Food distributors are unfortunately expected to feel significant losses from the COVID-19 pandemic and containment efforts. According to Mark Allen, CEO of the International Foodservice Distributors Association (IFDA), the industry is expected to lose $24 billion over the next three months.
This is a result of major disruptions in the supply chain and delivery of food in America, as thousands of restaurants have either immediately closed their doors or are facing a drastic reduction in business caused by the pandemic and containment efforts, which means customers are staying home.
“Right now, we have heard reports from distributors that business has declined up to 50%,” said Allen in a recent statement. “These are not businesses the size and scope of the airlines but are family-owned businesses that have sustained wars, recessions, and other challenges, but who say two weeks of this is all it will take to have a significant impact on their business.”
The Federal Reserve Board and Senate both recently announced critical financial relief packages. Despite these, food distributors are left to keep goods moving across America, maintain driver/technician health and safety measures, adapt to quickly changing market conditions and business models, all while keeping an eye toward long-term operational efficiencies. They continue to seek additional relief through the Paycheck Protection Program, tax credits for unsold product, and enhancements to the CARES Act.
Taking A Broad Look at the Current Situation
The transport of food and health/sanitary items such as cleaning supplies and paper towels have placed significant strains on the supply chain. Food distributors have to scrutinize significant preventative measures needed to ensure the health and safety of customers, drivers, and everyone that is in contact with goods that are transported and delivered.
These organizations must rely on their asset management partners to ensure the trucks in their transportation fleets continue to operate as efficiently as possible in order to safely deliver food and essential goods during the COVID-19 health pandemic and containment efforts.
The timely transport and safe delivery of these critical items are paramount to helping Americans get through this pandemic, and these companies are working around the clock to ensure fleets and their customers have the support they need to deliver these goods. Some asset management partners are specifically helping by coordinating the delivery of new truck units with the Original Equipment Manufacturers (OEMs) to fleets that have an immediate need to accommodate additional shipments of critical supplies. These partners are also helping to coordinate with fleets that have new equipment deliveries that have been disrupted due to plant suspensions or supply chain disruptions for the delivery of these new units.
Keeping Drivers Safe and Trucks Clean
There are several considerations for drivers, as well as ways to help keep them safe during the current coronavirus outbreak and containment efforts. There are many issues regarding the health and wellbeing of drivers, such as where and how drivers will eat and take rests on the road. It is also important to monitor and focus on the daily disinfecting and cleaning of each truck, as well as the interaction with the maintenance departments when repairing units. These necessary steps help ensure the safety of not only drivers but also the technicians needed to properly maintain and keep trucks on the road.
This daily focus on impeccable cleanliness is also imperative for trailers, where refrigerator units must be appropriately cleaned and maintained for the health and wellbeing of drivers, customers, and everyone along the supply chain.
Properly Maintained Trucks Keep Running – Important to the Supply Chain
Because many food transportation trucks are running around the clock to deliver essential items promptly, keeping vehicles maintained has never been more important. Fleets should be leveraging critical data to keep track of maintenance trends and milestones to keep trucks safely operating to ensure on-time deliveries and prevent unwanted breakdowns while using data to prioritize necessary repairs and preventative maintenance measures.
Maintenance and repair (M&R) is traditionally a significant expense for fleets. Given the current circumstances, additional M&R costs from trucks that are not properly maintained can further erode a fleet’s financial picture in a time when the economic situation has placed enormous strain on food distributors.
Food Distributors Building More Flexibility into their Daily Programs
It’s imperative that food distributors recognize they must be as flexible as possible with their own business models. With the closing of restaurants, especially, many distributors need to reallocate their trucks and resources to help with the demand on the grocery side. This has created a shift in some fleets and the way they approach their own business and driver programs.
Some fleets are suddenly in need of additional trucks to help keep up with increased capacity demand. These are immediate needs, and the structure of their truck deal needs to be flexible to meet this urgent demand, but also allow them to return the asset when the impact of the current circumstances return to normal, which is an unknown at this point.
One option that works well in this type of scenario would be a sale leaseback agreement. A fleet can select the assets that are older models, which are inefficient and more unreliable, and work with a firm that can purchase those assets and lease them back for an interim period and then transition to new equipment when ready. This would enable the fleet to generate cash. The cash gained can then be used for immediate internal needs or simply provide extra working capital.
Where Companies Are Leveraging Data for Optimization
Because of these adaptations, routes and typical business patterns have shifted for many trucks and drivers. As a result, food distributors with private transportation fleets must leverage truck utilization data daily, load percent capacity, driver wellness, and other KPI’s to monitor the efficiency and optimization of each unit. While it’s important to take an “all hands-on deck” approach to helping deliver goods and items promptly, fleets need to keep an eye on truck utilization to maintain the right lifecycle management of each unit in the long term.
Additionally, it is essential to have advanced data feed capabilities that upload in real-time compared with backward-looking data that only looks at the previous month’s data. This is crucial for managing through items such as mileage, MPG, idle time, routing, and driver hours, and it will allow fleets to most efficiently navigate through the extraordinary pace of changes due to COVID-19.
Learning from COVID-19 and Positioning for Long-Term Success
With this knowledge, food distributors can quickly and successfully adapt to their changing requirements, keep drivers and customers safe from the additional spreading of the COVID-19, and adequately maintain trucks while preserving as much of their bottom line as possible while we all help each other through this time of uncertainty.
But these organizations must remain focused on the larger picture, with long-term business strategies in mind. Proactive companies that may have been considering modernizing their transportation fleet and updating their equipment will realize that this is an opportune time to analyze the age of their assets and plan for the recovery. Organizations should recognize that pent-up demand will eventually be realized further stimulated by additional government stimulus packages. Therefore, food distributors will need to be prepared to accommodate with updated equipment that offers advanced safety features at all-time low rates, providing significant savings in operational costs.
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