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Supply Chain Challenges, Freight Transportation

Retail Consolidation Services 101

Alex Stark | June 08, 2017

Increasing revenue and decreasing carbon emissions. These are two primary goals of every retailer and logistics company, despite the recent U.S. decision to pull out of the Paris Agreement on climate change. But most retail supply chains have a structural flaw that gets in the way of these goals. 

The flaw?

Large retailers have thousands of suppliers, each managing its own transportation to the exact same distribution centers (DCs). 

The solution? 

Retail consolidation services, such as those performed by leading 3PLs. 

The typical supplier-to-retailer model

Let’s take 10 consumer goods manufacturers who sell through the same grocery and mass retail chains. Each of those suppliers stores product in its own individual warehouse, and then moves product from their warehouse to 10 different retailer distribution centers (Walmart, CVS, Kroger, etc). That’s 100 separate trips – many of them likely less-than-load (LTL) – to the same locations. It’s like 10 neighbors on the same block each taking a separate car to the school play: it’s wasteful in terms of resources and carbon output. 

Utilizing retail consolidation services

In the retail consolidation model, instead of 10 suppliers shipping to 10 different retail warehouses, those same suppliers could simply each make one trip to a common 3PL warehouse. The 3PL then manages the orders between the retailers and the suppliers and consolidates the orders of the 10 suppliers into one shipment to the retailer DC. The 10 LTL shipments become one full, multi-vendor shipment. 


Benefits of retail consolidation services

To the supplier, benefits include a reduction of transportation costs of 25%–35% AND a reduction in warehouse costs of 15%.

To the retailer, benefits include minimized inventory (without stock-outs) through regular orders of smaller quantities; quicker order-to-delivery time; and increased warehouse efficiency through the receipt of fewer, fuller loads. 

In short, both the supplier and retailer reduce costs and maximize efficiency while reducing carbon emissions. Sun-Maid® is a great example of this.   

KANE took over distribution of Sun-Maid products in the Mid-Atlantic and Northeast regions and immediately integrated Sun-Maid into its freight consolidation program, which includes products from candy, pet food, condiment, and other grocery manufacturers. KANE automatically builds full truckload shipments based on ship-to points and requested arrival dates (RADs), and Sun-Maid pays only for the portion, by weight, of the truckload shipment that its products represent.  This strategy led to a 62% reduction in Sun-Maid’s outbound freight costs

To learn more, check out our white paper and/or contact KANE to see how our retail consolidation service can apply to your supply chain. 

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