Del Monte exec reflects on dramatic market shift of 2022

This story originally appeared in FreightWaves’ Supply Chain Playbook.

Robert Savage wears several hats at Fresh Del Monte, one of the world’s largest providers of fresh fruit and vegetables.

He brought those hats to the annual meeting in Orlando, Florida, of the Transportation Intermediaries Association, the brokerage sector’s trade group, where he and a panel of other shippers looked back on a 2022 that started with the companies that needed to move goods behind the eight ball of a tight freight market and found itself by April 2023, the time of the TIA meeting, in a far different position.

Savage also has the roles of president of Tricont Logistics, the overall logistics company within Fresh Del Monte, and Tricont Trucking, the private fleet for Tricont Logistics.

FREIGHTWAVES: How different is your life than it was a year ago?

SAVAGE: It always seems to go up and down between who’s in control of the marketplace. Sometimes it’s the shippers and sometimes it’s the carriers. I would tell you that last year was probably the quickest turnaround I’ve ever seen, from all the carriers being in control at the beginning of the year to the shippers then gaining more control. If you had a long-term contract and you started the year in 2022 and you didn’t make adjustments to your contracting process with your capacity, you really got burned on rates by the end of the year.

We guessed that it would be in our best interest to move to a six-month RFP versus a 12-month RFP so that we could catch any change in the market. If it was going in our favor, then we were not going to get hit with a whole year of higher rates. And it worked just as we expected it. The six-month RFP really played into our favor and we were able to capitalize on the changes in the marketplace and recapture some of the huge increases that we took at the end of 2022.

FREIGHTWAVES: You talked about the carriers being in control. If they were in control, were they not enough in control to resist the six months? How were you able to implement that?

SAVAGE: I think the funny thing is that the carriers wanted the six months. They were anticipating the market to continue to go higher so they felt a six-month RFP would benefit them.

I think in our case we saw that even though there could be a negative associated with it, the benefits outweigh the negatives. But the carriers saw it as a benefit for them because they thought the market would go up and they were going to capitalize on the higher increases. So you know it’s a game and it’s always been that way. You may not like the answers and the pricing you’re getting, but it’s just a business decision. And you try to work the best rates and plans that you have within your organization. Sometimes you win and sometimes you lose.

FREIGHTWAVES: What has been your history of RFP durations?

SAVAGE: I primarily stick with the 12-month cycles and I would tell you that last year was probably only the second time I’ve moved from a 12-month cycle to a six-month cycle. When the rates went up in ’21, we caught it on the good end when we locked in our rates prior to them going higher. I would tell you that if the market took off and there was a shortage of capacity, and it looked like there was no end to it, I would move back to the six months. But that’s really happened very few times. Another time we went with six months was with the changeover to the ELD mandate in December 2019.

FREIGHTWAVES: At the panel you spoke at in Orlando for the Transportation Intermediaries Association in April, you said you had a lot of RFPs out there in the market and they’re all for 12 months.

SAVAGE: Our contracting period doesn’t change. So our normal 12-month contracting process goes from mid-March through mid-March the following year. We start our RFP process typically in the first part of December and we award by mid-February for mid-March. That’s our normal process. When we went to a six-month RFP, we cut out about 30 days of that process. We also cut out a two-round bidding process to a one-round process. And then we still have two weeks of direct negotiations with the carriers before we implement.

FREIGHTWAVES: At the peak of the market, the rejection rate in the Outbound Tender Rejection Index was about 25%. What were you seeing in your business?

SAVAGE: The highest we saw was around 11% and right now it’s probably closer to 1.5%. Right now, if a carrier or broker drops a load, they’re recovering it. They need the revenue, they need the business. They’re covering it so we don’t typically have many issues regarding tender acceptance. And right now it takes a lot of work off our dispatchers because of the acceptance rate being so high right now.

FREIGHTWAVES: Do you still have a dedicated fleet in-house for some of your shipping needs?

SAVAGE: Yes. I am the president of Tricont Logistics and the president of Tricont Trucking. Fresh Del Monte is the largest customer of Tricont Logistics and also Tricont Logistics uses Tricont Trucking to manage all the freight that moves in our private fleet. It is around a $240 [million] to $250 million logistics company that includes our private fleet. The dedicated fleet is probably around a $55 million to $60 million fleet. So it is not even close to a majority of our shipping so we still need to book a lot of outside freight.

Since we reorganized Tricont about 18 months ago, we’ve added a lot of new customers working in various markets, like selling our warehouse services and ocean services. So anything that we have is available space. We’re offering the services to other customers now whether it be our Fresh Del Monte companies, our competitors or just customers that need to use our on-time delivery services.

FREIGHTWAVES: How big is the dedicated operation in terms of equipment?

SAVAGE: We have anywhere from about 190 to 220 tractors. We keep about 15% of our fleet as rentals so we can fluctuate with the marketplace. We have around 250 to 260 trailers. They are all reefers.

FREIGHTWAVES: Why do you have that sort of balance in your dedicated fleet? Why isn’t it more or why isn’t it zero?

SAVAGE: The key here is that produce is a very sensitive market and the dedicated fleet is designed for our Fresh Cut product. If it isn’t delivered within 48 hours, the product gets thrown away. So that private fleet gives you guaranteed capacity and typically runs within a 200- to 250-mile radius of a Del Monte facility. The drivers average around 14 stops a day on tractors in the Fort Lauderdale marketplace. So there’s a lot of multistop, multi-deliveries. The products are fresh-cut produce and also some bananas and pineapples. Do we use some third-party providers? Yes, we do.

FREIGHTWAVES: What is your trickiest product to move?

SAVAGE: It would probably be that fresh-cut product because of the fact that once you cut it, there are a couple of things that make it a very difficult product. It’s dated and most of the dated products are guaranteed to the customers with a certain amount of shelf life. So basically if it doesn’t deliver within 36 hours, it’s usually missed the shelf life and it’s disposed of.

FREIGHTWAVES: What product does your group move more of than any other?

SAVAGE: It would probably be bananas the No. 1 item and then [pineapples].

FREIGHTWAVES: Tell us about your relationships with the brokerage community.

SAVAGE: My background is one where I worked on the shipper side, the carrier side running a trucking company, running a brokerage company and building a brokerage company. So my experience is a little bit more rounded than most people. In my 30-plus years, I’ve done all aspects of the transportation side. So when you’re on the shipper side, you know that on the broker side they’re always telling them to pick up the phone, get to the decision-maker, call, call, call, relentlessly.

We have a goal as a shipper to not ignore anybody. So what we do instead of just saying no to everybody, we’ve increased our standards of who we do business with. We want to deal with the bigger parties. They provide us a lot more security in regards to somebody getting injured and triggering a workers’ compensation claim. Nobody likes to pay claims. Smaller guys sometimes find it easier to walk away and leave you with the claim instead of a larger guy who has $2 million or $3 million in business with you.

FREIGHTWAVES: So you don’t write off anybody from day one. That’s one of the points you made at TIA.

SAVAGE: A couple of things we don’t like is junk mail, where somebody sends a generic message from somebody who knows how to find your address. Those are just junk mail to us. We respond to them. We tell them, “Listen, you’re not allowed to do junk mail. Please don’t do that.” You get two warnings. If you violate that, we will block your prefix email from coming into our server. We probably see three or four of these a week.

The other thing is you’re on a list for brokers that is sold by companies and then you’re in their Salesforce system. They keep track of how many times they call, when they called you last, and we find it better not to ignore them. We find it better to respond to them. But there are rules. We send the standard email to every single broker or carrier and we say, “Here are our rules. If you’re a broker, you have got to have been in business five years. You have to do at least $200 million in gross revenue outside of any private fleet or any other company you own. You have to be able to sign a contract and you have to have these insurance requirements. And if you meet those requirements, please send us your information.” If you’re a broker, there’s a waiting list.

We kept 25% to 28% of our brokers and the other providers are asset carriers that we do business with.

FREIGHTWAVES: Do you maintain that average? Does it go up and down?

SAVAGE: Yes. When markets are very tight and capacity is tight, we add more brokers and brokers tend to get more business. That doesn’t mean we change our requirements. We focus on trying to expand our brokerage group to another 3% to 5% to give us additional capacity if we need it. Carriers can’t flex as much as a broker can. And a broker does take a lot of the liability off a shipper because they’re having to vet all the carriers. So if I have a load I have to get it covered but I can’t set a new carrier up to cover it, having enough brokers to cover the influx of business or a changing marketplace is critical to us.

FREIGHTWAVES: At the TIA conference you said something about rail that I’m sure the rail people didn’t want to hear. You said while rail can be cheaper, the savings are just not worth it. Can you elaborate?

SAVAGE: When a product leaves the port even in a refrigerated container, the process of ripening is beginning and even with refrigeration you can’t stop it. It just slows it down. So if you add an extra day or two to the process, it gives us a high risk of product decay and a product could be overripe. So we need on-time delivery and rail does not have that in a lot of areas. There are a lot of problems, such as when they have a shortage of chassis, stuff like that at some of the rail container areas. You can also have problems with gensets, which is what you put on the chassis to keep the reefer unit running while you’re making a delivery. There’s very few of those and making sure you have them is difficult. And so the number of things going wrong on the rails is significantly higher.

Also, the way they handle claims is not to your benefit. If the rail does something wrong, it’s hard to get your money back. It’s hard to file and it’s hard to get them to pay. We’ve done some rail from Mexico all the way up to Chicago for some of our avocados. Why? Because avocados are more durable fruit, they can last longer and we tried to save us some money. But again, if the claim occurs in Mexico or the damage claims are in Mexico, it’s under Mexican law and it isn’t in our favor. So it requires us to carry extra insurance and other things that are more difficult.

FREIGHTWAVES: Sustainability issues are of growing importance, particularly for large companies like Fresh Del Monte. It’s part of the package now. How does that affect your shipping practices?

SAVAGE: Sustainability is very important for Fresh Del Monte. There are articles about us where the farms we use need to have a certain amount of area that’s set aside for planting trees and maintaining a healthy environment. We do a lot of things around the world that focus on the transportation side, most of it on the private fleet. We look at that when we go to buy a truck, the fuel efficiency is something on the truck to make it more sustainable for the environment. Right now we’re looking at electric vehicles for yard transportation and for our new port that we’re putting in in Freeport, Texas, in 2024.

The post Del Monte exec reflects on dramatic market shift of 2022 appeared first on FreightWaves.

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Editor: John Kingston