By Kasey Cronquist, Iom, Ceo/Ambassador, California Cut Flower Commission
A recent study by the University of Southern California commissioned by the California Cut Flower Commission (CCFC) has shown that a model of cooperating California’s flower freight can help to reduce landed cost pricing out of California. Currently, California’s flower farms’ transportation challenges are related to the Freight-On-Board (FOB) origin pricing, competitive pressures from flowers imported from South America and competition within California for outbound trucks from California. Established in 2008, the CCFC’s Transportation Committee has been working to address these challenges to provide greater nationwide access of their flowers to more people in more places across the country.
Customer Feedback: We’re Still Listening
Previous market research reports by Prince & Prince Inc., dating back to early 2000, revealed customers of California’s flowers found low shipping volumes, quality controls and costs as underlying problems and points of concern for buyers faced with decisions between California or Miami. In addition, California’s FOB origin pricing required their customers to be responsible for organizing their own transportation for their shipments out of California. An astute wholesaler interview by Prince & Prince in the 2000 study articulated the problem saying:
“…an individual wholesaler does not have a lot of clout with the trucking companies. The volume of boxes received by anyone wholesaler is usually small compared to the volume of boxes from the growers. Thus, the grower has the clout with the trucking companies…All-inclusive pricing would make it easier for the wholesaler to make purchasing decisions for California product. But it would also get the grower involved in the freight side of the business — getting the grower involved in the responsibility and liability of the efficient freight transport — and drive that efficiency upward.”
While many transportation improvements for California Grown Flowers have been made during the past 10 years, the underlying issue posed by the wholesaler in 2000 has remained. With 250 California flower farms, 700 wholesalers nationwide and three primary trucking companies to work with, competition for shipments hasn’t necessarily built the most efficient transportation model. In fact, competition appears to have actually driven costs up instead of down. As import market share and shipment volumes from South America have continued to grow over the past 20 years, high costs associated with California’s transportation into key markets have been a barrier to growth.
California’s agriculture production represents the No. 1 state in cash farm receipts in 2009. Producing far more than it consumes causes competition for outbound trucks to be fierce in California. Florida, on the other hand, offers far more competitive rates for outbound shipments. With Miami representing the primary port of entry for the majority of flowers sold in the United States, this becomes a compounding competitive challenge for our California flower farmers.
Cooperation Shouldn’t Be “Freight”-ening
To try and tackle these challenges facing the future success of its farms, the CCFC’s Transportation Committee has commissioned two studies to look at how to best address California’s transportation challenges. Both studies have since supported the suggestion offered by the wholesaler interviewed by Prince & Prince in 2000 and have found that consolidation of freight volume by cooperating farms will drive the improved efficiencies and lower costs. The first study conducted by Tom French with the Supply Chain Coach, a Dublin, CA-based company that helps create and improve supply chain solutions, found by coordinating shipments through a point of consolidation, shipping costs were reduced between 13 – 58 percent. The recent release of the study by Daniel Epstein, in the Department of Engineering at the University of Southern California, found the consolidation of California’s floral freight volumes provided for 22-34 percent in transportation-related cost savings.
California’s flower farms will now be taking a good hard look at how to best implement these recommendations of consolidation provided by the Supply Chain Coach and the University of Southern California. Providing customers with the best quality product at the best possible price has always been a necessary virtue for California to maintain its competitive advantage over cheaper imports. A cooperative shipping network for California will allow our farms to ship more full truckloads and eliminate the duplicity and partial loads that currently drive up costs. A more efficient transportation system for California will allow California to offer FOB destination pricing, better compete with imports in important markets and achieve better-negotiated trucking rates than any one grower or wholesaler.