The economic boom of the 1990s ushered in a revolution in data and systems that served as a catalyst for supply chains to operate more efficiently and at lower costs. For the food supply chain specifically, this had a material impact on traditional manufacturers like ConAgra, Kraft, Pillsbury and others which commenced an effort to leverage data to optimize their distribution network.  In doing so, these CPG manufacturers soon realized the value of regional public distribution centers as opposed to operating warehouses attached to their respective plants which were not typically in areas that were cost efficient from a transportation perspective. This was validated by the historical cost estimates showing that transportation represented a much larger supply chain cost than  warehousing costs, in fact it was as much as 65-80% of overall costs. Given this, the timing was ripe for supply chain software like Caps Logistics, Manugistics and other tools at the time to demonstrate the transportation savings of keeping large regional buckets of inventory near to the locations where retailers and food service providers kept their distribution centers. Those geographical guidelines have not changed much in the past 30 years. Large CPG food manufacturers still primarily position inventory in the traditional five DC network areas, which include:

• Southeast (usually Metro Atlanta)
• Northeast (usually Eastern PA or Western NJ)
• Midwest (Chicagoland and Western Indiana)
• Southwest (DFW metro area)
• West Coast (Northern CA or Southern CA)

When manufacturers started adjusting their supply chains to support consumers in these areas, they soon realized that outsourcing may be a better use of their capital, ultimately opting to spend on manufacturing and marketing versus warehousing and transportation. It was during this time that supply chain departments began outsourcing to third-party logistics providers more than ever before. These warehouse logistics providers made a name for themselves by being willing and able to grow with their manufacturing partners in whatever capacity was needed whether that required building rainbow and modular pallets, accepting substantial case pick, recouping damaged cases into a new corrugate boxes, boxing operations for the meat industry, or any other service that was needed. Logistics providers built their business case on being willing and able to adapt to these supply chain trends and executed logistics activities as their manufacturing partner requested.

Fast-forward 30 years… a recession or two later and a food supply chain impacted by the pandemic.  While the historic locations of third-party warehouses haven’t changed much, it appears that many third-party logistics providers have abandoned their original focus of adapting to manufacturing customers’ needs.  Rather, in an effort to minimize labor and thus traditional service offerings, third-party warehouses often favor the simple full pallet-in/full pallet-out type of business profile that fits well in automated environments, while intentionally avoiding performing the some of the value added services that grew the partnerships and “stickiness” with their manufacturing customers back in the 1990’s.  This is evident in the transportation sector as modern providers show reluctance to manage multi-stop deliveries, with carriers focusing primarily on single stop loads to avoid the complexity and having more to manage.  Finding the carrier still willing to do the “milk-run” with multiple stops is harder and harder to locate.

With growing third-party warehouse space (especially in the cold storage sector,) as well an many new entrants into the market, I believe the 3PL warehouses that re-prioritize service offerings and company culture will be the ones to survive and thrive.  Warehouse providers willing to take on the activities that others won’t do, will help distance themselves from the rest of the pack.  Direct-to consumer unit picking and shipping, store-ready picked pallets, and assembling/kitting specialty items are just some of the tasks that can show your company’s willingness to do “whatever it takes” to serve potential customers.

In short, we as third-party logistics providers need to get back to the basics of what helped us grow to be such a strong, value-added industry, that is, doing whatever it takes to serve our customer, even if it’s not the easy stuff.