We’re more than halfway through 2021 and it’s been a very challenging year for transportation executives, to put it mildly. There have been great imbalances between freight demand and capacity across all modes, forcing shippers to reevaluate their strategies for getting their goods into customers’ hands. One approach receiving renewed attention is pool distribution. What is pool distribution? Why is it worth considering in today’s market? How does a transportation management system (TMS) help enable a pool distribution strategy? Those are the main questions I discussed withJP Wiggins, Co-Founder & Vice President of Logistics at 3Gtms, during a recent episode of Talking Logistics.
Pool Distribution Defined
To level-set our audience, I began our discussion by asking JP to define what pool distribution means in today’s environment. JP explains that besides the dozen or so national less-than-truckload (LTL) carriers who will take your shipment door-to-door anywhere in the U.S., there are about 75 regional LTL carriers who will get your shipment cross-country through interline relationships with other regional carriers.
“What pool distribution does is enable a shipper to combine multiple LTL shipments going from say Pittsburgh to LA into a single truckload for the long haul part of the journey and then have a regional carrier distribute them to customers from there,” says JP. “That’s really all it is. We’ve been doing this since the ‘80s. It’s gotten a lot easier recently with transportation management systems (TMS) allowing you to set up pool points to drop freight at regional carrier terminals. So, it’s allowing shippers to have direct access to all of these regional carriers, which has been really important in dealing with the capacity crunches we are seeing across the board.”
I asked JP why pool distribution is getting so much renewed consideration right now. JP points to the capacity crunch at all levels. As an example, JP notes FedEx Freight recently dropped 1,400 customers because they don’t have enough capacity, and adding capacity is very expensive. “They’re focused on profitable operations, not adding capacity,” he says. “We also have capacity issues in parcel and truckload, as well congestion at ports and rail terminals.
“This is the new normal we’re going to be experiencing for the next decade. Things are just evolving so rapidly. It’s not just COVID, although that caused a rapid infusion of new technology. The workforce is also evolving with more people working remotely. And you have to consider the gig economy, as well. But the biggest labor shortage may be at the warehouse where there aren’t enough people to load and unload shipments. Demurrage charges are skyrocketing. You need technology to figure this all out to make the right decisions. It’s all dynamic.”
Pool Distribution and TMS
Following up on the technology aspect, I asked JP how a TMS can help. JP says, “The key is it has to be simple and fully automated all the way through to the financials. Set up the agreements with the carriers for pool points and then let the software do the work for you. It will use the pool points when it makes sense for cost and time considerations. It has to be holistic, yet simple, letting the technology do the hard grunt work and letting the transportation analyst make the final decisions where necessary.
“Then let the software do all the math to properly pay the multiple carriers involved and to invoice customers. Plus, the software has to provide all of the tracking for visibility to the status of each shipment.”
What are the benefits of using pool points? JP says, “Primarily it’s cost savings, as long as you have the volume going to an area. It can also be faster since you’re doing a straight run to the pool point rather than using interline carriers where loads have to be consolidated and deconsolidated. You could also use intermodal for the straight run. There is also less opportunity for damage and errors due to less handling.
“But perhaps the biggest benefit right now is it opens up additional capacity to you that you otherwise wouldn’t have. And you have the opportunity to negotiate rates with those pool point carriers.”
Are Pool Points Right for You?
The biggest question then becomes is using pool points right for your operations? JP had some great insights on what companies should be asking themselves, as well as their technology and 3PL partners, to get answers to that question. Therefore, I encourage you to watch the full episode for all the details. Then post a comment and share your own experience and perspective on using pool distribution.