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Consumer Goods Logistics, Freight Transportation

One Surefire Way to Lower LTL Costs

Alex Stark | March 13, 2014
LTL has its drawbacks.  It has higher freight costs than truckload, delivery times are unpredictable and invoices can be very confusing.  Still, small to mid-sized shippers depend on LTL carriers to move their smaller shipments to market, both long-haul and last mile, because they lack the volume to ship FTL.

The key to moving away from a dependence on LTL and to substantially lower LTL costs is collaboration.  

Instead of surrendering your freight to an LTL carrier to move through its network, align with a third party logistics provider (3PL) that has a dense concentration of customers moving goods to the same retail customers.  They can then leverage their customer base and software to identify consolidation opportunities and save you money.   

Pool distribution is certainly not a new idea, but rising pressure to lower LTL costs and carbon emissions is making this "share the ride" concept a more popular option.  The collaborative distribution strategy can work with both long-haul and last mile moves. 

Collaborating to Reduce the Cost of Long-Haul Moves

Shippers that utilize national LTL carriers are subject to tariff rates that can reduce your profit considerably or, worse yet, price your product out of the market range.  Nationals can cover all of your LTL needs, but you are at the mercy of their hub network across the nation.  Transit times are longer to suit their schedule and escalating freight costs can be prohibitive.  Imagine delivering a shipment into the LTL terminal on Monday, but it doesn't get loaded for transport until Friday.  That's four days lost in transit as well as DOS receivables.  

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An alternative would be to move goods to a local consolidation point, where a 3PL like KANE combines your freight with others moving to the same areas of the country into full truckload shipments.  The key, of course, is having other shippers with similar products, ship-to points and delivery timelines.  That's why a 3PL is an ideal partner, since they have visibility to freight across a large customer base.  

You many need to work with your retail customers to adapt ordering cycles to allow you and your 3PL to create a predictable schedule for consolidation. 

Collaborating to Reduce Final Mile Delivery Costs

Collaborative distribution strategies also work for final mile deliveries.  For example, it's simply inefficient for dozens of smaller suppliers to send discreet shipments to a major grocery chain to arrive on the same day.  Those shipments could easily be combined on a single truck to lower the cost for all shippers.  It also lowers costs for the grocery chain, who now receives the same products in one shipment versus five shipments, relieves dock congestion, and reduces manpower requirements for processing the inbounds.  This can only be optimally achieved if the supplier's goods were stored at the same distribution warehouse.

Companies like Sun-Maid are making collaborative distribution work to lower LTL costs.  KANE is one of the company's partners.  Sun-Maid's results are achieved without significant involvement of the retailer in the consolidation.  However, KANE is actively reaching out to retailers in an attempt to have the collaboration be more retailer-driven.  That is, retail buyers would consolidate orders to companies whose products are distributed from the same 3PL.  This retail consolidation solution would introduce a whole new wave of efficiency to product distribution. 

The systems are in place to make retailer-driven collaboration a reality.  We just need the will and determination to make it happen. 

Overall Benefits of Collaborative Freight Strategies

  • Cost savings of 25% - 35% by shifting to the lower cost TL mode and sharing costs with other shippers.
  • Faster transit time by avoiding the LTL terminal network (Coast to coast in 5 days via pool distribution vs. 10 or more days via LTL network).
  • Predictable delivery times – shipments can be scheduled to meet your RAD (requested arrival dates) requirements.
  • More manageable inventory due to faster transits.
  • Reduced greenhouse gas emissions since the same volume of freight is delivered in fewer, fuller loads.
  • Integrated logistics solution for warehousing and final delivery.

KANE strongly believes that collaborative freight strategies are a key to running a more cost-effective, more sustainable supply chain. Contact us at 888-356-KANE (5263) or info@kaneisable.com to discuss how collaborative distribution could work for you.   

LTL Secrets Revealed