A pilot project is allowing Edmonton food processors to dramatically cut their shipping costs.

Initial results from the project are showing savings, on average, of 36 per cent for the delivery of perishable food products from the provincial capital to destinations such as Calgary, Vancouver and the Pacific Northwest region in the United States.

Designed to enhance the market competitiveness and long-term market expansion opportunities of small and medium-sized agri-food processors located in the Greater Edmonton area, the operation consolidates smaller perishable shipments into larger, more economical loads.

Through a consortium known as the Food Processors Logistics Research Council (FPLRC), led by the AgriFood cluster of Edmonton Economic Development Corp. (EEDC), nine food processors have come together to combine shipments of perishable frozen and chilled foods to distant markets.

The shippers had expected to save five per to 10 per cent on the short haul to Calgary, and 15 to 20 per cent on the longer Vancouver run, says Lori Schmidt, director of cluster and industry development for EEDC and the EEDC AgriFood cluster manager.

But the test results have been more impressive. Savings of 36 per cent have been realized on the Edmonton-to-Calgary run while rising to 40 per cent on the Edmonton-Vancouver route.

"It was a pleasant surprise, therefore, when the project reduced shipping costs by as much as 36 per cent (overall) compared with producers' existing arrangements," notes Schmidt.

Preliminary work on the project dates back to early 2005, though shipments only began at the end of last June.

"We have moved approximately 1,300 pallets and about 1.5 million pounds of product," says Milt Poirier, a partner with QGI Consulting Ltd., which is the contracted management firm for the FPLRC project.

"We're running regular scheduled service one day a week to Calgary and two days a week to Vancouver, one day a week for frozen service to Vancouver and one day a week for a chilled (produce) service to Vancouver.

"We've also had some interest expressed by a couple of participants to get into the Pacific Northwest," adds Poirier, noting that they have moved a number of shipments for one of the FPLRC members and they're trying to get others involved in order to move full truckloads of product into that region.

QGI has set up a process - with one carrier in the Edmonton-to-Vancouver transportation lane and one in the Edmonton-to-Calgary lane - and established a secure website accessible only to the shippers, where they enter their volumes. It then deals with the order process.

Eric Haak likes the results so far. The vice-president of operations at Sunrise Bakery Ltd., which has been in business for more than 40 years, says the project will allow companies to increase their competitiveness in existing markets and improve their chances to develop new markets.

"We're sold on it. We've already seen some benefits and we would like to see it expand," says Haak.

Despite being a small community bakery that's grown to supply product across North America - providing the cake centres that go into Dairy Queen ice cream cakes and supplying various Costco divisions, among other customers - Haak says shipping costs have always been a huge concern for the Edmonton-based operation.

"We're always looking at ways to reduce our costs and Edmonton is a little isolated, so freight is a real cost for us," says Haak.

"For the lanes we're doing, Calgary and Vancouver, we don't have full truckloads going to those locations. Now we're all able to ship truckload quantities at less than truckload prices - we're able to marry it up with (products from) other manufacturers and it has reduced the price considerably."

Haak also likes the cross-border potential of the project, with the possibility of easing the amount of paperwork and regulations companies need to deal with, especially in a time where border security and regulations are only expected to get tighter.

"Cross-border for us would be most advantageous," he adds. "It's not only the freight costs that are a concern; it's the cross-border crossing. A pallet at a time, it's difficult to do. If we're doing a full truckload it's easier. We ship to over 40 locations in the U.S. and if we could ship just a few pallets at a time (on full trucks from Edmonton) to those locations, it would be a huge benefit to us."

Meanwhile, word of the project has reached Calgary's food- processing industry, and according to Poirier, it has piqued their interest. Poirier says an overview has been put together and an information meeting is expected to be held this month. Should the demand be sufficient, it would likely entail replicating the Edmonton project in Calgary as opposed to expanding the current market test.

Companies that are not currently part of the FPLRC can get involved by contacting either Schmidt or Poirier.

However, Poirier notes that the project may not benefit all agri-food companies.

"Different shippers may be more mature or sophisticated in their transportation capabilities," he says. "They may in fact (already) have very good transportation rates. It's not a carte blanche in that everybody that comes in the door is going to save money. It's very specific and is done on a case-by-case analysis."

Work on the second phase of the project, the development of the business case to identify the longer term investment opportunities, is already under way.

"Ultimately, what we want to develop is a permanent consolidation centre where numerous small shipments of perishables would be consolidated into larger loads certified for export, pre-cleared for customs and then shipped utilizing state-of-the-art security and monitoring systems by truck, rail or air to customers in Canada, the United States and beyond," says Schmidt.

"We would be the first place certainly in Canada, probably in North America, that would have the security side of it."

The consolidation centre would be an in-and-out facility, not meant to store goods, with cross-dock facilities to erase any concerns about cross-contamination.

The final business case is expected to be completed by the end of January.

"Then we'll market that to potential investors," says Schmidt. "We really see this as being a private for-profit operation. But in the meantime we'll keep the pilot project going so companies can use the process. Shipments are going on a regular basis. That will continue to run until the end of March."

(Laura Severs can be reached at laura@businessedge.ca)