If you need to get across town fast and your choices are a taxi cab or public transit, you’d likely prefer the cab.
Times being what they are, however, the price of that cab ride might drive you to the bus stop. But what if you could share an air-conditioned cab ride with others going to the exact same place, and pay about the same as the cost of the bus ride?
Welcome to pool distribution. Direct car service for a mass transit price.
Shippers of temperature-controlled freight, particularly those that ship smaller orders, continue to rely on national less-than-truckload (LTL) food distribution companies for deliveries across the U.S. Instead, they should consider a pool distribution strategy that consolidates freight with like shippers and delivers it in truckload volumes directly to key markets – no stops – for final-mile delivery.
Companies with temperature-controlled freight that don’t have the volume to ship direct, full truckloads must rely on a limited number of LTL carriers who specialize in temperature-controlled transportation. Because demand exceeds freight capacity, particularly in the cold freight category, freight costs are high. Also, shipments can take as many as nine days to make a cross-country trip as product moves through the LTL terminal network. That’s a lot of extra touches, with the likelihood of increased damage and product loss.
Inflexibility is another downside to a national LTL solution for temperature-controlled transport. Sailing schedules may be infrequent as carriers struggle to combine various bookings to reach a full truckload (TL). As a consequence, retail customers can get frustrated with longer, unpredictable delivery times. And internal customers, namely your finance team, don’t like the lengthy order-to-cash cycles that come with national LTL service.
Bottom line: If a retailer across the country submits a small, 7,000-pound order for your temp-controlled products, it’s tough to economically execute this shipment.
Pool Distribution: Ideal for Short Shelf Life Products
An alternative exists to address many of the service and cost shortfalls of LTL networks. A pool distribution strategy combines freight moving to the same place at the same temperature range. You can arrange this collaboration yourself, but most often it’s managed by third party logistics providers (3PLs) who have relationships with multiple shippers with like products and can play matchmaker.
There is nothing new or revolutionary about pooled shipments, but many food distribution logistics pros cling to the national LTL model because, frankly, it’s easier. National LTL is an on-demand model. Get an order on Tuesday, you make a call to a carrier, you ship. Get an order on Wednesday, you ship. Get an order on Thursday...
A pool strategy moves from on-demand shipping to more of a pre-planned, coordinated shipping schedule. The pool concept works at both origin (pool consolidation) and destination (pool distribution). At origin, 3PLs or carriers managing long-haul TL moves establish a regional consolidation center where companies ship finished goods from the factory for distribution to other regions of the country.
The 3PL works with multiple shippers of temp-controlled freight to fill freight capacity. Through this collaborative strategy, the 3PL coordinates with participants, who agree on a schedule of outbound shipments and delivery dates.
Long-haul pool shipments may deliver direct to a large customer, like Walmart, or the shipment may stop at a retail DC and then continue to a local pool distributor for large-scale distribution within a region. Most often, the full trailer goes direct to a local pool distributor that sorts and segregates products based on purchase order information and arranges final delivery to consignees to meet agreed arrival dates.
Larger companies may not need to worry about origin consolidation if they are moving full truckloads into a region. For these companies, local pool distribution still adds significant value.
Pool distribution is ideal for short-shelf life products, such as confections, that can’t afford to be stored for long periods. With a pool strategy, retailers submit orders and requested arrival times and food shippers arrange delivery to meet these requirements. It’s the perfect strategy for a zero-inventory model.
Benefits of pool distribution
Cost savings, time savings and predictability are the main advantages of a pool strategy.
- Cut freight costs 8% to 20%. This is achieved by leveraging the economies of TL shipments and cost-sharing across pool participants.
- Speed delivery times up to 4 days. Instead of making multiple stops as it travels through the LTL terminal network, product ships direct to the destination region, reducing turn time. There, pool distributors sort and segregate products and prepare shipments to specific retailers.
- Meet retailer RAD dates. Unlike national refrigerated LTL carriers, who must wait to build full loads, pool shipments combine freight for known participants on an agreed shipment schedule.
- Ease your administrative burden. The process of identifying, vetting and managing multiple temperature-controlled LTL carriers sucks up time, with little reward other than a stiff LTL bill. Working with a pool distribution partner who has established carrier relationships is far easier to manage.
- Reduce carbon emissions. Whenever you combine freight to create fewer, fuller loads, you take trucks off the road. You can then calculate these carbon reductions and include them in your environmental progress reports.
- Reduce damage. The fewer touches in transit, the less damage. A pool shipment should result in a minimum of 2 fewer touches per trip compared to LTL.
Pool distribution is a collaborative strategy. As pressure increases to reduce freight’s impact on greenhouse gas emissions – and it will – that pressure will trigger more interest in shipper-to-shipper collaboration to combine loads. As with most green freight initiatives, pool distribution helps meet both sustainability and cost cutting goals.
Requirements for success
So, if the value proposition for pool temperature-controlled transportation is so clear, why isn’t the strategy more prevalent among small and mid-sized food shippers?
It’s because the strategy requires change.
Some of that change may involve working with retailers to create more defined ordering and delivery schedules. To go back to our car service analogy, a transportation company might offer very attractive rates to take four passengers to and from the airport on a weekly basis. But if two of the passengers regularly cancel and another is regularly late, the solution falls apart. The company’s service and price commitments were based on a predictable number of passengers on a predictable schedule.
But most of the change is in the shippers’ internal operations and the need to synchronize inventory availability, orders, shipping schedules and final deliveries in a way that meets retailers’ RAD dates at the lowest possible shipping cost. Typically, retailers will provide a wide enough shipping window to allow time for consolidation at the front end.
Other requirements for success in pool distribution for temperature-controlled products include:
- Density of like shippers. Look for pool providers with a dense concentration of customers whose freight is similar to yours, with like temperature requirements.
- Cold chain integrity. Pool distribution providers must ensure an unbroken cold chain as product moves from trailer to warehouse dock to trailer. Make sure your pool provider has the equipment and strict protocols for temperature monitoring in the warehouse and during refrigerated transport.
- Compatible products. Confections are a good example of like products that have similar temperature requirements. But temperature control isn’t the only criterion for compatibility. For example, certain products, like mint-flavored items, have an odor that makes it more difficult to combine with other products, like chocolates.
- Systems to automate the process. It’s important that you or your transportation provider have systems that can automate the load building process, combining like shipments that are going to the same place in the same time frame at the same temperature range.
- In-transit visibility. Your pool distribution provider should give you 24/7 visibility and control of freight in transit. Providers that offer a door-to-door temperature-controlled transportation solution should have direct connectivity with local pool distributors so that, regardless of who is handling the freight anywhere in the country, up-to-date delivery data is available through a single web portal.
Is pool distribution right for you?
If you are delivering direct in full truckloads to consignees across the country, then pool distribution is not for you. But even for the largest companies, most shipments are LTL or multi-stop truckload shipments. In these cases, pool distribution can save you money and time. The key is to find like shippers who share your temperature-range requirements.
How do you get started? Well, you could take out an ad:
Or, find a 3PL that has relationships with other food shippers and can coordinate the freight collaboration on your behalf.
One of the most appealing benefits of a pool strategy is the ability to realize immediate freight savings and to determine a clear ROI. Collaborating with other food shippers takes time and effort. 3PLs can facilitate these arrangements since they have relationships with other food shippers and visibility to where and when their freight is moving.
Are you experiencing slow, costly and inflexible national LTL service for temperature-controlled transportation? If so, what are you waiting for? Jump in the pool.