Pool Distribution: The Speed of Parcel at the Cost of LTL/Truckload

With four kids heading in four different directions each night (swim practice, track practice, sax lessons, religious school), the only way my wife and I are able to pull it off is by carpooling with other families. It’s our own version of pool distribution, a replenishment and fulfillment model that, although it has been around for some time, is in the spotlight again for many retailers and other distribution-centric companies.

Why the renewed interest in pool distribution today?

“If you look at the challenges many retailers face today as they move to omni-channel retailing and the impact of online competitors, their margins are really getting squeezed,” explained Chris Jones, Executive Vice President, Marketing and Services at Descartes in a recent episode of Talking Logistics. “At the same time, stores need to be more responsive, so even though they are carrying less inventory, they still need to make sure they have the hot products in stock and they need to be more responsive to [consumer demand].”

“When you take these factors into consideration and you look at the cost of doing store replenishment, what you’re getting with pool distribution is something you can’t get from a traditional less-than-truckload or truckload approach or even parcel — and all of these other modes have value, so it’s not a case of replacing everything with pool — but by leveraging the volume that other shippers have [in a pool network], you can lower your transportation costs down and do so more effectively than you could on your own because you benefit from all the other participants on the network.”

The other benefit is enhanced responsiveness. As Jones put it, “if you only had freight volume that warranted once-per-week delivery and it was just too costly to do it 2-3 times per week, you can now [replenish] your locations multiple times per week because your freight is moving together with all of this other freight that is moving on the same lanes. So what you’re getting with pool distribution is the speed of parcel but at the cost structure of LTL/truckload.”

The business case for pool distribution goes beyond lower transportation costs and enhanced responsiveness (although those are certainly the main drivers), as Jones discusses in the short clip below:

I encourage you to watch the rest of my conversation with Chris for more insights and advice on this topic, including the role of technology and how he sees pool distribution evolving in the years ahead. But I’ll leave you with this comment from Chris on what differentiates pool distribution today from previous models — and why you should revisit it as an option for your distribution/replenishment operations:

“Pool distribution is becoming more relevant today because you now have this notion of a network and a network effect. You’re seeing retailers and other companies deciding that they are going to use a common set of practices, processes, and [technology platform] to run the business, and that’s not only what gets them the economy of scale, but also the control [and visibility] they want to have on their goods as they move through the network. So, I would describe less sophisticated pool distribution as ‘Hey, send me your goods, I’ll group them with other shippers, and I’ll tell you when they show up.’ Where pool distribution has really moved to today is precision tracking at a carton or SKU level as the goods move through the network and all of the handoffs [from origin to final destination] that go on with it, so you’re ensuring things are happening the way they’re supposed to.”