The Complexities of Food and Beverage Logistics

Guest Post By Dr. Oliver Hedgepeth, Program Director, Government Contracts and Acquisition at American Public University

The food and beverage business is more complex than the average person suspects. Have you ever checked the country of origin label on the items you buy? This will give you some idea of the logistics involved in your food.

In some cases, our food and beverages are flown in from Asia, often via Anchorage, Alaska for a refueling stop.  When I lived in Alaska, having over 600 such jets land each week was normal.

I owned part of a transportation company from 2006 to 2010. We often delivered to a local Wal-Mart distribution center. One stormy night delivering a truck load of frozen meatballs was the first up-close encounter with the food and beverage industry.  As I waited for the truck driver to unload the pallets of food, I looked around the huge warehouse where mountains of food were catalogued and stored ready for to pack into other waiting delivery trucks. The scene was a small city of activity.

The source of our food and beverages is one side of logistics in that industry. The other side has to do with recycling.  When I ran my trucking company, one night a rented trailer leaked air conditioner water on pallets of baby food. The food was not contaminated but could not be delivered to the intended customer. The food was donated to local food banks, churches, and homeless shelters avoiding the landfill for those thousands of small jars.

Food and beverages are controlled for safety and security in movement and storage and shelving. The Food and Drug Administration makes sure that consumers have access to safe food and beverages. When food is recalled or the sell-by date has arrived, reverse logistics comes into play.

At a Food and Beverage Committee meeting at a Reverse Logistics Association meeting a few years ago, I met a young entrepreneur who had a process to reclaim sugar from old drinks, sodas, and candy. The reclaimed sugar is then used in new products.

Other parts of food and beverage that are rescued or recycled that have nothing to do with taste.  A complex array of such things as white paper, computer paper, corrugated fiberboard, aluminum cans and foil, aerosol cans, metal cans, plastic translucent bottles, glass bottles, fats, oils and greases, and wood wastes (pallets) are also used and then must be recycled or disposed of.

Food and beverages are part of one of the world’s most complex cycles of a product life. The industry is about safely serving consumer and finding ways to reuse associated materials.

About the Author: Dr. Oliver Hedgepeth is the program director for Government Contracts and Acquisition at American Public University (APU). He is the former program director of Reverse Logistics Management and Transportation and Logistics Management. Prior to joining APU, Dr. Hedgepeth was a tenured associate professor of Logistics and chair of the Logistics Department at the University of Alaska Anchorage. His book, RFID Metrics, was published in 2007 by CRC Press and is in revision.

The Rise and Fall of Branded Logistics

Logistics was originally dominated by local businesses that understood certain transportation lanes, but did not have the national reach to move products nationally, or internationally. This was the case when United Parcel Service (UPS) became an early branded logistics company. Since then, there has been a steady rise in branded logistics companies. But, have these companies gotten so large that they might start to feel other providers are starting to take a bite out of their market share?

History of Branded Logistics

UPS was considered an alternative to national mail service, which at that time was the dominant player for logistics. National postal services have long been known for inefficiencies and taking far too long to deliver shipments. It is this common perception--more than anything else--that has led to the rise of branded logistics.

FedEx has become one of the most successful brands in logistics by offering innovative services while building a reputation for being fast, efficient, and reliable. Other companies that have built similar reputations are DHL, TNT, and UPS, who have been pushing the envelope with regard to deliveries. Businesses can no longer operate without these companies that offer scalable, seamless logistics.

Problems on the Horizon?

Advances in technology may soon lead to more competition. Local operators might be able to serve certain shipping routes and national mail carriers could re-tool and make these logistics giants take notice.

Not too long ago, these branded logistics giants were taking on the national mail carriers in a David versus Goliath showdown. Today, these companies have grown to a size that makes them less nimble and perhaps vulnerable.

Branded logistics companies have also failed to maintain innovation, which was at the heart of their initial success and what made FedEx the brand it is today. While these companies are continuing to implement incremental improvements and automation, few of these giants appear poised to make the next great leap in technology.

Competition from Amazon and Wal-Mart

Amazon, a global retailer, is looking to use drones for making deliveries, and has even purchased a drone manufacturing company so that they can customize their delivery system. This will make it a new breed of branded logistics company.

What Amazon has done would be like FedEx purchasing Boeing or UPS purchasing General Motors so they can better customize vehicles to meet their exact specifications. Controlling the manufacturing of delivery vehicles means that Amazon will be a clear branded logistics company.

Many companies already use Amazon for their distribution. If it can master logistics, it could conceivably supply every household item directly to consumers without consumers having to interface with any other companies. Amazon seems to be moving to become a one-stop-shop.

One should expect Wal-Mart, a retailer known for having the industry’s most efficient supply chain, to also move in this direction. It is already custom-designing trucks for its supply chain and could plausibly design drone delivery vehicles like Amazon.

These changes will not happen overnight. There are still many obstacles, including acceptance by the FAA and public as well as changes in technology. The question is not if this shift will take place, but when.