It's hard to imagine a business more seasonal than the candy cane business, with most outbound shipments moving in September and October to reach retailers in time for the holiday season. Though production of the candy canes is continuous, there are shipping spikes that must be well managed in order to succeed.
Bobs Candies Inc. (www.bobscandies.com) has been meeting the challenge of getting its products on retail shelves at the right time, thanks in part to its reliance on a transportation management system (TMS).
“In years past, we had a huge number of shipments going out in that eight-week period, and we had a total manual system. It was all we could do to get the trucks lined up in time to make deliveries to the final destination,” explains Greg McCormack, president and grandson of the company founder, Bob McCormack.
“Before we got a TMS, being a seasonal supplier was very difficult,” he continues, “since you only have one opportunity to get it right. Product has to be in stores and we have a delivery window of two days. If we miss the window, we'll either get fined or the retailer will refuse the product. Because it's seasonal, there's nowhere else to send it. After all, Christmas only comes once a year.”
Bobs produces about half of its products in its home city of Albany, Ga. The other half is produced in a facility in Mexico, a maquiladora. Although the U.S. represents at least 95% of the company's business, the main reason it has manufacturing in Mexico is to avoid the duties it is required to pay for sugar. “The price for sugar in the U.S. is double or triple what it is in the world market.,” notes McCormack. “Sugar is a large part of our ingredient cost and we save about 50% of the ingredient cost in Mexico, just on the price of sugar.”
Bobs buys sugar for both plants from a sugar mill in New Orleans. “If I call them from Albany and say I need a truckload of sugar, they'll load the container with sugar and cut me an invoice,” says McCormack. “If before they ship it, I call and say I don't need sugar here, but I do in Mexico, they won't do anything different. They'll keep the same sugar on the same truck and send it down to Mexico, but they'll change the price to about half. It's the same sugar but because it's shipped out of the country, it doesn't have to carry the duty.”
For inbound, most of the ingredients — corn syrup and liquid sugar — move by rail to the Albany plant, while those going to Mexico move by truck. Bobs has a rail siding in Albany where the liquids arrive in tank cars. For Mexican operations, corn syrup moves by rail and is offloaded in McAllen, Tex., into trucks, and then moves across the border.
All movement of finished product is done by common carriers. Bobs requires both less-than-truckload (LTL) and truckload shipments and negotiates freight contracts during the first half of the year.
“One advantage we have is that shelf life is measured in years, not months,” McCormack explains. “We've got a three-year minimum shelf life. We try to manufacture no more than a year out, and we don't want our cash tied up in inventory if we can help it.”
“Quite a few of our shipments go to the West Coast,” says McCormack. “In the past if we had a delivery date of October 1 to the West Coast, we'd ship LTL to Oregon, which was pretty expensive. With the TMS, we are able to look out and say, ‘We have 36 LTL shipments going to Oregon over an eight-day period, so let's pool these into one truckload, ship them to a regional carrier and let them LTL it from there.' The TMS allows us to do that.”
Bobs uses a server-based TMS hosted by Descartes Systems Group (www.descartes.com). Prior to installation of its TMS last fall, Bobs had difficulty keeping track of its large volume of shipments. With the TMS now up and running, the company has greater visibility into shipments.
“Now we know what we've got to ship, when we've got to ship it, where it's got to go, and how we can best facilitate both routing and price to get it to the destination,” notes McCormack.
The company has its core and preferred carriers. Through use of the TMS, McCormack has observed that rates are not everything. The ability to consolidate shipments has helped Bobs a great deal. “We've found that while prices between carriers may not differ greatly, one's delivery may be a lot better than another,” he notes. LT
U.S. manufacturing sets global pace
Not only is the U.S. economy on the rebound, but its manufacturing sector is growing faster than any other country's, according to the Global Purchasing Managers' Index from NTC Research Ltd.. A score of 50 or above indicates expansion, and the U.S led the world in April with a score over 62. Overall, global manufacturing output has expanded for 12 consecutive months, according to NTC.
Source: NTC Research Ltd.