Given the news every week about trucking capacity and driver shortages, pool distribution is the way to go, says Tim Egan, director of integrated logistics at refrigerated prepared foods and bakery products manufacturer Chef Solutions, Schaumburg, IL, the parent company of Orval Kent Foods, Pennant Foods and I&K DSD.
Chef Solutions has about 70 third--party carriers handling all its cargo around the country. Of that number, 23 are full truckload carriers, two are less--than--truckload carriers and a few handle parcels. The rest are all pool distribution carriers, which Egan says have worked wonders for his company.
With pool distribution, also called final--mile service in some circles, shippers move product into regional terminals in truckload quantities. There, the third--party logistics provider (3PL) unloads it, segregates and sorts it by store and reloads it onto local delivery trucks for delivery to multiple locations in a geographic area. This transportation method is usually cheaper than shipping as LTLs, depending on the number of stores, volumes per store, weight per shipment, frequency of deliveries and distances between the stores and pooling center.
"Historically, this final mile of freight delivery to the point of sale has been the most difficult," says Edwin Conaway, president/CEO of Con--Way Now, a unit of Con--Way Transportation Services, Ann Arbor, MI, which began offering this service last month. "The demands of just--in--time inventory, time--specific promotions and new product releases put significant pressure on a company’s supply chain to get product on the shelves as soon as possible."
Since implementing pool distribution about a year and a half ago, Egan has cut his carrier base by about 65 percent, reduced delivery costs by between 5 percent and 7 percent, and has always had trucks available whenever he’s needed them. "It's a great source of pride for me that we’ve handled our toughest delivery cycles without capacity issues," he says.
Not all shippers have been that lucky. In this tight market for capacity, "shippers who believe that if one carrier cannot do it for me there is another that can just don’t get it," says John Miller, general manager of refrigerated business at Schneider Logistics, Green Bay, WI. "It can quickly become a bidding war, and when it gets into a bidding war, it's never a good thing for the shipper."
The reverse is also true. "Truckload carriers in particular have been in the driver's seat because their thinking is that 'if you don't want me to take your freight, I will find someone else who does'," observes Tom Sanderson, president and COO of Transplace, a Plano, TX--based 3PL and logistics services provider. "For the big trucking companies, there is no incentive to find a solution to the capacity issue because there is no reason to change. Their prices are up, so their earnings are up. It falls on the shippers to keep on top of it."
"Demand is outweighing capacity, and that allows carriers to be more selective in whom they do business with," observes Brad Young, vice president of transportation business at Exel, which has U.S. headquarters in Columbus, OH. "Especially if you're perceived as a company that is difficult to do business with, carriers can just walk away now."
That is why it was crucial for Egan and Chef Solutions to lock in carriers early. "It allows us to have dedicated carriers that know our exact lanes, order cycles, the origin and destination of our freight and the frequency of loads with us for the rest of the year," Egan says. "Now, our buyers know exactly when they will get their shipments when there was a lot of uncertainty about that before. We have a confirmed order--to--shipping delivery cycle at least twice a week to all the markets we serve; for some, it's three times or even five times, but it's always at least two."