August 1, 2009
enroute | Motor Freight

Movin' on... and on... and on

movin' on... and on... and on

"Continuous moves" distribution strategies aren't for everyone. But under the right conditions, they can produce double-digit transportation savings.

By Mark B. Solomon

On paper, a "continuous moves" shipment strategy is a clear winner: A shipper works with a few core carriers to group a series of one-way hauls—between suppliers, manufacturing plants, distribution centers, and sometimes customers —into a round trip. The truckers benefit from fewer empty miles, less idle time, better asset utilization, and near-regular routes. The shipper benefits from lower rates and guaranteed capacity. The resulting efficiencies translate into better fuel economy and a smaller carbon footprint.

But shipping, like sports, is not played on paper. In practice, continuous moves are complicated to engineer, difficult to execute, and effective only under certain conditions. That may explain why the model's two-decade track record has been spotty at best.

Yet with fuel prices again on the rise and mounting pressure on companies to go green, continuous moves may be worth a second look, at least by shipping operations that have the freight density and geographic profile to make it work.

Hershey keeps things rolling
One company that has embraced the concept is The Hershey Co. In 2007, the iconic confectioner began a comprehensive review of its transportation and distribution processes. A key objective of the exercise —dubbed "Project Overdrive" —was to create an integrated transportation program by identifying continuous moves opportunities for Hershey, its suppliers, and its carriers.

In early 2008, Hershey and four of its core carriers launched a pilot program of continuous moves for outbound shipments from the company's factories to its four U.S. distribution centers and from the DCs to Hershey's retail customers. Hershey went nationwide with the outbound program later in the year. The company is currently implementing continuous moves for inbound freight to its plants from its packaging and commodities suppliers.

The program required Hershey to assume greater control over its transportation. In the past, inbound and outbound moves were managed separately. Suppliers were often responsible for getting their freight to Hershey's manufacturing plants, while Hershey managed movements between its plants and DCs. Under that system, for example, a packaging supplier located near Hershey's St. Louis DC would arrange for trucks to haul packaging materials to Hershey's factory in Robinson, Ill. Hershey, meanwhile, would manage outbound shipments of finished products from the Robinson plant to its St. Louis DC. Under the new program, Hershey manages both types of moves, which enables it to identify opportunities to combine trips. For example, Hershey might tender a load of packaging supplies bound for Robinson from St. Louis to an "outbound" refrigerated carrier that's scheduled to deliver finished goods to the St. Louis DC at around the same time. Instead of returning to Robinson empty to pick up another load for the DC, the refrigerated carrier drops its load at the DC, picks up the packaging material from the nearby supplier, and then delivers it to the Robinson plant, where the cycle begins again.

The advantages to Hershey are obvious: The confectioner improves asset utilization, reduces deadhead time and miles, relieves its suppliers of the task of transportation management, and benefits from volume-based discounts, according to Cindy Ambrose, project manager, integrated transportation for Hershey. The company has reduced transportation expenditures by 5 to 10 percent under the program, she says.

But the benefits go beyond the strictly quantifiable, she adds. The continuous moves program has also opened up new line-haul opportunities for its truckers in an otherwise weak market, making Hershey a more attractive business partner, Ambrose reports. That ensures Hershey will have the carrier capacity it needs during times of high seasonal demand.

Despite the many benefits Hershey has seen from its continuous moves program, Ambrose emphasizes it is not a one-size-fits-all strategy. "We haven't approached this as a blanket program —we evaluate each situation on its own merit," she says. "There will be times when it does make sense and... times when it does not."

Match game
For all its strategic potential, the continuous moves approach has its drawbacks. For one thing, it's effective only under a limited set of conditions. A shipper's tactical stars have to be aligned for the method to work, says Charles W. Clowdis Jr., managing director, North America, global commerce and transport for the consultancy IHS Global Insight. For example, it's critical that the inbound raw materials and the outbound finished goods match up in cube and density so they can be trucked by the same conveyance, he says.

Geographic proximity is another consideration, Clowdis says. Supplier sources, factories, distribution centers, and final delivery locations must be relatively close to one another or shippers run the risk of missing the carefully timed shipment cutoffs that are integral to a successful continuous moves plan.

Clowdis says the model can be effective in the retail environment. If stores are situated close to vendor locations, the trucks that make store deliveries can then pick up loads from vendors and haul them to the retailer's DCs. He adds that the model also has potential in the automotive sector, where raw materials are shipped from a parts supplier located near an auto assembly line to a plant where components are assembled. From there, the components are shipped to the final stop, where they are used to build cars.

Another drawback to the continuous moves strategy is difficulty of execution. Coordinating the many moving parts of this type of program is a painstaking, time-consuming exercise, and it doesn't take much to throw it off course, says Clowdis. It's rare for a company to have such a flawless supply chain that it can execute these demanding programs consistently, he adds.

Even advocates of the strategy acknowledge the difficulties of doing it right. "Few companies have executed this successfully," says Dawn Salvucci-Favier, senior director of product management for the services team of JDA Software Group Inc., a software developer that provides consulting and IT services to support the Hershey program.

Salvucci-Favier says most of the failures stem from a lack of coordination among the supply chain partners. The strategy works best if the program is run by a shipper who's working with a core group of dedicated carriers, she says. A continuous moves strategy is less likely to succeed if it's coordinated by a third-party logistics service provider that brings multiple carriers into the loop on a transactional basis, she says.

Jim Butts, senior vice president of the transportation brokerage giant C.H. Robinson Worldwide, says market conditions also play a role. Interest in continuous moves runs highest when demand for truck space exceeds available capacity or when fuel prices are rising, he says. Shippers under pressure to create efficiencies and to secure reliable carrier capacity have a strong incentive to make such programs work, he explains.

In an environment where demand is slack and fuel prices quiescent, however, the benefits of continuous moves may not outweigh the costs and risks of embarking on what often becomes a major redesign of a shipper's distribution process, Butts says. "Most shippers are able to achieve their goals of saving money on freight costs without such an elaborate approach" as continuous moves, he says.

Salvucci-Favier disputes the notion that a continuous moves model can only work under certain market conditions. "Regardless of the capacity and fuel situation," she says, "Hershey and others will be able to lower operating costs and improve efficiency with a program like this."

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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