( This article is excerpted from the complimentary report
Advanced Pool Distribution: Key Enabler of Retailers’ Omnichannel Transformation,
available for download here. )
In Part One of this series, we looked at how basic pool distribution works. Here we look at what differentiates advanced pool distribution from basic pool distribution.
Networked Pool DCs With Standardized Best Practice Operating Procedures
Many PD providers in North America use Descartes Pool Distribution (specifically BearWare)1 to run their operations, which has created an interoperable network of pool distribution providers. As of Q1 2017, there are over 125 third party PD providers on the BearWare/Descartes network, with over 150 PDCs (pool distribution centers) between them, covering all major U.S.2 and Canadian markets. Retailers use the same software with any provider on this network — to schedule shipments, create labels, scan outbound freight (from retailer to PD provider), send ASNs, receive regular status updates (received at DC, putaway, shipped to store, received at store, returns, etc.), and more. They don’t have to deal with a different system for each provider.
Just as important, all pool distribution providers in the network use the same mature set of standard operating procedures, which have been developed, evolved, and refined over the last 25 years. When a new PD provider is brought into the Descartes Pool Distribution/BearWare network, they receive extensive operational training on these best practices. This has two important consequences. First, the retailer can use the same software and operating procedures across their entire network, rather than having to deal with multiple different integrations and procedures, one for each different PD provider. The network offers a fungible set of service providers — i.e. providers across the network are interchangeable.3 That tremendously simplifies things for the retailer, making it easy for them to mix and match different pool providers to meet the retailer’s exact needs and geographical footprint.
Secondly, the common operating procedures ensure not only interoperability, but a consistent level of service and quality across this network of independent PD providers. The retailer is ensured that they will always get the same best practices, the same fine grained, case-level, near-real-time tracking, and at least the same level of core service, regardless of which provider they are using.
Total Precision Visibility
When all pool distribution providers in a network are following the same standard procedures (as described above), they will be scanning every move or change of status of every carton/SKU. That provides consistent, network-wide, precise, granular, near-real-time visibility — from the time a shipment leaves the retailer’s DC4 up to receiving it at their store, even if the retailer moves to a different PD provider. Without this, there is a significant blind spot after merchandise leaves the retailer’s own DC. If shipped via LTL, the status is typically unknown until it is delivered and even then, there is the challenge of dealing with different carriers’ methods of notifying status. Parcel carriers provide scans at more points during the trip (pickup, destination hub, delivery), but the retailer still has to deal with multiple different parcel providers and has no single centralized source of visibility.
When using Descartes Pool Distribution/BearWare, retailers gain a single source of visibility across the network. It combines all scan and status updates, not only from all the various PD providers they are using, but also from all the parcel carriers, the retailer’s own private fleet, and other non-pooled delivery using other carriers. These are all combined together, with the pooled delivery visibility, into one unified visibility system, providing the retailer’s planners and store managers and associates with a single interface for checking the status of all shipments to the stores and to the end customers, no matter which mode they are shipped by.
Advanced pool distribution providers provide more granular scans than either LTL or parcel. They provide carton-level scans at every step of the way, including receipt at the DC, putaway or transfer to offsite storage, picking, loading into the truck, receipt at the store, or in some cases even replenishment onto the store shelf. They also provide status visibility out-bound from the store for ship-from-store, store-to-store transfers, and returns.
This visibility has a lot of value. On a tactical level, it saves time and phone calls asking where things are. It also reduces chargebacks and disputes between carrier and retailer as they have a common view of what happened. Perhaps the greatest value is the ability to gather rich data for performance tracking and analytics. With unified visibility, the transportation staff spends less time gathering and cleaning up the data, and has more time to analyze it and respond to and fix issues. They are able to get ahead of the curve and be proactive, potentially avoiding expediting, identifying and resolving problems a lot earlier in the cycle. With better visibility into what they actually have in the PDCs (pool distribution centers) and stores, they know when more cost-effective shipping options can be used, and reserve expediting only for when it is truly needed. Ongoing opportunities for improvements can be uncovered and continuous improvement realized.
Flexibility, Timing, and Total Control of Delivery in the Last Mile
Advanced pool distribution provides trap and hold (holding back inventory at the PDC), as well as offsite management (holding inventory at a nearby customer-managed site), allowing much more flexibility, precision, and control of the timing of releasing inventory to stores. Retailers maintain total, precise control of their inventory all the way through the last mile, in a way that is not possible with either LTL or Parcel.
Trap and Hold Enables Metered Deliveries, Precision Slots, and Additional Flexibility
In the early days of pool distribution, a ‘push’ approach was used: all goods arriving at the pool point were pushed to the stores on a regular schedule, typically every two or three days to each store. Now pool distribution providers can do ‘trap and hold’, where shipments are held at the pool DC until the desired timeframe. A PDC can thus provide much more flexible and precise metered deliveries, on an as-needed basis, as well as accumulate inventory for surge delivery.
A pool distribution provider can provide different options for different retailers: one retailer might opt to get the prime delivery slot, an hour before store opening, while the next one gets a late morning slot or afternoon slot. Each retailer can decide what is most important for them: paying extra for the better slot or getting a discount if they have the flexibility to take delivery at a different time. Even paying extra, the cost of precise delivery is much less using pool distribution than with parcel or LTL.7 Precision delivery also enables better store labor planning because the retailer knows exactly when they will need more associates available to receive and put away deliveries.
Trap and hold also provides flexibility for other circumstances and objectives. For example, fast fashion or seasonal items can end up selling faster than planned at some stores and slower than planned at other stores, resulting in out of stocks, markdowns, and/or costly inter-store transfers. Using trap and hold, the retailer can hold back a significant portion of that inventory at the PD or offsite until demand patterns are clearer and then send the right amount, based on actual demand.
Split/Intraday Deliveries
Some stores might have very limited or non-existent back store stockroom space. Instead of two or three large deliveries per week, the pool distribution provider can provide ‘split deliveries,’ where a single inbound shipment is split into smaller daily or even twice daily shipments. While the retailer pays a bit more for these kinds of services, that kind of delivery frequency may be essential for smooth operation of the store and is often impossible or prohibitively expensive without a pool distribution point nearby.
Intact Shipment Delivery
Sometimes it is important for an order or shipment to be delivered ‘intact’; that is the entire set of items needs to arrive at the store together at delivery. Intact shipment delivery might be needed for promotions or some other event, where you can’t afford to have displays and merchandise sitting around waiting for the other pieces to arrive. Neither parcel nor LTL can guarantee intact deliveries. In a pool distribution center (PDC), even if the pieces are shipped from different sources or arrive in different shipments, they can be held at the PDC until everything has arrived and then sent to the store intact at the precise desired time.
Surge Capacity
Peak seasons can be particularly stressful for retailers, as they struggle to dramatically increase the velocity and frequency of shipments over long distances just at the time when competition for limited available transportation resources is at its highest. Pool distribution can help smooth out transportation demand, providing capacity to accommodate not just seasonal peaks, but also other holiday-specific surges, big promotions, or special circumstances (e.g. big events or weather-related). Without pool distribution, when faced with these demand surges, retailers are forced to try to make a series of bulk shipments in a short time window, and hope that the needed transportation capacity is available, that the timing is right, and that they will have enough space at the stores to store all of that inventory. When demand is higher than expected, expensive expedited shipping is resorted to and stores can still run out of product just at the point when demand is highest, resulting in major lost sales and disappointed customers. When demand is lower than expected (as often happens), all of the in-transit shipments will arrive and jam up the works at the store, potentially requiring earlier than desired markdowns in order to clear out the excess inventory to make room.
Forward Positioning to Smooth Out Transportation and Store Space Requirements
With pool distribution, inventory can be forward-positioned at the pool distribution center, bringing in the additional needed inventory over a period of weeks or even months, in anticipation of the demand surge. Inbound deliveries can build up the required stocks of inventory at the pool DC (or an offsite location nearby) at a methodical, cost-effective rate, over time. The replenishment lead time from PDC to store is extremely short (same day, if needed). Inventory can now be brought to stores on very short notice, to meet demand during surges. As the peak season progresses, additional deliveries to the pool distribution can be made or held back, based on actual demand. This surge capacity is provided without sacrificing any of the precision and carton/SKU-level control.
Best-practice standardized operating procedures can also help during peak season, when there is a lot of temporary labor working in the distribution center. For example, large, obvious, intuitive labeling of cartons, combined with corresponding markings on floors and shelves, standardized procedures known and followed by all the workers, and scanning at each step (providing instant feedback at the moment something needs correcting) — the combination of all of these helps to ensure precise compliance with all of the required sorting, sequencing, holding, and other services. Thereby, deliveries are consistently intact, on-time, in-sequence, and with correct quantities and items. In fact, pool distribution providers’ average chargeback rates are about half that for LTL carriers and significantly less than the typical rates for parcel. That type of pre cision and consistency during surges is only possible with the systems, disciplines, and processes enabled and mandated by an advanced pool distribution approach.
In Part Three of this series, we discuss the types of value-add services and custom programs available from many pool distribution providers.
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1 BearWare was acquired by Descartes in 2015. — Return to article text above
2 Including Alaska, Hawaii, and Puerto Rico. — Return to article text above
3 While all PD providers in the network offer the basic core services, some providers will offer specialized value-add services that others do not provide. The network’s common operating procedures ensures that these value-add services are provided in a consistent way, whenever more than one provider offers those services, regardless of which provider is providing the services. — Return to article text above
4 Alternatively, when orders are drop shipped from the supplier directly to the PD and the supplier participates by scanning each carton loaded onto their truck, then visibility of these drop ship shipments is also possible. — Return to article text above
5 Drop and hook is dropping off a trailer and leave it for the retailer to load or unload. This accommodates retailers that have high volumes and/or can’t handle specific appointment times. — Return to article text above
6 OS&D = Over, Short, and Damaged. — Return to article text above
7 Standard LTL and ground parcel services have multi-day windows of delivery. Parcel can provide more precise day-specific or even portion-of-day-specific delivery windows, but only at high premium prices. Some LTL providers offer guaranteed delivery windows, even down to hour-specific, but as well for a large premium in price. — Return to article text above
To view other articles from this issue of the brief, click here.