General Mills reaps strategic advantage as ‘Shipper of Choice’

Getting trucking right is particularly important for a company like General Mills (NYSE: GIS), which has faced so much cost pressure from this aspect of its supply chain in the recent past.

General Mills is indeed getting trucking right. It placed tenth among 25 companies in FreightWaves’ Shipper of Choice Awards, conducted in partnership with freight brokerage Convoy.

The awards were given based on the votes of carrier-members of the Truckload Carriers Association and the Blockchain in Transport Alliance, or BiTA, and are meant to recognize shippers for their trucker-friendly practices.

“General Mills believes being a shipper of choice is a strategic advantage and we strive to continually improve both the driver experience and our engagement model,” the company said in response to questions from FreightWaves.

“We engage with our shipping locations across our network to ensure safe and driver-friendly experiences,” it explained, adding, “We also continually work across our supply chain to enable and improve freight characteristics including dwell times, network densities and drop trailers.”

“General Mills remains committed to strategic partnerships where we can engage in transparent conversations to identify mutual productivity gains and collaborate on solutions to address headwinds,” it told FreightWaves.

The Minneapolis-headquartered packaged-food producer counts Cheerios, Yoplait, Häagen-Dazs, Betty Crocker and Pillsbury among its brands. It posted pro forma fiscal 2018 net sales of $17 billion. With that kind of sales volume, it’s essential to both manage logistics costs and maintain strong relationships with logistics partners, including trucking companies.

Its properties are widely dispersed across the country. According to its latest annual report, the company has 27 food-production locations in the U.S. – in California, Georgia, Illinois, Iowa, Michigan, Minnesota, Missouri, New Mexico, New York, Ohio, Tennessee and Wisconsin.

Like all other cargo shippers, General Mills faced a significant impact from the surge in trucking spot rates in 2018.

On a conference call with analysts held on March 21, 2018, chief executive officer Jeffrey Harmening disclosed that freight costs were higher than previously estimated. He reported that the company had 20 percent of its shipments in the spot market at that time, versus 5 percent historically, with spot prices 30-60 percent higher than contracted rates.

To address the issue, he said General Mills was optimizing its distribution network “between the factory and the customer.”

On a conference call on December 19, 2018, the logistics issue was raised by an analyst seeking a progress report. General Mills chief financial officer Don Mulligan responded that the company has significantly increased its visibility on logistics costs.

“We didn’t have the visibility we needed [previously],” he explained. “We made some changes internally from a systems and process and an information flow standpoint to make sure that we are getting the sufficiently granular look at what the costs are.” He said General Mills now had “a much greater visibility into our cost structure.”

In regard to freight costs, he said, “As far as logistics and our freight costs in particular, we still see those being up double-digits. We do annual contracts that are tied to our fiscal year [its fiscal year runs through May] and that contract this year reflected the higher in-market costs, which we expect to see throughout the balance of our fiscal year.”

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