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Grocers are increasingly finding that cold chain performance comes down to the relationships they make and build upon. Successful execution today is as often as not dependent on utilizing third-party logistics providers’ (3PLs) expertise and physical resources.

Nicole Glenn

Nearly 60% of 3PLs expanded their cold chain capabilities in the previous 12 months, according to the “2023 27th Annual Third-Party Logistics Study” authored by C. John Langley Jr., Ph.D., clinical professor of supply chain management at Penn State, University Park, Pa., and NTT Data, based in Plano, Texas. Three-quarters of 3PLs expect more cold chain outsourcing to occur in the next three years, and 72% are expanding their cold chain capabilities and capacity in response.

TO 3PL OR NOT TO 3PL?

Cold chain experts point out that not all 3PLs are created equal and that finding the right partners is critical for retailers to fulfill their end-to-end logistics needs.

“Good communication is always critical in a 3PL partner assessment. Like any good relationship, it’s always about meeting expectations. I am a firm believer in scorecards — on both sides,” says consultant Nicole Glenn, founder and CEO of Candor Expedite, Plano. Glenn says that grocers should only work with 3PLs that “demonstrate a solid understanding of the retailer’s requirements” and have “a great reputation in the industry and operate on best practices on behalf of the shipper.”

She warns retailers to assess upfront both insurance considerations and potential chain-of-custody issues that may arise while working with 3PLs.

David Sterling

David Sterling, partner at Sterling Solutions LLC, a supply chain management consulting firm based in Memphis, Tenn., says grocers turning to 3PLs for cold chain warehousing solutions need to apply the same metrics they would if they were operating the facility themselves. He believes location is critical, and visits to each site are a must. “You’re looking at things like what are the wait times for truckers coming in.”

Sterling adds that most grocers will store their inventory in a facility shared with others. “You’ve got to consider whether you’re going to be the smallest fish in the pond and understand how much attention you are going to get, and if that matches what you want.”

“Retailers should consider factors like operational execution reliability and a metric-driven organization focused on case pick accuracy, overall order accuracy and delivery standards from their 3PL partner, especially during holiday peak seasons,” says Brian Beattie, president, North America West, Lineage Logistics, North Bergen, N.J. “We believe it is critical for a 3PL to have the subject matter expertise to meet and exceed regulatory compliance requirements as well as the ability to conduct operational activities at a very high level on a consistent basis.”

“We ask current and prospective customers: What are the gaps or issues that your organization is trying to solve? What does success look like? What are the expectations of your organization, if any, when working with a 3PL? (e.g., what does your company need to do to make this successful?). What is the risk if your organization stays the current course? Can that risk be minimized by utilizing a third party where sup- ply chain is core to what they do?,” says Tracy Urbanski, senior vp of operations, freight management, at Reading, Pa.-based Penske Logistics.

Tracy Urbanski

“Understand each 3PL’s standard operating procedures. Understand each 3PL’s throughput to ensure that the facility is set up to handle your velocity,” says John Gaudet, CTB, vp of business development at RLS Logistics, Glassboro, N.J. “PRWs (public refrigerated warehouses) are unique. No two are alike,” he continues. “Some are set up for bulk storage, some seasonal, some for pallet in pallet out, and others can handle more case-picking; be sure to understand what that location excels at and plan accordingly.”

GROCERS HAVE CONCERNS

Executives at 3PLs say demand for their services has been up significantly in recent years but that grocers often have concerns before committing.

Beattie says that grocers prioritize food and employee safety. In addition, “They can be very cost-sensitive and expect their 3PL partner to optimize the storage and distribution of their product, keeping product as fresh as possible for their customers and delivering on time and in full to their stores or distribution centers. They also value robust communication related to the inbound flow of goods from the retailer’s suppliers, along with both inbound and outbound carrier performance. This is critical to avoid out-of-stocks and to facilitate reliable delivery to the stores.”

Brian Beattie

“Loss of control is something that is often a concern,” says Urbanski. “Effective distribution is essential to a grocer’s ability to satisfy their end consumers’ needs and to grow their business. When they choose outsourcing, they are required to relinquish at least some of that control. Cost is always a critical decision point or concern — the balance of price and service must be evaluated.”

Gaudet says grocers are looking for “the right provider that has a successful food safety program and is a strong operator with some seasonal inventory capacity.” He adds that a lot of new 3PLs backed by private equity are entering the business and constructing mega warehouses. The concern should be No. 1 with the construction costs — are the rates for storage and handling in line with the market? — and No. 2, as a new facility, are they operationally ready to handle my account?”

OPEN COMMUNICATION IS KEY

According to experts, attention to detail and performance measurement are the keys to continually improving cold chain results in collaboration with 3PLs. Identifying best practices designed to optimize end-to-end results is key in any relationship.

“Set clear expectations for the relationship, specifically on timing, reporting, tracking and invoicing. It’s also important to help your 3PL understand your customer’s expectations,” says Glenn. “Go into a transition transparently. Give your vendors all the information needed so they can successfully set you up, and avoid you being billed for extra charges.”

‘The most successful partnerships are the ones where both the customer and the 3PL can work together towards a common goal.’

“Make sure that processes are set up to minimize temperature variability, including node-by-node annual checks of their cold chains,” adds Sterling. “That is absolutely key in refrigerated and frozen products to deliver the quality that consumers expect. Be sure that’s what is being done in facilities and on trucks. In the end, it’s a customer satisfaction issue because you don’t want a customer getting a product home and then having an ‘Oh no’ reaction,” he says.

“The better the sharing of data, the better the results,” confirms Beattie. “Some of the more successful grocers are putting their 3PL-related dollars into technology to improve food safety, compliance, and process efficiencies, along with renewed investment and commitment to employee engagement/satisfaction.”

Urbanski says, “The most successful partnerships are the ones where both the customer and the 3PL can work together towards a common goal. Having transparent and open dialogue goes a long way in ensuring this. Alignment across organizations and collaboration are key enablers to a successful, long-term partnership.”