All You Need To Know About Co-loading
Many businesses are unfamiliar with the concept of co-loading, and wonder whether this practice can benefit their operations. Here are some answers to common questions about co-loading.
What is co-loading?
Co-loading is the equivalent of ride sharing for freight transportation. It is the consolidation of shipments across multiple companies on the same transportation vehicles. Companies can consolidate truckload (TL) with less-than-truckload (LTL) shipments, or multiple LTL shipments together, or multiple TLs together to make co-loaded shipments.
How is co-loading different than LTL?
Co-loading is similar to LTL shipping in the sense that multiple companies share space on the same truck. However, in co-loading, shipments do not go through the hub-and-spoke network of the LTL carrier for consolidation. Rather, they are consolidated using multi-stop truckloads.
What are the benefits of co-loading?
Co-loading can result in several benefits for three groups involved.
- Reduces transportation costs (up to 30 percent on certain lanes)
- Reduces lead times for LTL shipments
- Reduces probability of products getting lost or damaged for LTL shipments
- Creates the opportunity to reduce inventory
- Creates the opportunity to reduce receiving costs
For the society:
- Reduces CO2 emissions
- Reduces roadway congestion and depreciation
What are the drawbacks of co-loading?
Co-loading is not possible for every type of shipment. In fact, several criteria must align across multiple companies for it to happen. Products need to be compatible, they need to fit on the same truck, and timing should work.
What types of shipments are suitable for co-loading?
Co-loading makes sense for shipments that are handled in the same way. For example they are all palletized and are transported using the same type of trucks, such as dry vans. Also from the shipment size perspective, the sweet spot for co-loading are larger LTL shipments and smaller truckload shipments so we can mix them together. From the geographical standpoint, shipments that have origins and destinations that are in a close proximity have a higher potential for co-loading. From an industry perspective, it is easier to co-load shipments that are in the same industry, but that is not a requirement.
If co-loading is so effective, why hasn’t it become more popular?
Co-loading has been around for a long time – since trucks could stop across multiple companies and form a multi-stop truckload. But the reason co-loading hasn’t grown to become another transportation mode until now is because the technology to make it happen was not readily available. It was not until the past few years that we started talking about big data and how it can be used to create value. Today, technology is the enabler that allows us to seamlessly evaluate transportation data across firms and make co-loading decisions.
Another factor that plays a role is that companies have realized that through collaboration, they can achieve results that are not possible otherwise. And co-loading is a form of horizontal collaboration with high potential and a natural place to start. This will allow companies to mitigate the continuous rise of transportation costs.
Are there different variations of co-loading?
Yes there are. Co-loading can be done in two forms:
- Passive (Opportunistic): In this case we co-load shipments if the timing, shipment size, and several other factors coincide to make it possible. So we take advantage of opportunities if and when they occur.
- Active (Planned): In this form we plan to make co-loading possible by changing either or both of shipment timing and size.
Active co-loading is much harder to coordinate, as it can impact inventory decisions throughout the supply chain. And not all shippers can control their shipment size/timing. But active co-loading can result in significant more savings. It is always easier to start with passive co-loading and then expand to active if possible.
How does co-loading impact my service levels?
For LTL shipments, co-loading reduces lead times to your customers. LTL is usually the slowest mode of shipping, due to the way consolidation is performed in the hub-and-spoke network. For truckload and intermodal shipments, co-loading will not have as significant an impact because multi-stop truckloads (if built properly) have the same service levels as truckloads.
It should be noted that the greater the number of stops on a multi-stop truckload, the greater the risk for delays. Thus it’s important to build multi-stop truckloads in a way that minimizes that risk.
How does a company get started co-loading?
There are two ways for companies to get started co-loading:
- Do it yourself (DIY): In the DIY model, shippers have to identify potential partners, share data and utilize supply chain engineering resources (people and software) to see if and where the co-loading opportunities exist. One of the co-loading partners has to take responsibility of the transportation execution activities in order for the collaborating partners to realize the savings.
- Third-party logistics provider (3PL): Co-loading activities can also be orchestrated through a 3PL who is capable of managing and performing such activities. A 3PL can potentially create a more scalable co-loading network that might generate even greater benefits, as this would be its core competency.
Do I need to change my processes and or systems to get started co-loading?
It depends on a combination of factors including whether you want to do active or passive co-loading, whether you’re doing co-loading yourself or via a 3PL, and your current systems/processes. Usually active co-loading will require you to change your processes irrespective of the other factors. But passive co-loading can be done with little changes to processes and systems if you’re using a 3PL or if your current systems/processes are already advanced enough to make it work.