POOL DISTRIBUTION: The Forgotten Mode?

Transcription

1 Shippers are giving pool distribution a second look thanks to today s thirdgeneration TMS, which is more powerful, flexible, and sophisticated than prior generation products. Produced by In partnership with

2 If you are moving freight between regions, shipping a high volume of less-than-truckload (LTL) shipments between regions, or looking for ways to save money on longer freight moves, then you ve probably considered pool distribution as a viable option. Based on the perceived difficulties associated with the shipping approach, you likely turned to a different shipping strategy to fulfill your needs. After all, pool distribution has historically presented some stumbling blocks for shippers looking to leverage this strategy. If you ve never considered pool distribution, it s time to give it a second look. Thanks to full-featured, modern transportation management systems (TMS), companies are rethinking how they look at pool distribution and reaping the rewards of this oftenmisunderstood shipping tactic. Over the next few pages we ll explore the historical challenges associated with pool distribution, explain how shippers of all sizes can leverage this shipping strategy, and show how one major manufacturer has successfully combined a full-featured, modern TMS with an effective pool distribution approach. The Forgotten Mode Defined as the consolidation of freight going into a region, and then using a local delivery company to handle the final delivery, pool distribution fulfills a need in an era where shipments can be as small as a single package or as large as a full truckload. Somewhere in between those two endpoints lies a gap that most shippers fill by using LTL freight options. Once those LTL shipments reach a certain level of volume and frequency, it makes sense to explore other, more affordable options. 1

3 Fortunately, a good TMS will do all of this hard match on the fly and present results that allow the route planner to do his or her job more efficiently. JP Wiggins, vice president of logistics That s where pool distribution enters the picture. Take, for example, the company that needs to move a group of LTL shipments from Chicago to various southeastern destination points. Instead of using LTL, it could put those shipments on a truckload (TL) and then have that vehicle drop shipments off in hub cities like Memphis and Atlanta. From there, the pool based in each of those hubs would make their respective deliveries throughout the region. Up until recently, managing pool distribution was a task that many shippers were unwilling to take on, and their technology systems weren t much help either. Some shippers use static routing charts, while others rely on their third-party logistics providers (3PLs) for the technology component. And while many of the Tier 1 TMS platforms support this type of freight consolidation, for example, those systems are also very complex and difficult to implement and maintain. Many older systems also struggle with dynamic planning, where orders changes constantly happen and dealing with real-time execution requirements. For past-generation systems, the TMS vendors engineers were heavily involved in setting and tuning the transportation optimization needed to fully leverage pool distribution, says JP Wiggins, vice president of logistics at 3Gtms. The problem is that shippers businesses change more frequently now, and an untuned TMS leads to a loss in savings associated with this shipping strategy. The Technology Component With the rise of omni-channel and e-commerce, shippers use of LTL is increasingly exponentially. To get the most out of pool distribution, shippers need to have at least some volume of LTL freight being shipped regularly between geographic regions. The longer the moves and the more freight that s involved, the more sense it makes to look at pool distribution. The basic savings come from the fact that it s cheaper and faster for a shipper to move a full TL of freight closer to it s destination, says Wiggins, than having it shipped via carrier s LTL network. The cost savings associated with a fine-tuned, optimized pool distribution strategy can be substantial. Wiggins estimates that pool distribution supported by a full-fledged, modern TMS can help a company save at least 10% in annual freight costs. Each shipment has different pool points, cross-dock times, crossdock fees, and local delivery fees, he points out. Fortunately, a good TMS will do all of this hard match on the fly and present results that allow the route planner to do his or her job more efficiently. As an added bonus, pool distribution is generally faster than LTL direct, which must rely on the carrier s hub/spoke delivery system. It s generally faster to load a shipment on a truck and drive the long distance with TL, and then use pool distribution to cover the remaining distance, Wiggins says, adding that most LTL carrier terminals accept TL drops and are willing to serve as pool points. Once those willing carriers are identified, negotiating rates for pools and regional carriers is pretty straightforward. 2

4 Pool Distribution Example I F Pickup A Pool point Pool point G H J C D E B K Linehaul (TL) Sub-trip (LTL or parcel) Direct TL Multi-stop TL Route 1: I Route 2: A, B, C, D, E, F, G, H Route 3: J, K Most regional carriers are hungry for pool freight because it allows shipments to enter their networks that they wouldn t normally be handling. In fact, Wiggins says the first optimization engines were developed back in the 1980s for regional LTL carriers specifically for this purpose. And, aside from LTL carriers, there are also numerous special purpose cross-dock facilities in every region. Combine these opportunities with the obvious advantages that pool distribution presents, says Wiggins, and the strategy becomes that much more enticing for shippers. Pool distribution is an option that all shippers moving to LTL shipments inter-regionally should evaluate, says Wiggins. Not only are the cost savings and service benefits of pool distribution plentiful, but when you add a modern TMS to the equation to handle the routing optimization and execution the average 10% freight savings becomes even more attractive for a wide range of companies. Pool Distribution in Action: Bemis Manufacturing As a family-owned business that traces its roots back to 1901, Bemis Manufacturing Company has quietly grown into an innovative, international company that serves customers around the world. 3

5 3Gtms combination of many quality options with a uniquely powerful optimization engine saves us a lot of money and doesn t take any more time. Keith Bassuener, manager of distribution and logistics Based in Sheboygan Falls, Wis., the company is best known for its toilet seat products, but it also makes, commercial, and indoor furniture, suction canisters, sharps containers, fluid management systems, gas caps, gauges, and various contracted injection molded plastic parts. Previously using an off-the-shelf TMS to manage its freight pooling, Bemis needed a more automated approach that would manage tasks like freight routing which it handled manually. We knew that we were leaving money on the table by not being able to run through all of the available shipping options including multiple locations, multiple carriers, LTL vs. TL vs. parcel direct, or hundredweight programs, says Keith Bassuener, manager of distribution and logistics. There were a lot of variations and calculations to be managed for any one plan during any given day. To better manage its end-to-end, global transportation network, Bemis implemented the 3G-TM TMS in early And because Bemis mix of freight changes dramatically from day to day, it needed an optimization platform that could easily and quickly choose among all of these options and find the most cost-efficient way to move its freight. In many cases, that option was pool distribution. Bemis has been using TMS solutions for over 20 years, and 3G-TM was the first modern TMS we found that allowed us to manage our pool points and multi-stop TL planning, says Bassuener. We evaluated many different systems, but those few that had true pool distribution functionality were too complex to set up and maintain. For Bemis, the TMS factors in fuel charges, stop-off charges, bridge charges, and other fees to develop an effective pool distribution plan for any given shipment. The system also factors in the rates, carrier capacities, service and drive times, appointment hours, equipment requirements, and other key points. Armed with a full-featured TMS, Bemis can now expend less manpower on manual tasks while also providing a higher level of customer service. Our TMS figures out where everything intersects and then comes up with the best daily freight plan, says Bassuener. Aside from monitoring any exceptions, my team can focus on signing up and monitoring the most effective carrier selections for our transportation network. Bassuener says Bemis is also benefitting from its TMS optimization capabilities. 3Gtms combination of many quality options with a uniquely powerful optimization engine saves us a lot of money, adds Bassuener, and doesn t take any more time. We ve created a great set of transportation options to move our freight, including LTL and TL carriers along with many overlapping pool points. TMS + Pooling = Success There was a time when the cost of installing and implementing a full-featured TMS was too high for the typical mid-sized company to even consider. As we ve covered in these pages, the environment has changed dramatically over the last few years. Today, companies of all sizes can tap into the power of a TMS without having to break their budgets, tie up IT resources, spend years in the implementation phase, or even maintain the systems over the long haul. 4

6 Companies like Bemis, for example, have found themselves operating in an increasingly global transportation framework that s virtually impossible to manage using just spreadsheets and phone calls. When you start using pool distribution, there are suddenly a lot more moving parts to deal with, says Wiggins. To get your arms around the number of shipments that need to go out during a certain week, the best freight options for those orders, and the best execution strategies, companies need a TMS that offers complex optimization tools and capabilities. On average, firms that implement TMS are not only seeing a double-digit reduction in annual transportation costs, but they re also achieving efficiencies that simply can t be attained using an Excel-based transportation management approach. Historically, return on investment for TMS that supports pool distribution was skewed because the systems were too expensive and took too much time to install and implement, says Wiggins. The vendor community has stepped up to the plate and made it much easier for any size company to realize the value of a full-featured TMS. About 3Gtms 3Gtms is the fastest growing, Tier-1 transportation management system (TMS) provider. It is dedicated to helping shippers and logistics service providers gain a competitive advantage through technology. Whether you move $10 million or $1 billion in freight, 3G-TM solution seamlessly manages the full transportation lifecycle, including transportation planning and optimization, execution and settlement, empowering customers to make better shipping decisions while meeting their service goals. 3Gtms is dedicated to delighting its customers and as a result, holds a 100% customer satisfaction rate that is unmatched in the industry. For more information, visit: 5