Share, you know it makes sense
The Americans call it LTL (Less Than full Load) distribution. It requires a shared user network to enable it to operate at an affordable cost to the user, delivering anything from one to 20 pallets to customers across the country. In 1975, there were five national providers of LTL distribution for groceries delivering to retailers with orders consolidated across many manufacturers.
Between 1970 and 2000, we saw the advent and eventual apogee of retailer centralised distribution with orders of 26 pallets being the industry norm.
As a result of this change, most ambient LTL companies closed down their small order delivery networks due to lack of critical mass.
However, the latest push from Asda and Somerfield to cut stocks will add to LTL traffic volumes.
DHL-Exel is also rumoured to be investing in additional LTL in-house grocery capacity since it can see the trend as a market opportunity for its business.
The market rate for a half pallet delivery is around five times the cost per case of a full load to the same area.
If, as an LTL consolidator, you can take five manufacturers' orders to one retailer depot on one vehicle, you will have added more than enough value in consolidation to overcome the additional costs of handling required to create consolidation in the first place.
I cannot see a return to five national LTL grocery providers. But I can see room for two, with full, national ambient service provision plus the regional networks and the odd specialist.
I know that five leading manufacturers are presently looking (together) at ways to make such consolidation easy to achieve.
Because of the on-cost of LTL distribution, this initiative deserves some air-time in the industry.
Apart from anything else, it should mitigate the need for retailer pre-consolidation centres, which are the most inefficient way imaginable of overcoming the problems of LTL arriving at retailer depots.
Tim Knowles is a partner at supply chain consultancy TKA.
