Specialty Retail’s Best-Kept Secret: Pool Distribution
While e-commerce is growing rapidly, the vast majority of retail revenue still comes from stores. And now that the holiday shopping season is here, retailers are bracing for the tidal wave of consumer demand and its impact on their supply chains. For specialty retailers such as Famous Footwear and GNC, pool distribution — in its contemporary form — has become more relevant than ever as a store replenishment strategy, and is a critical factor in keeping the shelves decked for the holidays.
The Speed of Parcel at the Cost of LTL
Pool distribution has been around for 30 years, however, it looks different from the 80s, when it meant using a pool point within a less-than-truckload (LTL) or private transportation network. It’s now a unique model where retailers share a common distribution network of logistics services providers (e.g., Dicom Transportation Group with a national footprint, Freight Systems in the Pacific Northwest/West Coast) that use common technology to manage the flow of goods from distribution centers or suppliers to a store’s backroom. With decreasing margins and the need to move goods quickly, pool delivers the higher speed of parcel at the lower cost of LTL.
The Power of the Network Effect
Pool is a great example of the power of the “network effect” because it leverages numerous retailers and pool operators to substantially lower distribution costs and increase delivery frequency. Delivery density and frequency drive the savings and better service. For example, rather than five retailers having five separate LTL or parcel deliveries to a mall in one day, those five retailers share a single delivery where the five stores get serviced as one stop. Stores are replenished more often because the volume of goods moving through a dedicated transportation network is higher.
An Abundance of Benefits
Pool’s benefits extend beyond faster and lower-cost store replenishment. They include the following:
- Large transportation savings: The shift to pool from parcel and private/dedicated fleets offers big savings by eliminating the costs associated with an in-house fleet.
- Precision tracking: Highly granular tracking of commingled freight provides complete visibility for retailer and pool operator. Advanced shipment notices (ASNs) from the retailer to the pool operator details, at the carton level, what goods to expect at a pool point, and all cartons are scanned at each touchpoint (e.g., pool receipt, staging, loading, store receipt).
- Minimal product losses and claims: Technology flags exceptions (e.g., missing or wrong carton) so retailers can reconcile issues as they happen, which minimizes product losses and claims — a benefit for retailers and pool operators.
- Optimal inventory management: With complete visibility into where goods are and an understanding of replenishment lead times, retailers minimize both overstocking and out-of-stocks.
- Ability to “meter” inventory: Fast-moving SKUs, peak season and/or promotional inventory, and non-merchandise can all be staged at the pool operator for delivery later. With this “trap and hold” approach, pool operators cater to retailer requirements on an as needed basis, and retailers overcome the constraints of small store backrooms.
- Reduced store labor: Defined delivery schedules, tighter delivery windows (e.g., two hour) and predictable levels of on-time performance help retailers better manage store labor and payroll.
In Time for the Holidays?
Given the standardized processes and technologies in pool today, retailers can take advantage of an infrastructure that already exists to quickly convert some or all of their store replenishment operations to pool. This season, keep your store associates selling — and your pool operators shipping — so those sought-after holiday items arrive at the store quickly, on time and intact.
Jeffrey Berichon is senior vice president of product strategy, retail distribution, for Descartes Systems Group, a provider of on-demand, software-as-a-service solutions for logistics-intensive businesses.
Jeffrey Berichon is the senior vice president, product strategy, retail distribution, for Descartes Systems Group.