in multiple facilities covering all regions of the U.S.