fastlane
Share and share alike
IN THIS AGE OF EVER-RISING FUEL PRICES AND THE PUSH
to reduce carbon footprints, logistics and supply chain managers
are constantly searching for ways to cut transportation costs as well
as the number of trucks on the road. One proven technique for
doing so is through consolidation programs, sometimes referred
to as “shared services” or “collaborative distribution.”
This is hardly a new idea. For over 50 years, consumer goods
companies have slashed costs by consolidating their smaller
orders with those of other manufacturers to create one or more
large shipments. Although the shipping climate back when these
programs were introduced was quite different from today’s, the
current environment could not be better for this tried-and-true
concept.
As for the origins of the practice, the first
food consolidation program was set up in the
late ’50s by a warehouse in Huntington, W.Va.
At that time, major food manufacturers
shipped most of their customer orders by rail,
which presented the problem of how to serve
smaller accounts that did not buy enough to fill
a rail car. Utilizing one of the more bizarre rail
tariff provisions in effect at the time, the public
warehouse came up with a plan: It would consolidate compatible orders from multiple
clients and load the merchandise into a separate rail car bound for each individual destination (up to three),
thereby allowing its clients to ship goods at carload rates (plus
stop-off charges) rather than at significantly higher less-than-truckload (LTL) rates.
Not surprisingly, the concept was a hit with shippers. And
though consumer goods shipments gradually shifted from rail to
truck, shippers continued to use consolidation programs in order
to get truckload, rather than LTL, rates. Participation in consolidation programs has waxed and waned over the years, but lately
there’s been an uptick in interest.
Today’s consolidation programs are typically administered by
logistics service providers (LSPs) that, with their large client bases
and sophisticated systems, are able to combine what would have
been LTL shipments into truckloads, reducing freight and handling costs as well as carbon emissions. The leading providers
boast systems that combine orders, by customer and requested
arrival dates; route the shipments; and electronically tender the
freight to the appropriate carriers. One particularly effective pro-
gram is that offered by Scranton, Pa.-based
Kane Is Able. Its “Collaborative Distribution
Program” has produced both handling and
transportation savings for shippers as well as
their customers. It is a classic example of how
new, creative thinking about an old concept
can result in new successes.
C.H. Robinson has also taken steps to make
it easier and more economical for its customers to consolidate shipments.
For those companies that haven’t given such
programs much thought, this might be an
opportune time to do so.
The traditional objection
has been that outsourcing
carries some additional
expenses, but those pale
when compared with rising
truck costs.
You don’t have to be a
small shipper to find value
through collaboration. In
an era of small just-in-time
shipments and reduced
inventories, even large corporations make small shipments. Nor do you
have to spend time finding the right collaborative partners. The LSP does that, ensuring
that all of the products to be consolidated are
compatible.
These programs obviously require the cooperation of shippers, LSPs, and customers. And
they won’t reduce fuel prices per gallon. But
when managed efficiently, they can—and
do—go a long way toward maximizing fuel
efficiency. ;
Clifford F. Lynch is principal of C.F. Lynch & Associates, a
provider of logistics management advisory services, and author of
Logistics Outsourcing – A Management Guide and co-author of The
Role of Transportation in the Supply Chain. He can be reached at
cliff@cflynch.com.
