The costs and efficiencies of multimodal—moving products by combining air, rail, road and ocean transportation—are recognized by many carriers and third-party logistics (3PLs) providers, as discussed last month in the first part of this series: “Multi-Modal Management: It’s a Group Effort.” But several food & beverage (F&B) transportation companies reveal that less than 40 percent of companies make sincere efforts to institute any modal optimization initiatives, according to 2009 data from AMR Research. To improve asset utilization, lower cost-to-serve and reduce carbon footprint, companies and 3PLs need to adopt best practices. Additionally, 3PLs must be involved in multi-party collaboration to extend best-in-class modal optimization practices across a broader supply chain network.
In continuation of our two-part series, this month we identify seven best practices within the multi-modal approach of moving products; and the implications of the operating model for shippers, carriers and 3PLs.
Parcel Case Strapping—Multiple parcel orders for the same customers are strapped and shipped to the customer as a single shipment. This parcel aggregation model often reduces cost because there is an optimal weight/cube bracket within which a parcel is most economical. Shipments that are too light or small and fall outside this bracket are more expensive if shipped independently.
Parcel/LTL Minimum Charge Analysis—Parcel costs and less than truckload (LTL) minimum charges are compared for each shipment and shipped using the cheaper mode.
Parcel Zone Jumping—Parcel shipments for certain expensive zones can be shipped at a lower cost by using a combination of truckload (TL) and parcel. Parcel shipments to the same zone are consolidated and shipped via TL to the zone, cross-docked and delivered to customers via a series of parcel shipments. This helps transporting goods for a majority of the distance via TL, which is more economical than parcel because it avoids parcel shipments’ expensive zones.
Cross Dock/Pooling—LTL shipments going to the same three- or five-digit zip codes can be pooled at the origin to build TL loads, shipped to the destination zip codes, cross-docked there and finally delivered to end customers via LTL shipments. This helps to transport the goods for the majority of the distance via TL, which is more economical than LTL.
Aggregation—Aggregation aims at consolidating orders and shipments between the same origin and destination points to build larger shipments to customers without changing modes, e.g., shipping fewer LTL shipments in heavier LTL weight brackets as opposed to shipping a high number of LTL shipments in lighter LTL weight brackets. Similarly, shipping fewer and fuller partial TL loads as opposed to a higher number of and less-full partial TL shipments.
Consolidation/Co-Loading—This is similar to the aggregation best practice with the difference of consolidating LTL and partial TL shipments into full TL shipments.
Continuous Move Routing—This best practice helps convert partial TL loads to full TL loads and minimizes the deadhead miles. Instead of going from point A to point B and back to point A, continuous move routing builds routes such as A to B to C and ultimately back to A. The interim stops can be either for making customer deliveries or picking up loads from suppliers to be carried back to point A.
Adoption impact on shippers, carriers & 3PLs
Once the advantages of multi-modal operation are recognized, the industry will see a “snowballing” effect, i.e., after the first few successful collaborative alliances are established, a landslide of alliances will form. The following looks at the implications on shippers, carriers and 3PLs.