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Chris Kane
Chief Customer Strategy Officer
Kane Is Able, Inc.

Chris Kane is the Chief Customer Strategy Officer at KANE IS ABLE, INC., a third-party logistics provider that helps consumer packaged goods (CPG) companies warehouse and distribute goods throughout the U.S. Chris has helped transform KANE from a strong, regional player in the Northeast to a nationwide provider with locations in all regions of the U.S.

Supply Chain Comment

By Chris Kane, Chief Customer Strategy Officer, Kane Is Able, Inc.

October 18, 2012

Collaborative Distribution: A New Model for CPG Distribution

Creating a Shared Infrastructure for Product Distribution

Imagine taking a cab to the airport. You sit in traffic for most of the way and, upon arrival, fork over most of the cash in your wallet to pay for the trip. As you walk into the departures building you bump into five people from your town who also arrived by cab and realize, together, that you could have paid less (and burned less fuel) to ride a shared shuttle van.

Unlikely, you think? The same thing happens every day across America as CPG products make their way to the warehouses of the country's largest retailers. Different products all going to the exact same location, but each following its own individual line of supply and, in the process, blocking up our roads, burning fuel and emitting noxious gases that threaten the health of our planet.

Kane Says:

Load consolidation today is opportunistic and occurs if a 3PL or carrier recognizes orders from multiple manufacturers moving to the same customer.

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It’s time to retire this outdated model. The way to do that is collaborative distribution. That’s when CPG manufacturers store products in the same warehouse and ride in the same truck as products from other companies whose loads are destined for the same retailer warehouse. In this model, everyone saves and the amount of energy used to transport the goods is substantially reduced, along with pollution and congestion.

Collaborative Distribution is not simply load consolidation – a freight strategy the industry has employed for decades. Load consolidation today is opportunistic and occurs if a 3PL or carrier recognizes orders from multiple manufacturers moving to the same customer. For load consolidation to work in its current form, nothing needs to change. Collaborative distribution, in contrast, requires retailers, CPG companies and 3PL providers to think and act differently.

• CPG manufacturers may need to move their inventory to co-locate with like vendors shipping to the same customers. Also, they must allow their goods to be shipped with other companies, even competitors. This is already happening. The Hershey Company and The Ferrero Group, two multi-billion dollar confectionery companies that compete in certain categories, recently announced they will create a shared warehousing, transportation and distribution model designed to improve each company’s supply efficiency, competitiveness, and carbon footprint.

• Retailers must get their different buying groups – for ketchup, pickles and paper towels – to do something they are not doing today. Talk. These buyers need to consolidate orders and agree to receive these different products on the same days. The logistics folks at the distribution center would be happy. They’d much prefer to receive one consolidated shipment from multiple vendors than four staggered shipments from individual companies, tying up dock doors and unloading crews.

• Third-party logistics providers (3PLs) will need to alter their pricing to reflect the efficiencies of collaborative distribution and determine an equitable way to share the savings among retailers and their CPG suppliers. 3PLs are also in a perfect position to act as neutral matchmakers for manufacturers whose distribution operations could be combined. In addition, they can provide the technology and visibility platform that will be required to enable a much greater level of data sharing.

At its core, collaboration distribution is a very simple idea: create a shared infrastructure for product distribution. Instead of tens of thousands of product “streams” emptying into the same ocean, combine them into one highly efficient river of product that takes trucks off the road, reduces pollution, and cuts grocery distribution costs as much as 35%.

Making collaborative distribution work will require changing entrenched processes, and change is never easy. But we all need to wake up to the ineffectiveness of what we’re doing now, and the opportunity to take a whole new direction.

Kane is Able, Inc. ( http://www.kaneisable.com) is a third-party logistics provider that helps consumer packaged goods (CPG) companies warehouse and distribute goods. KANE has been a pioneer and active advocate for greater collaboration in the CPG supply chain.

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