Pooled distribution as a store replenishment strategy is more relevant than ever because of decreasing margins and the need to move goods quickly to stores in reaction to changing consumer demand. Pool distribution is a great example of the power of the “network effect”, as it leverages numerous retailers and pool operators to substantially lower distribution costs and increase delivery frequency. While pool started with specialty retailers, it is applicable across much of the retail market and in other distribution-oriented industries. Retailers and distributors should consider pool as part of their strategy to lower distribution costs and improve store replenishment performance.
Pool distribution is unique in that retailers share a common distribution network of logistics services providers who use a common process and technology to manage the flow of goods from the retailer’s central DCs or suppliers to their receipt in a store’s back room. Delivery density and frequency drive the pool’s transportation savings and better service. For example, rather than 5 retailers having 5 separate LTL or parcel deliveries to a mall on one day, those 5 retailers share a single delivery where the 5 stores get serviced as one stop. Stores can be replenished more often because the volume of goods moving through a dedicated transportation network is higher in that lane (e.g. pool point to mall). Essentially, pool delivers the higher speed of parcel with the lower cost of LTL (see Figure 1 below)
Figure 1
Parcel and LTL–based replenishment are not the only candidates for replacement with pool distribution. Private and dedicated fleets are also opportunities. Depending upon the store density and proximity to distribution centers, the cost to service stores on a frequent basis may be prohibitive. Equally if fleet-based delivery is optimized for lower costs it may be too slow resulting in too much inventory in the stores, or worse, higher occurrences of out-of-stock merchandise. In most cases, the savings opportunities for pool distribution are large. Retailers moving to pool distribution from parcel and private/dedicated fleets have seen pool distribution significantly contribute to transportation cost reductions of as much as $20M annually.
In the past, because of the comingling of freight, the tracking of goods had to be absolute and highly granular (e.g. carton level) with complete visibility for the retailer and pool operator. The pool process and tracking started when the retailer sent an Advanced Shipment Notice (ASN) to the pool operator detailing at the carton level, exactly what goods are expected to be inducted into a pool point. All cartons were scanned at each touch point from pool receipt to staging, loading and store receipt. If there was an exception (e.g. missing carton or wrong carton), it was reconciled at each touch point. This approach helped to ensure that there were minimal product losses and claims, which benefited both the retailer and the pool operator. A common pool management system for the pool network and participating retailers helped standardize the process and provided uniform visibility through the ASN to store receipt lifecycle.
Today, the satellite networks of the Cargo Carousel System bypass the ASN with not only real-time notification but also track & trace capabilities that include real-time reporting and alerting to everything from route deviations and unauthorized door openings to atmospheric changes within the trailer (temperature, humidity, light exposure, shock, O2, CO2, ethylene).
The standard-sized modules of the Cargo Carousel System are the true catalyst that allows retailers to share a common distribution network of logistics services because anyone can use the same modules for multiple purposes.
The benefits of pool distribution extend beyond faster and lower-cost store replenishment. Retailers can better optimize inventory as they have complete visibility to what goods are where (e.g. in transit or received at the store) and understanding of replenishment lead times as they know how quickly goods are moving through the network. Fast moving and peak season inventory can be staged for more timely replenishment to minimize out-of-stocks. Store labor utilization can improve as delivery schedules can be provided with defined and tighter delivery windows.
While e-commerce continues to grow, stores still represent the vast majority of the revenue generated for retailers and they need to be serviced more cost effectively and quickly. Pool distribution is a great opportunity for retailers – and distributors, looking for those 7 and 8 figure transportation cost reductions while at the same time dramatically shortening replenishment cycle times. This is why pool distribution is more relevant than ever. Learn more…
Circular Supply Chains Inc. 