Report Highlights Importance of Logistics for Consumer Packaged Goods Shippers

Importance of Logistics for Consumer Packaged Goods Shippers

A recent report issued by Zipline Logistics, a Columbus, Ohio-based 3PL focusing on retail and consumer products, continues to drive home the importance of logistics for consumer packaged goods (CPG) shippers.

Data for Zipline’s report, entitled “Retail Buyers Spotlight Practical Ways Brands Can Stand Out,” was based on a survey of CPG shippers conducted by Zipline.

The key findings from this research included:

• 100% of retail buyers said a vendor’s ability to deliver product on-time impacted their willingness to work with them, showing the increasing importance of logistics for CPG shippers;
• 73% of retail buyers told us they have ended vendor relationships over delivery issues;
• 54.33% of buyers oversee 6 or more competing brands in one category, making successful transportation a clear advantage and differentiator; and
• 73.33% said they work directly with logistics colleagues at least once per week and 40%  said they do so on a daily basis

Zipline noted there are various factors highlighting these data points, with one being that e-commerce, not surprisingly, has had a tremendous impact on the CPG market, in that it has further increased competition and the need to have products on shelves.

And that is accentuated by how shoppers see out of sticks at a 33% clip, leaving them to go with online alternatives to get needed products.

Another key subsequent result has been made clear, with retailers getting firmer with their respective vendor compliance programs that include fees for vendors should they underperform.

Zipline said that the objective of these programs is to encourage on-time delivery of goods to prevent against out of stocks and loss of revenue to online competitors.

That speaks to the aforementioned findings in the report that communication and on-time delivery are key logistics themes, with retail buyers saying they prefer working with vendors that communicate clear status updates and deliver products on time.

In an interview, Andrew Lynch, Zipline co-founder and president told Logistics Management that 73% of buyers have ended their vendor relationships over delivery issues speaks volumes.

“We went into this with some thoughts in mind that logistics had moved up [in importance] as a strategic priority for retail brands,” he said.

“As a specialist in this space, we have always thought it was much more important than it was getting credit for. And with news about things like Walmart tightening up OTIF or Kroger adds new OTIF for must arrive by date requirements, or another retailer coming out with a late delivery penalty program….all seemed to be the focus. We know our customers are experiencing this pressure, so we suspect there is a better story here on the buyer side that can maybe solve why so many of these retailers are doing this. So often the retailer gets vilified, with people, for example, calling Walmart ‘greedy.’ But this is not the case; it is Walmart trying to fix a structural operating issue. That is the lens we see it through, with a CPG retailer view.”

Another key takeaway cited by Lynch in the report focused on how many competing brands an individual buyer in a category may be handling, as evidenced by 12%-13% of buyers had between 11 and 20 brands in a category.

And when talking to CPG retailer, Lynch said Zipline is trying to explain to them that while there are innovative and exciting brands in their respective categories, it is important not to forget there are six more brands coming up in a given category.

What’s more, a category leader such as General Mills or Coca Cola, are also pushing out their own innovations and exciting brand within a given category.

“The shelf space competition is a huge story right now, and when we talk clients about how much pressure these retailers are under to explain the low fulfillment rates many retailers had before implementing on-time delivery programs - and how many business retailers are losing due out out-of-stocks every day - it paints a picture of how much pressure they are really under,” said Lynch.

“And then to add to that, coming from the bottom you have all these other brands fighting for the same shelf space they are trying to get from retailers, and when you put those two factors together, one of the only solutions you can come up with is to have a stellar logistics program…because there is really no room for failure. If I fail once, I lose sales and let my retailer down, and if I fail multiple times, the retailer cannot afford to lose foot traffic to other retailers because my product is not on the shelf and I will be bounced right out.”

Lynch concluded by saying it is currently both a dynamic and precarious time for CPG brands, with the Zipline report’s findings being a big part of that story.

Related Article: The Supply Chain Link Both Walmart & Amazon Are Missing - The ‘Perfect Order’

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