Transportation costs hound Minnesota fresh produce industry - The Packer

Transportation costs hound Minnesota fresh produce industry

05/18/2012 01:12:00 PM
Tom Burfield

The cost of fuel has added significantly to the price buyers and consumers pay for produce.

While people may not have gotten used to it, “we know what to expect from it,” said Kevin Hannigan, executive vice president for J&J Distributing Co., St. Paul, Minn.

For G.O. Fresh Inc., Minneapolis, fuel costs are about the same as they were last year, said Marylou Owen, owner and chief operating officer.

Generally, suppliers absorb increased freight costs, she said. An exception was in 2008, when fuel costs spiraled out of control and many suppliers added fuel surcharges.

Since then, priced have stayed relatively high but not have not spiked to that extent.

“We have not seen (surcharges) since then,” she said.

Russ Davis Wholesale Inc., Wadena, Minn., has its own fleet of tractor trailers and box trucks for smaller deliveries, said Jeff Nagel, sales manager, East.

“We service all of our customers with our own trucks and drivers,” he said.

The company owns trucking and freight brokering firms and operates a truck repair center, but fuel costs still have had as big an effect as they have on anybody else, Nagel said.

The firm, which also procures transportation from outside carriers, has implemented a transparent rate mechanism based on the national fuel price index that adjusts up and down.

“It’s incorporated in a user-friendly fashion that customers appreciate,” Nagel said.

When fuel is listed as a separate line charge, customers say they’re not sure how to recoup their cost, Nagel said. They prefer it to be included in their invoices.

Owen said it’s difficult to predict what the transportation scene in the Twin Cities area will be like this summer.

“There are a lot of pieces that need to come together” to make the transportation process at J&J Distribution efficient and productive, Hannigan said.

“We’re trying to emphasize great partnerships and supply chain management,” he said. “It’s not just about being the cheapest guy on the block.”

Transportation and deliveries have become more challenging than ever as customers try to maintain as little inventory as possible, sometimes requesting daily deliveries to achieve that.

“We’re always trying to figure out how to keep prices down,” he said. But with rising fuel costs and other challenges, “It’s been really difficult for us,” he said.

Another aspect of the transportation process quickly is becoming an irritant in its own right as companies are forced to do more with fewer people.

“The length of time you wait to get things done keeps growing and growing,” Hannigan said.

It’s not unusual for a driver to have to wait for nine to 15 hours to get his trailer loaded — a process that typically should be completed in two hours, he said.

Some drivers want to limit pickups, Hannigan said, and as the loading process takes longer and longer, overtime costs skyrocket.

Hannigan says the situation could turn into a nightmare this summer as costs continue to climb.



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