EYE ON LOGISTICS BLOG

How Pool Distribution and Consolidation Can Reduce LTL Shipping Rates

Charles Miller

23 April 2018

Considering shipping strategies like pool distribution and consolidation? Here’s a real-world example of how they work to reduce shipping and claims costs.

The ATA recently projected that, by 2028, all modes of transportation would move 20.73 billion tons of freight per year — a figure that represents 36.6% growth in a decade. With that kind of upcoming demand, it’s time to take stock of options to improve logistics now.

We’ve talked about getting creative with your shipping strategies and outlined the basics of aggregation, pooling, and more. But how impactful are strategies like pool distribution and consolidation?

Here’s a real-world example of how a simple inbound freight assessment can snowball into big savings.

2 steps to evaluate your pool distribution and consolidation capacity

Let’s take a food manufacturer as an example.

A manufacturer in the Midwest receives several weekly loads of product from vendors on the East Coast. The current schedule has the East Coast vendors shipping from their plants to the same Midwest facility multiple times a week. Sometimes a single vendor sends two separate pallets in a day.

With this in mind, here are the steps we can use to identify pool distribution and consolidation opportunities:

Step 1: Consolidate the geographic area

By taking a step back to look at the manufacturer’s supply demands and the vendors’ shipping patterns, we immediately see opportunities for improvement. In this case, several vendors in the same region are all shipping separately.

So, how to go about consolidating?

First, can the ordering pattern tolerate change? If you can over-order or store product, you can update your buying schedules to account for static shipping days. Then you can consolidate your vendors in the North East geographic area to, say, a Tuesday/Thursday ship schedule. Requiring the vendors to ship on those days offers front-end consolidation.

Step #1 requires no advanced logistics — no mode conversions, nothing fancy — just getting everyone organized.

Step 2: Evaluate volume

The next big question: do you have enough volume for inbound consolidation? Once you have determined your vendors’ shipping patterns, it’s all about increasing your volume.

Once your vendor is consolidating based on the new purchase order schedule, you can consider working with a 3PL to consolidate shipments into larger LTL or TL shipments. By shifting your LTL shipping into larger LTL shipments, you will realize more per-pound savings.

With enough volume, you could even establish a consolidation point. One carrier could then do all of the pickups and delivery to a consolidation point, where a 3PL could arrange for shipments out.

Step #2 demonstrates how gains from consolidation are really all contingent on volume.

Generate cost savings beyond pool consolidation

A surprising way to reduce your claims — and your costs

Pool distribution and consolidation of your LTL shipments can yield very significant reductions in your claims costs. This often-overlooked benefit of a pooling strategy is, again, all about volume.

Here’s how it works: A carrier will likely load a larger LTL shipment in the headload of the trailer. If you are taking up significant space in an LTL trailer (as in up to half of the trailer), there’s a good chance the carrier won’t unload it at each and every terminal.

Most LTL loads are subjected to a significant number of “touches.” Each touch increases the risk of damages, and thus claims risk. (Although we do offer some strategies to deal with that risk specifically.)

But with a larger, consistent load, your carrier will gain familiarity with your product. Little details — like not loading your food ingredients next to someone else’s table saws — go a long way to preventing claims.

Consolidation can significantly reduce your claims costs. The result: lowered costs to the manufacturer, the vendor, the shipper, and the pure cost of product. Anytime you can reduce claims, that helps everyone in the logistics supply chain.

With the true cost of claims — including critical variables like vendor relationships, downtime of manufacture, processing time, the expense of claims follow-up… well, it’s more important than ever to reduce claims up front.

Access continuous move savings

Also, pooling can set you up to take advantage of continuous move strategies. Building on our real-world example above, if vendors are bringing product to the Midwest and our manufacturer’s products are headed back to the East Coast, we have a continuous move opportunity. The carrier can bring the supplies, then reload to deliver the finished product to the final customer. More than ever, continuous move is always a very valuable cost-saving strategy.

Where can your organization start saving with pool distribution and consolidation?

For consolidation, alignment and visibility are not just buzzwords. The fact is that most organizations simply do not connect inbound and outbound shipping strategies. A 3PL can help your organization take a step back to see the big picture of shipping logistics.

If you can take control of your inbound or outbound shipments, a 3PL can help you develop a strategy to not only consolidate and reduce claims up front, but also to evaluate your outbound and eliminate deadhead. The result: the cost savings you need and the improved carrier relationships that will make your life easier.

Charles Miller

Charles is the General Manager at Evans Transportation's headquarters.

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