Summary: Finding cost savings in the transportation of agricultural commodities can make a significant impact in the bottom line when bringing those commodities to the marketplace. Pool-distribution can offer a significant savings in the transportation of agricultural commodities. This model is used frequently in the commodities industry and is proven to reduce costs.
What is the fastest and most cost efficient way to move agricultural commodities to the marketplace? There are certainly a number of things to consider, but one solid choice is pool distribution. When distributing a high volume of agricultural commodities, identifying the right distribution model is a major factor. Technological considerations, costs, transit times and additional factors need to be assessed when determining how to best implement this model. By looking at all of these factors, you can determine if this is the right course of action for your needs.
To see how this model can benefit a business, take this scenario into consideration. Suppose an agricultural commodities company has to move goods from Virginia to Southern California. The company has a number of options to distribute their commodities. In some cases, less than a truckload shipping would be the company’s typical choice. The company could also use its own transportation assets to long haul the freight. However, a better option is the pool-distribution model.
Why is this model better? The biggest reason is the cost-saving aspect. Basically, there are two major cost saving opportunities with this form of transportation that come into play.
First off, the company will reduce its transportation costs by utilizing this model. This form of distribution offers the opportunity for the retailer to combine all of its orders for a given market, shipping them by using a single truckload into a cross-dock facility for final delivery to the marketplace. With less than a truckload shipping, the company will be required to pay the cost of many individually rated less-than-a-truckload bills on a regular basis. By pooling its orders, the retailer can move all of that individual shipment volume on a single truckload, which results in significant transportation cost savings. Over the course of a year, this can result in a major improvement in the bottom line.
The company can also reduce its distribution costs in a particular market by using this model. Essentially, the company can reduce the overhead expense of a distribution center by leveraging a cross-dock facility as part of the pool network. Once the shipment arrives in the destination market, it is brought directly to its sale point. This model will reduce transit time and improve delivery. Depending on the agricultural commodity, this can be extremely beneficial in the process.
When multiple agricultural commodities are being shipped through this model, a company can cut its transit time in as much as half, which increases the speed to marketplace drastically. A standard shipment going across the country takes between five to ten days on average because of other deliveries and stops within the carrier’s network. Including the time it takes to receive, cross-dock and deliver the next day, this model allows a company to have the freight to the marketplace in less time than it takes a typical carrier to move it into the West Coast marketplace.
Technology can also play a role in cost savings with this distribution model. Technology helps maintain the speed and accuracy in which shipments are moved through the supply chain, thus providing a company with additional cost savings. Shipment tracking often provides simple notifications, letting you know that goods are in transit and the status of your shipment. However, technology provides an opportunity to do much more than that.
Technology provides for inventory control at a more precise level throughout all stages of transit. It helps manage damaged freight, shortages and overages while minimizing claims, ultimately resulting in greater efficiency and cost savings. This can offer some important peace of mind when it comes to transporting goods and reduce headaches that can occur in the process.
Technology also provides an opportunity for more precision in meeting next-day delivery requirements. Most commodities deliveries are based on time-specific delivery windows. Routing and planning technology allows a company to hit those windows, which minimizes additional costs that could be incurred. Many companies do not utilize this, but with pool distribution, they can.
When considering this distribution model, there are a number of factors to consider in evaluating how this can best work for you. Basically, there are two major criteria which should be considered. The first is that the company must have enough volume and consistency to take advantage of the benefits that go along with pool distribution. It is best to have a high volume. This fits very well with the model.
Secondly, the transportation provider must have a network of suitable cross-dock facilities, which allows for efficient next-day distribution into the marketplace you desire. The provider should have dedicated transportation assets to provide guaranteed capacity. This is important because capacity has become more challenging recently, with regulations and shifts in the industry. The provider’s technology must add value for the company. Most importantly, a provider should know the ins and outs of the commodities industry.
One of the most important factors to stress is the building of a strong relationship with the carrier, where both parties realize the full benefits of this distribution model.
If you are considering this model for your agricultural commodities, it is best to start by researching carriers and warehouses that work specifically with your needs. This way you can be assured that the carrier is familiar with the nuances of the industry and has extensive experience in this area. Find out what carriers other companies are using and begin your research there. Sometimes, the best opportunities can come from word of mouth, so find out which carriers have been reliable for other companies. Don’t be afraid to ask all the big questions, including how well that carrier has handled the volume.