By Homayoun Taherian
As transportation costs continue to rise, many companies are searching for ways to reduce spending by looking beyond their supply chain boundaries and collaborating with like-minded peers.
This type of horizontal collaboration – sharing supply chain assets with competitors – is known as co-loading in the freight transportation domain. Co-loading allows multiple companies to share space on the same transportation vehicle. It’s like ride sharing for freight. Co-loading does not only help save on transportation costs, it reduces carbon emissions, wear on transportation infrastructures and air pollution, in turn, creating healthier living environments across the nation.
To better understand the significance of co-loading, we need to look at the traditional utilization of truck capacities in the US. According to various DOT statistics:
- 15-25% of all the miles traveled in the US by freight trucks are empty miles. That means the vehicle carries no load while traveling. These are due to empty backhauls and deadhead miles.
- The utilization of the remaining 75-85% of the non-empty miles is on average 64%. Another way of looking at this is that we are leaving 36% of our capacity for moving freight on the table. Co-loading is a way to get the full value of each move – leading to an overall reduction in necessary trips.
Co-loading is similar to less-than-truckload (LTL) shipping in the sense that companies share space (and cost) on the same vehicle. It differs from LTL, thought, as shipments do not go through the hub and spoke network of the LTL carrier for consolidation. Instead, shipments are consolidated using multi-stop truckloads and thus it travels faster with less chances of getting damaged or lost. Co-loading is suitable mainly for larger LTL and smaller truckload shipments. It can be accomplished by combining LTL shipments on existing truckloads, combining multiple large LTLs or by multiple smaller truckloads together. The yellow shaded area in the figure below shows the sweet spot for co-loading.
The recent advent of big data processing technology has pushed co-loading into popularity too.
In a case study performed as a part of my master’s thesis at Massachusetts Institute of Technology (MIT), I worked with six Fortune 500 shippers located in the Midwest and identified an excess of $1 million in transportation savings through co-loading. This co-loading would also result in more than 1,000 metric tons of CO2 emissions reduction annually.
There are two ways for companies to get started on co-loading. The first is to 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.
For more information on how to setup such a relationship please refer to my thesis “Outbound Transportation Collaboration- (DIY)”.
Co-loading activities can also be orchestrated through a third party logistics provider (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.
As companies evolve in their supply chain management activities, they will see fewer improvement opportunities within their traditional boundaries. But cross-company collaboration such as co-loading will extend the companies’ supply chain boundaries to a much larger network. This opens up new opportunities waiting to be explored.
Homayoun Taherian is the founder of Cnergistics, LLC — a logistics service provider specialized in co-loading services. During his graduate studies at Massachusetts Institute of Technology (MIT), he worked with six Fortune 500 shippers located in the Midwest and identified an excess of $1 million in transportation savings through co-loading.