COLD CHAIN CUSTOMER RESEARCH REPORT
Results and findings of GCCA’s research into food companies’ perceptions of the cold chain, and how cold chain providers can improve their services and relationships with these partners.
Contents About the Research..................................................................................................................................................5 At A Glance...................................................................................................................................................................6 Research Findings: Competing Priorities........................................................................................................8 Cold Chain Providers Need to See Themselves as Brand Extenders..................................................9 Customers are Generally Satisfied with their Primary Cold Chain Provider.................................11 Customer Service (in many forms) Takes Center Stage........................................................................14 Customer Service: A Driver for Insourcing and Outsourcing.............................................................15 Cost and Pricing are Still Important to Decision-Making, but not the Only Factor.....................16 Insourcing and Outsourcing. Quality, Accuracy & Reporting Weigh Heavily.................................19 Key Performance Indicators: Reporting Needs a Conversation.......................................................22 Conclusion..................................................................................................................................................................24
COLD CHAIN CUSTOMER RESEARCH REPORT |
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Letter from the CEO In 2016, the association embarked on the execution of a new strategic plan focused on opportunities for GCCA to help members meet their business objectives. Members emphasized the importance of presenting themselves as a total supply chain solution to customers, the challenge and cost of dealing with regulatory issues, the need to stay current with industry innovations, and the need to better market the services of third-party logistics providers to frozen and refrigerated food companies. IARW member companies have unmatched expertise in providing a wide range of supply chain services in the temperature-controlled marketplace. This led to a major opportunity to promote the industry more aggressively and better position ourselves as experts in the cold chain. Before we can enhance awareness of who we are and what value we can provide, night, and how they see third-party logistics we must understand customers’ needs, perceptions of the industry, what we do well, providers adding value, our industry will be able to move forward in being more than and where we can improve. just partners to food companies, but rather The result was this research initiative, extensions of their core business. As the which began with qualitative focus sessions temperature-controlled logistics industry involving 30 food processors and 12 retailers, continues to evolve from purely storage to and culminated with this quantitative survey an integral part of food companies’ brands of more than 200 food companies. After and operations, we, the Global Cold Chain hearing from food companies across the Alliance (GCCA), want to ensure that the global cold chain, and understanding what industry never loses sight of the value and drives their businesses, keeps them up at necessity of strong partnerships.
Corey Rosenbusch, GCCA President and CEO This report was developed through the support of several key contributors. Research and survey development was led by Maritza Matheus, Matheus Marketing, LLC; the report content was written by Denise Kennedy, Anthology Communications; and the graphic design by Jordan Dunn, JD Design. Project management was provided by Kenna Lewis, Global Cold Chain Alliance staff.
The Global Cold Chain Alliance would like to thank several contributing IARW members for their guidance in both the research process and report development. A special thank you to Nick Pedneault, Congebec Logistics; Marty Steinmetz, United States Cold Storage; Michael Black, Americold Logistics; Tony Leo, RLS Logistics; Tony Lucarelli, Henningsen Cold Storage, Co..
About the Research GCCA embarked on a three-prong research strategy to learn about the perceptions from food companies of the cold chain, and how cold chain providers can improve their services and relationships with these partners. GCCA’s research approach included both qualitative and quantitative research: • 2016: One focus group at the 2016 Global Cold Chain Expo primarily involving processors who were customers of GCCA members.
The report below encompasses a holistic view of the research conducted over the last 18 months, including both qualitative and quantitative. Of the 270 quantitative responses, 202 were considered complete and included in the final analysis. For this report, any group within the category of refrigerated and/or frozen 3PLs, warehouse providers and/or cold chain partners are referred to as ‘cold chain providers.’
• 2017: One focus group at the 2017 Global Cold Chain Expo with retailers, representing varied and distinct national and regional grocery retailers’ operations, markets and target consumers..
GCCA SURVEY BY THE NUMBERS
• A comprehensive market research survey sent to customers of GCCA members, which primarily included food manufacturers and processors and refrigerated/frozen distribution customers. For this report, we will refer to any company related to refrigerated or frozen food storage, distribution, etc. (anyone who responded to the survey) as ‘food companies.’ Respondents were asked to only consider their primary cold chain provider (no transportation or ambient included).
56.9 % Food manufacturers or processors (refrigerated and frozen) 29 % In refrigeration and/or frozen distribution (to include broad line food service distributors, traders such as importers and exporter, specialty food distributors)
67 % Directors/Managers with supply chain logistics functions 10 % C-Suite Executives 9 % Owners/CEO United States 69% South Africa 13% Canada 5%
*Respondents self-selected their identifying information, such as role in company and type of company.
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At A Glance Understanding and learning from refrigerated and frozen food companies will allow cold chain logistics providers to advance their businesses, the industry and open clearer lines of communication among all parties. The following report summarizes the feedback the Global Cold Chain Alliance (GCCA) collected as part of its three-pronged industry research. GCCA focused on collecting feedback to understand the trends, perceptions, and considerations that are driving the industry today. The overarching feedback from food companies indicates a few interesting storylines. It is clear that food companies consider several factors when making decisions about the cold chain, but overall the research shows that customers have competing priorities and changing needs as the industry faces investment, innovation, and growth. For cold chain providers, customers’ priorities are growing and changing, and the need to be more responsive, agile and customer-centric is a demand the industry must face.
Cold chain providers need to value their role in maintaining their customers’ brands. Consumers demand food safety at all levels of the supply chain. In this age of social media, food companies face an increased pressure to protect their brand. And in relation to this, they want and expect more from their cold chain providers. Both the GCCA survey research and focus group sessions indicate that protecting the brand and ensuring food safety has eclipsed just about every other priority – including reporting, sustainability, and cost. However, there is a gap in the priorities, execution, and operations around brand protection. Cold chain providers seldom highlight their role in food safety and brand protection. It is unmistakable: third-party partners – or cold chain providers – are extensions of their customer’s brand, and customers see value in providers “owning” that role.
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Beyond protecting the brand, GCCA’s research indicates that most cold chain provider customers are satisfied with their primary partner, but continue to expect improvements around customer service and transparency around costs.
Customers are generally satisfied. While change is afoot across the industry, it is important to note that most respondents and participants of the survey and round tables are generally satisfied with their primary cold chain provider. But providers cannot rest easy on this satisfaction, as the details covered in this report indicate that satisfaction comes with demands for costs controls and customer service.
Customer service is a key driver of both customer retention and attrition. Many food companies indicated that while costs are important, customer service drives numerous decisions including the ‘who,’ ‘what’ and ‘when’ around insourcing and outsourcing. Additionally, food companies see customer service as many different things, including partners who can be innovative, flexible and responsive.
Costs are important but not always the main driver of decision-making. Cost transparency is key. Accuracy, quality, and efficiency are as – and sometimes more – important than cost. And it is no surprise that more and more food companies are looking to understand why costs rise and what variables add to cost fluctuations. Managing costs + transparency + quality is the best recipe for better perception of customer service.
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Research Findings: Competing Priorities Responses to both the qualitative and quantitative aspects of GCCA’s research suggest food companies look at a variety of factors when making decisions about the cold chain. From this, several themes rise to the top. • Overall, cold chain providers’ conversations with their customers tend to be tactical and focused on pricing and KPIs. However, customers’ main priority points, when asked to consider all factors, were protecting the brand and good customer service. Providers must incorporate these topics into those conversations to close the gap from between customer perceptions and provider realities. • Cold chain providers must be able to understand, articulate and react to their role in protecting a brand.
•F ood companies are mostly satisfied with their primary cold chain partner. •C ustomer service is key. When selecting vendors, food companies and retailers consider location, availability and customer service. But when ending the relationship, the factor most often cited is customer service. • I n many cases, cost is not the primary issue in decision-making. Research indicates cost is one factor, while accuracy, quality, and efficiency have risen in importance. •Q uality and accuracy show up in many answers across the research, including why companies insource and outsource as well as looking ahead to future trends and impacts across the industry. •K ey performance Indicators (KPIs) are important, yet survey respondents
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and focus group participants indicate a need for more universal standards in KPI reporting as well as a need to work to identify what metrics they need and want. This emphasizes that, in addition to the baseline of industrywide KPIs, cold chain providers need to work with customers to understand what measurements are most helpful based on their reporting and analytics requirements. It is not one-size-fits-all. Other important trends and considerations emerged as part of GCCA’s research. For larger companies, compliance and standards, which once ruled industry conversations, have taken on less importance. For companies both large and small, sustainability (“going green”) has evolved into part of the business but is not seen as a major driver of impact.
Cold Chain Providers Need to See Themselves as Brand Extenders Across GCCA’s research, participants routinely revisited themes that emphasize that cold chain providers are a direct extension of their customers’ brands, perception, and value with consumers. Seventy-seven percent of survey respondents either “Strongly Agree” or “Somewhat Agree” with the statement, “My cold chain provider plays an important role in my company’s food safety.” When cross-referenced by company category, customers in retail, refrigerated or frozen distribution, and food manufacturing and processing all “Strongly or Somewhat Agree” cold chain providers
play an important role in their company’s food safety. In sharp contrast, 100 percent of respondents in agricultural production strongly or somewhat disagree. Additionally, company directors and managers tend to agree more with the statement, “My cold chain provider plays an important role in my company’s food safety,” whereas executives are more likely to “Strongly Disagree” with the statement. Respondents want cold chain providers to consider themselves an extension of their brand to alleviate customer concerns, yet fear cold chain providers do not take this role seriously. Comments in the focus groups indicated their perception is that
“...it’s more about ‘don’t make a mistake’… you have got to protect the brand, period. … Might be one of the scariest things, having it not in-house, because you don’t have that control, necessarily.” —Processor
[Figure 1] Agreement or Disagreement: “My Cold Chain Provider Plays an Important Role in My Company’s Food Safety.”
Overall: 56.06%
Strongly Agree
20.45%
Somewhat Agree
8.33%
Neither Agree nor Disagree
4.55%
Somewhat Disagree
10.61%
Strongly Disagree
Strongly Agree: 63.22% of Directors/Managers of Supply Chain Operations Strongly Agree 50% of C-Suite Executives/Vice Presidents/ Senior Executives Strongly Agree 41.67% of CEOs/Owners Strongly Agree 41.18% of Others Strongly Agree COLD CHAIN CUSTOMER RESEARCH REPORT |
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[Figure 2] Top Business Trends that will Impact the Company Rank
Factors
Frequency of Answer Selection
1
Food safety and protecting the brand
122
2
Operations (order accuracy, shorter delivery times, fill rates)
102
3
Regulations and compliance
92
4
Changing market place (consumer eating trends and preferences)
89
5
Quality standards (certifications, testing standards)
84
6
Automation and other technologies
62
7
Human resources (recruiting and retention of talent, working with top management)
54
8
E-Commerce and non-traditional delivery channels
49
9
Financial (access and cost capital, low margins)
46
Sustainability efforts (reducing carbon foot print, “going green”)
36
10
providers are focused primarily on money and profit, and rarely mention their role in protecting food companies’ brands. Adding to that, respondents indicate “Food Safety and Protecting the Brand,” “Operations (to include order accuracy, shorter delivery times, fill rates, etc.),” and “Regulations and Compliance” are the top three business trends that will impact their companies the most. The next two, “Changing Marketplace” and “Quality Standards,” follow closely in concern. Even when cross-referenced by respondents’ titles within their companies, the top trends remain the same across all job titles. Per the graph to the right, directors, CEOs, and C-Suite executives all ranked “Protecting the Brand” in top five business trends. Brand protection is not just a U.S.-based phenomenon. The top five business trends for countries headquartered outside the U.S. are the same as the top five among the total sample, although not in the same order. Additionally, when looking at trends by the size of the company, “Food Safety and Protecting the Brand,” “Changing Market Place,” and “Operations” are generally of higher concern to all companies, while “Sustainability” is of least concern.
“Smaller, often family-owned “It’s a shared journey, or stably-owned, tend to be a absolutely. I think it has to little more service-oriented.” be, because [the cold chain providers] are effectively —Processor stewards of our quality program and our brand.”
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—Processor
Customers are Generally Satisfied with their Primary Cold Chain Provider Respondents gave a good report card to their primary cold chain partner, as 74 percent of respondents indicate some level of satisfaction with their provider and only 18 percent indicating they are dissatisfied. Delving further, 44 percent report being “Somewhat Satisfied” and 30 percent are “Extremely Satisfied.” When crossed with Annual Revenue, satisfaction rates continue to be high, but larger companies have more likelihood of dissatisfaction. During the focus group discussions, customers indicated that as they grew, they needed to rely on national providers to fulfill distribution needs. And, as such, the shift to a national provider may come with less personalization, decreased customer service, and more dissatisfaction.
[Figure 3] Overall Satisfaction with the Primary Cold Chain Provider Overall: 30%
Extremely Satisfied
43.57%
Somewhat Satisfied
7.86%
Neither Satisfied nor Dissatisfied
13.57%
Somewhat Dissatisfied
5%
Extremely Dissatisfied
Participants in the qualitative indicated that smaller firms might have more customer service focus, but at the same time, they could be less likely to meet demands of a larger or growing company. Additionally, some customers felt that there was more uncertainty around smaller providers. This uncertainty primarily centered on food companies’ concerns that smaller companies might not have fully developed succession plans, and therefore that partnership would go away once the owner stepped back from the business. Secondarily, concerns around uncertainty included smaller cold chain providers’ potential inability to grow and meet demand.
Extremely Satistfied: 56.63% of companies Greater than $100,000,000 are Extremely Satisfied 40% of companies $50,000,000 to $100,000,000 are Extremely Satisfied 29.41% of companies $10,000,000 to $50,000,000 are Extremely Satisfied
“Small players may not have the resources… but the smaller ones, sometimes you’re just talking to the owner, so you got the ears of the right person.”
50% of companies Less than $10,000,000 are Extremely Satisfied
—Processor COLD CHAIN CUSTOMER RESEARCH REPORT |
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“…If you’re ever going to be working with vendors, third-party warehouses, third-party transportation, if they are, to what you said, aligned on what products they’re dealing with and the importance of the product, you guys are aligned on the same goals and know that this – when I say, on-time delivery, you know on-time delivery is defined as this: being within this window or whatever it might be. I think that’s key.” —Retailer In addition to being satisfied with their cold chain providers, survey respondents also indicated that their primary cold chain partner is aligned to their company needs. Alignment was also a theme of the qualitative discussions where respondents highlighted the need for ensuring that their providers collaborate and focus on larger business goals with them, rather than just on the transactional exchange taking place.
“If you’re in a growth mode, the buildings and the vendors that you select, can they expand? That’s important. Because you know, you’ll find the solution today, but three years from now when your business goes up by whatever percentage, all of a sudden you’re out of space and you’re back to ground zero. So, do they have a footprint that can expand?” —Processor
Three quarters (76 percent) of respondents perceive their primary cold chain provider to be aligned with its services. Specifically, 45 percent rate their primary cold chain provider as “Very Aligned” and 30 percent as “Moderately Aligned.” As expected, respondents who reported the greatest degree of dissatisfaction with their cold chain provider also tended to state that their needs were not as aligned with those of their partner. The inverse is also true: respondents who reported being extremely satisfied stated that their needs were very aligned with those of their primary cold chain partner. This shows an opportunity for more collaboration and goal-sharing among food companies and cold chain providers. Across all four customer service categories, most respondents consider their primary partner “Very Aligned” with their needs. Respondents in the few Food Manufacturers and Processors group were the only ones to report “Not at All Aligned”. The results are similar when cross-referenced with customers conducting business domestically and internationally.
[Figure 4] Primary Cold Chain Partners’ Alignment with Customer
45.32% 30.22% 14.39% 3.60% 3.60% Very Aligned Not Too Aligned Neutral Moderately Aligned Very Aligned
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Customer Service (in many forms) Takes Center Stage Regardless of the size or location of the respondent, “Customer Service” was the primary reason respondents ended relationships with a cold chain provider. Other factors were “Insufficient Capacity,” “Damage or Loss of Property” and “Poor Operational Management.”
[Figure 5] Most important Factors in Selecting a Cold Chain Provider Rank
When selecting a cold chain provider, respondents indicated “Customer Service” to be in the top three factors, along with “Location” and “Price”. Other notable survey results about customer service include: • W hen broken out by U.S. region, respondents in the Southern Region placed the highest importance on “Customer Service” and “Location”. • “Customer Service” ranked highest in importance with customers earning “$100,000,000 or Greater” and those in the “Less Than $10,000,000” category. • The 2017 Retailer Focus Group further reinforced that customer service is a broad category that touches many areas. It includes improving communications, bringing innovative ideas for efficiency or improvements to clients, focusing on traceability and transparency and ultimately taking a customer-centered approach to business operations. • Both retailers and processors in the discussion groups focused on customer service and traceability. They defined customer service as being responsive, flexible and innovative. CEOs and C-Suite Executives selected “Pricing” and “Customer Service” as the biggest factors in selecting a cold chain provider. Directors/Managers of Supply Chain Operations selected “Location” and “Customer Service” as primary factors.
Frequency of Answer Selection
Factors
1
Location
80
2
Pricing
76
3
Customer Service
72
4
Established Relationship
38
5
Traceable Technology
25
6
Reputation
17
7
Regulatory Compliance
16
8
Compatibility of technology with my company’s technology
10
9
Automation technology
9
10
Innovative Approaches
7
11
High performing GM
5
12
Ability to use data and analytics
5
13
Energy efficiency & sustainability practices
4
“Things happen all the time. Can they respond? Can they react? Are they helpful? Will they go the extra step to help you?…We want the ability to be able to pick up the phone, reach out to somebody, and say, ‘Hey, I’ve got a circumstance, whatever. Can you help me?’ And then it’s having [to] embrace that and respond to it. And some do it very well, and some do it less than well.” —Processor
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“When we look at our relationships, we’re looking at the 5 Cs. So, Customer Service, Costs, Catch, which includes the inventory side, Carbon, which is the sustainability side of it and then Collaboration, which is about flexibility, responsiveness and bringing innovation to the table.” —Processor
Customer Service: A Driver for Insourcing and Outsourcing In the last three years, the primary reasons respondents ceased working with a cold chain provider were:
[Figure 6] Most Common Factors to Cease Working with a Cold Chain Provider
• “Customer Service Issues” • “Pricing” • “Insufficient Capacity”
55
45
• “Damage or Loss of Product”
51 40
39
39
38
35
• “Poor Management of Operations” Although “Pricing” and “Location” often drive the selection of a cold chain provider, “Customer Service” is the primary factor to sever a cold chain relationship. Additionally, upon further analysis, food companies and retailers define customer service broadly. Customer service primarily includes communications, reliability, transparency, flexibility, and innovation. Upon this broader interpretation of customer service, and comparing that to survey results, it is clear that the issue cannot be ignored. It presents itself in every facet of the overall customer experience. When asking respondents to identify their wants and needs from their cold chain provider, 34 percent selected a combination of quality and accuracy, customer service, communication and other factors. These answers show a deep interest in a variety of factors that touch customer service. Respondents want their cold chain providers to be real partners. They want them to be communicative and innovative as industry needs change and grow.
25
15
22
21 13
5 0
Customer Service Issues 51 Insufficient Capacity 40 Damage or Loss of Product 39 Pricing 39 Poor Management of Operations 38 Other* 22 Lack of Flexibility to Meet Your Firm’s Changing Needs 21 Location No Longer Meets Distribution Needs 13
*The Other category (13 percent) includes: Insufficient State of the Art Technology/Lack of Innovation, High Turnover Among Staff, Lack of Transparency, Few or No Value-Added Services, Your Company Decided to Insource
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Pricing is Still Important to Decision-Making, but not the Only Factor Customers want and need increased transparency about rising costs. Cost is an ever-present concern across the industry, as confirmed in the focus groups and roundtable discussions as well as survey findings. Costs are increasing. In fact, 81 percent of the survey respondents reported that cold chain logistics costs increased for their companies in the last 24 months, the bigger increase being in outsourcing costs. Delving further into rising costs, survey respondents indicated that: • Companies of all sizes have seen an increase in logistics costs. • All U.S. based companies reported an increase, but the biggest increase in costs was in the Midwest and the smallest increase in the Northeast. •R ising costs were a reality regardless of company function with agricultural production, food manufacturing and processing, refrigerated and frozen distribution, and retail all reporting increases.
“For transportation, it’s on-time delivery. That’s the most critical one. And then, for warehousing… we have a lot of great metrics to measure a third-party logistics company. The rate of damage I think is one that we keep tabs on. Inventory discrepancies is another one… obviously, we keep tabs of cost.”
While the survey highlighted the inevitable realities of increasing costs, the focus groups specifically centered on rising transportation costs and increasing driver and labor wages. Food companies seek to understand what is driving rising costs, and many mentioned that if costs continue to escalate broadly, customers may look to insource. When looking across the survey, “Managing Costs” was in the top three choices for a variety of insights around what customers need and want. • Among all U.S. respondents, almost 16 percent (13 of 82), indicated “Managing Costs” as what customers want or need to improve their company’s cold chain (second to “Accuracy” and “Quality”). When looking at a company’s function, “Cost” and “Reporting” are most important to food manufacturers and processors, while firms in refrigeration and frozen distribution request “Accuracy” and “Reliability.” Cost is present in the decision-making process but often takes a back seat when respondents thought about what they need to improve their cold chain logistics operation. It is present in every piece, but not the single determining factor. Customers looking to outsource or insource consider a wide array of decisions.
“… innovative thinking on how to get cost out while maintaining the quality of service is a huge, huge focus for us.”
—Processor 16 | COLD CHAIN CUSTOMER RESEARCH REPORT
—Processor
[Figure 7] Temperature-Controlled Logistics Costs in Last 24 Months Decreased
Increased
Stayed the Same
Total
11 6.29%
217 78.87%
21 13.21%
159
6 4.51%
101 75.94%
26 19.55%
133
10 6.21%
130 80.75%
21 13.04%
161
Temperature-Controlled Outsourcing Logistics Costs
Temperature-Controlled Insourcing Logistics Costs
Total TemperatureControlled Logistics Costs
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Insourcing and Outsourcing. Quality, Accuracy & Reporting Weigh Heavily The report began by emphasizing that it is not one single thing that shifts a food company to make a change in their logistics provider. The trends, though, show that “Accuracy and Reliability,” “Reporting,” “Quality,” and as mentioned “Cost,” all combine to help logistics managers and C-level executives make decisions. Another issue is the set of factors that drive food companies to insource or outsource.
[Figure 8] Factors Rated Extremely Important to Influence the Decision to Insource Frequency of Answer Selection
0
10
20
30
40
50
Quality Assurance
53 48
Logistics Cost Reduction
48
Allows for More Control Reliability of Storage Space
Why Companies Insource & Outsource
45 40
Order Fill Rate and Accuracy 36
Protects the Brand Your Company has more Expertise
Insource Quality Assurance
26%
Allows for More Control
24%
Logistics Cost Reduction
24%
Reliable Availability of Storage Space
22%
19
Capital is Inexpensive
18
Cold Chain Providers do not have Enough Capacity to meet Demand Previous Issues with Cold Chain Providers Allows for Investment in Technology that Cold Chain Providers Will Not Make
15 12 10
Outsource Location
35%
Allowing the Company to Focus on its Core Competencies
30%
Cold Chain Provider’s Expertise
28%
Cold Chain Provider’s Logistical Expertise
[Figure 9] Factors rated Highly Influential in the Decision to Outsource Frequency of Answer Selection
28%
0
10
20
30
40
50
60
70
Because of your Cold Chain Partner’s Expertise
Even when cross-referenced with companies’ annual revenue, the findings are the same: regardless of an organization’s annual revenue, reasons for insourcing and outsourcing remain consistent. These frequently selected responses are similar to those expressed in previous research: customers want to focus on their core work, and they view cold chain providers as experts in their part of the supply chain. Respondents also mentioned space constraints (i.e., not having enough room for storage and being too small of a company to justify handling everything in-house) as another reason for outsourcing. Although regulatory compliance is a future highimpacting trend, it is not currently a reason for outsourcing. Freeing up capital is another low-influence factor for outsourcing.
70
Flexibility in Distribution
61 57
Cost Reduction Because of your Cold Chain Partner’s Expertise
56
Flexibility in Distribution
50 40
Cost Reduction Frees Up Resources other than Capital
31
Your Company’s History of Outsourcing
33 29
Frees Up Capital Assists with Regulatory Compliance
27
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Factors for insourcing and outsourcing on their own merits may not be too surprising to cold chain providers. However, when these considerations are combined with what survey respondents need and want from their partners, a more holistic picture emerges. “Accuracy and Reliability,” “Reporting,” “More Storage Capacity” and “Managing Costs” are the priorities for food companies.
When looking at wants and needs by customer size: •C ustomers greater than $100 million indicate “Accuracy and Reliability,” “Reporting” and more “Storage Capacity” as primary wants and needs from cold chain providers. • For smaller companies, the wants and needs are more diverse and include a focus on “Costs and Reporting.” Mid-size companies are still looking at “Accuracy and Reliability” first and foremost, with “Cost” the secondary driving factor.
When looking at other customer needs by revenue and other key indicators: • “ Cost and Reporting” are most important to food manufacturers and processors, while firms in refrigeration and/ or frozen distribution stated “Accuracy and Reliability.” • “Location,” which is of high importance throughout other responses, does not feature high on customers’ needs and wants. • W hen reviewed by U.S. region, “Accuracy and Reliability” is most frequently requested in the South, whereas “More Storage Capacity” is requested in the Midwest.
Space Locally Decrease Labor Rate
Location
Communication
Interactive Website
More Storage Capacity
Accuracy and Reliability Nothing/Satisfied Customer Service
Transparency Robotics Reporting
Help with Future E-Commerce Privacy Cost Strategic Partnership Chilled Capability Proximity to Supply
[Figure 10] Needs and Wants in a Cold Chain Provider *Word size based on frequency a particular answer option was shared
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Key Performance Indicators: Reporting Needs a Conversation The top four KPIs that respondents base their logistical operations evaluations on are: 1. “Shipping Accuracy” with 75 percent of respondents favoring this metric 2. “ Warehouse Cost per Unit” (68 percent) 3. “On Time Delivery” (63 percent) 4. “Inventory/Cycle Count Accuracy” (58 percent) All other KPIs were of significantly less interest than the top four. (Note: A few respondents wrote in “Interested in ISO 22 0000”, “Carrier Metrics,” and “Export Documentation.”) These top four KPIs apply when crossreferencing the data across a variety of factors, including by the number of contracts, the size of the company, the title of respondents, and customer category. Despite the overwhelming survey responses relating to “Warehouse Cost Per Unit,” “Shipping Accuracy,” “OnTime Delivery/On Time Shipment,” and “Inventory/Cycle Count Accuracy,” what is clear is that Reporting is still something that food companies need and want. In exploring this topic in focus groups, participants told us that many cold chain providers give them metrics without working with the customer to understand what metrics the customer finds valuable. This was especially true with the retailers who participated in the focus groups who often felt that a combination of standardization and transparency are necessary for their success.
For food processors, they want consistency and standardization. And many feel that cold chain providers have customized KPIs to individual requests making industrywide comparisons and standards difficult if not impossible. Customers want to be able to measure across the cold chain, not attempt to compare KPIs that are named the same thing but contain different data points. Understanding that customers want and need a more uniform approach to KPIs across the industry will allow providers to address customer needs. *For figures 12-13, respondents were asked to identify all KPIs their company is interested in when evaluating logistical operations. The numbers represented in these figures show how many times that KPI was selected by the noted respondent type. When looking at what key performance indicators companies are interested in broken down by demographics, there were three notable outcomes. 1. Companies with an annual revenue greater than $100,000,000 saw ‘Warehouse Cost Per Unit’ drop to #4 compared to #1 in overall reporting. 2. When looking at company type or function, those in refrigerated or frozen distribution saw “Warehouse Cost Per Unit” drop to last place (#9). 3. There was no differentiation noted when broken down by respondent title.
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[Figure 11] KPIs, Ranked Shipping Accuracy
151
Warehouse Cost per Unit
138
On-Time Delivery/ On Time Shipment
127
Inventory/Cycle Count Accuracy
117
Out-bound Turn Times
75
In-bound Turn Times
72
Recent Warehouse Audit Score (AIB, BRC, SQF, Silliker, etc.)
70
Warehouse Shrinkage (adjustments)
65
Case Pick Percentage
56
“I think the industry could use some standardization, frankly, in terms of their reporting back to their clients or retailers. So, with some consistency there, I think that to me, represents a big step that can be made.” —Retailer
[Figure 12] KPIs, ranked by Annual Revenue Less than $10,000,000
$10,000,000 to $50,000,000
$50,000,000 to $100,000,000
Greater than $100,000,000
Warehouse Cost per Unit
8
16
12
37
Shipping Accuracy
8
15
13
48
On-Time Deliver/On Time Shipment
7
12
9
45
Inventory/Cycle Count Accuracy
6
12
8
40
Out-Bound Turn Times
3
7
5
24
In-Bound Turn Times
3
6
3
23
Case Pick Percentage
3
6
3
20
Warehouse Shrinkage (adjustments)
4
7
4
24
Recent Warehouse Audit Score (AIB, BRC, SQF, Silliker, etc.)
2
6
2
25
[Figure 13] KPIs, ranked by Company Function Agricultural Production
Food Manufacturing or Processing
Refrigerated and/or Frozen Distribution
Retail
Warehouse Cost per Unit
7
72
12
37
Shipping Accuracy
4
87
41
8
On-Time Deliver/On Time Shipment
6
72
35
7
Inventory/Cycle Count Accuracy
3
70
33
6
Out-Bound Turn Times
2
37
26
4
In-Bound Turn Times
3
35
25
3
Case Pick Percentage
2
27
19
5
Warehouse Shrinkage (adjustments)
4
42
20
2
Recent Warehouse Audit Score (AIB, BRC, SQF, Silliker, etc.)
0
44
14
6
“I think there has been a lot of standardization that is occurring, and I’m not sure it hasn’t gone too far in some instances. The operations that run some outsourced operations don’t understand the business they’re running in…local management teams are not clued into what the real underlying businesses are, and I think that is something that needs to be watched.” —Retailer “I would say one thing with metrics, I was a bit surprised coming into the frozen refrigerated world that they didn’t have their own standards in managing the warehouses, and they expect the customer to tell them how to manage the warehouse. So from my perspective, I expect operational metrics to already exist, and us to be melding that information into what we wanted to see. And it’s almost the other way around. They almost had to recreate a lot of information based on what we had asked for.” —Processor
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Conclusion If you’re a cold chain provider, three distinct realties are present in this research:
Customer service Even though 95 percent of conversations at the business table might be around costs, it is customer service that matters most. Cold chain providers should not allow the noise around pricing and KPIs to distract from the realities of needing to provide high-quality customer service. Cold chain providers are in the service business. Successful cold chain providers will need to ensure customer service is embedded into their company cultures.
Integral to brand and food safety Cold chain providers must find opportunities to position themselves as an integral part of the customer’s food, safety and brand initiatives. Nothing is more important to food manufacturers than ensuring the safety of their food. Cold chain providers are experts in that process and critical to it. To be an extension of the brand, providers must create dialogue and build the brand into the conversation when communicating with customers.
Standardize KPIs As an industry, it is essential to build cohesiveness and consistency around standardized key performance metrics. This means looking beyond what gets reported, what those metrics include and how they are defined. Consistency across the industry is important. Each customer might want some tailoring, but having standardized elements that are shared broadly with customers will help significantly.
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