The growth in the cold chain logistics market for food and beverage distribution is real, and it’s here to stay. Trends in consumer behavior, packaging, and logistics technology are powering rapid expansion, and the winners and losers in the food distribution space will be determined by who’s in the best position to capitalize on that growth. More than ever, that means that digitization is non-negotiable.
In an era where the defining technological shift is coming from the direction of AI (which we’ll also discuss in this piece), digital transformation might not seem like the sexiest area of focus. But in point of fact it’s a prerequisite for leveraging more impactful technology down the line, and it can be a huge driver of value in and of itself—especially where visibility is concerned.
The simple fact is that by prioritizing digitization in the right functional areas in logistics, you can benefit from growth in the food logistics market and ultimately expand your margins and decrease costs. The trick is to make sure you’re focusing on the right processes—which is exactly what we’re here to help with.
1. Handoffs Between the First, Middle, and Last Miles
A 2024 analysis by McKinsey yielded a genuinely eye-popping fact: “between $65 billion and $95 billion of waste is generated at interaction points between shippers, dispatchers, third-party logistics companies (3PLs), and carriers at the time of delivery.” That’s 65 billion with a b, and the bulk of that is felt by B2B industries like food distribution.
This should give some indication of how much value you can save by focusing on digitization around these handoff points. And in the intervening years since this study was done, the capabilities that food distributors can leverage to improve those handoffs has improved meaningfully. More and more distributors are finding ways to ensure total visibility, clarity, and control across the first, middle, and last mile of the supply chain.
We recommend leveraging SaaS logistics technology to connect these different touchpoints within a single holistic and connected process. If you’re leveraging a delivery management solution, that means ensuring that your tracking and chain of custody capabilities extend to the first and middle miles while providing alerts and notifications across the lifecycle of each order.
2. Strategic Route Planning
One of the top challenges in food distribution is gaining visibility into your cost per case, cost per route, and cost per delivery—and lack of visibility in this area can quickly become an issue. If you don’t know how much you’re spending to serve your customers, you can’t protect your margins.
This is true even at the planning stage. Most businesses that plan out their weekly routes without a sophisticated route planning tool wind up in a position where they can’t easily model the cost implications of updates to route plans. Not only does that mean that it’s nearly impossible to reliably improve route efficiency as conditions (order mixes, client rosters, delivery networks, product costs) change, it also means that getting buy-in for changes becomes that much harder.
That’s why having a tool that can digitize the strategic route process is so critical to boosting cost visibility. Here, we’re not just talking about turning a manual process into a software-aided one—we’re talking about leveraging a system that can use machine learning and scalable cloud-based technology to enable you to generate new route plans quickly and easily with total cost visibility.
The best route optimization software can easily cut routing time in half—which empowers you to reroute more frequently. At the same time, it should automatically cost out your deliveries so that you have total clarity into your cost to serve from every angle.
3. Daily Route Optimization
Of course, the best cost-to-serve estimates can change when the rubber meets the road. It’s not uncommon to see a significant gap between planning and daily execution in food distribution, in part because strategic route planning is such an onerous part of the job. Often, it feels easier to keep rolling out outdated plans and just “make them work” when it comes to daily execution.
This is a recipe for poor visibility and limited cost control. Conversely, when your digitized route planning is paired with integrated daily route optimization capabilities, you can ensure that your plans are actually built to execute. That means that your planned vs actual reports will look a lot nicer and your actual costs will match up with your expectations.
4. Chain of Custody Management
This is something that came up when we talked about the handoffs from one mile to the next in an earlier section, but chain of custody management really deserves its own explicit mention.
Simply put, there is no substitute for a robust digital chain of custody. It helps ensure that you’re meeting your obligations around compliance, traceability, and SLAs. More than that, it gives you the visibility to actually understand what’s happening across every mile, every transfer, and every delivery until the order reaches the customer.
The best practice here is to leverage a fully integrated process that starts with drivers and warehouse works and automatically loops in teams across the rest of your logistics operations. Drivers should be able to document proof of delivery and proof of exchange from their mobile devices in a way that’s instantly visible to dispatchers, managers, and even sales and customer support staff. This forms the foundation of total documentation for the entire journey, which in turn gives you the visibility to take control of your distribution processes and ultimately decrease costs.
5. Customer Communication and Engagement
All of this talk about digitization has been in support of increased visibility—and with good reason. Food distributors often lack the level of visibility into delivery operations that they need to manage costs and ensure efficiency.
At the same time, it’s important not to forget about your other top priority: your customers. Luckily, these priorities don’t have to work at cross purposes. In fact, they dovetail more often than not, especially when it comes to digitizing customer engagement.
A fully digitized and automated customer communication process is a thing of beauty. From a single platform and with just a few clicks you can automatically notify customers about any schedule changes, update them when their orders are out for delivery, and give them a heads up when the truck is due to arrive at the delivery site.
Different businesses will have different appetite levels for customer communication (food distributors on balance will send a lot fewer notifications per delivery than, say, appliance retailers), but the point is to be able to provide the level of transparency and visibility to your customers that builds confidence and ensures smooth deliveries. And to do it without laboriously contacting everyone on your roster by hand.
Conclusion: The Best Time to Digitize Is Right Now
Logistics visibility isn’t easy to achieve—at least not without the right tools and processes in place. But real visibility and the cost control that comes with it starts with digitizing and connecting your logistics process from the first mile to the last.
If you can turn route planning, route optimization, chain of custody management, customer engagement, and first and middle mile handoffs into smart, visible, digital processes, you can reduce costs and improve efficiency across the board. The key is to find the right technology partner to make these digital workflows a reality.