Transportation Consulting Blog

In view of the troubling state of the United States economy, shippers are looking for creative ways to reduce transportation costs, specifically LTL costs.  Tight capacity and rising freight rates are making this a challenge as we head into the fourth quarter of 2011.

Schneider Logistics is offering shippers an integrated delivery service that it says can cut transportation costs for certain types of freight by 7 to 20 percent.  The logistics arm of truckload giant Schneider national that they have branded Integrated Delivery Services is consolidating less-than-truckload freight for customers with similar distribution patterns. The service is aimed at shippers, often competitors, with common routes, distribution and cross-dock locations and dispatch and delivery schedules.  Food and the large diverse national retailers represent two such target markets.

Many years ago, a similar concept gained widespread acceptance in the automotive industry.  The major North American automotive companies, working closely with their core carriers, created multi-stop milk runs that would pick up auto parts that were delivered on a just in time basis to a Ford, GM or Chrysler plant.  Selected carriers would pick up a range of complementary parts that taken together could be used on an assembly line to build cars.

The Schneider Logistics concept is a bit different.   They are calling their approach more “strategic and creative,” even to the point of sharing a dedicated tractor-trailer with a competing company. They claim that more and more shippers are willing to do that, in various ways. Other carriers have offered “shared dedicated” or “collaborative distribution” services. Some shippers look for other companies with complimentary freight to help “cube out” or more completely fill a trailer, mixing lighter weight and heavier goods.

The fact that this concept is starting to take hold is no surprise to anyone.  In fact, the surprise is that it has taken so long to gain acceptance.  The delay has been largely a result of competitive shippers being reluctant to work collaboratively with each other.  With logistics service providers becoming so pervasive over the last decade, this lessens the size of the hurdle.  A third party can pull together the participants,, manipulate the confidential data from each party, create and optimize the most cost effective routes, orchestrate the consolidated movements and pool points and arrange for the deliveries. The shipper can enjoy the benefits of a truckload movement without the headache of trying to make it happen on their own, and at a savings over standard LTL rates.

The logistics arm of $3.1 billion trucker Schneider National piloted IDS with nearly 20 customers with competing brands in Denver, merging their freight.  The service is being rolled out in Portland, Ore.; Sacramento, Calif.; Los Angeles, Houston; Lenexa, Kan.; Jackson, Miss.; Winchester, Va.; and Memphis, Tenn. Schneider plans to expand IDS in the Midwest and the Dallas-Fort Worth area. Look for these types of shared service models to become more popular in the days ahead, particularly if the economy does not turn around soon.