There is no guarantee that a vendor is going to use the most efficient method of shipping. When transportation costs are a pass-through some vendors take a “who cares” attitude. Even when the competitive environment pressures the vendor to be tight with the freight costs, the shipment profile the vendor can achieve may not be as cost-efficient as what Walmart can accomplish. While smart retailers will work to force vendors to be more efficient, most vendors will only make a token effort.
In many cases the proper order-replenishment shipment size for products is not a truckload-sized shipment, even with Walmart's buying power. With around 150 distribution centers, and with each distribution center servicing 75 to 100 stores with unique merchandise assortments, many products shipped to Walmart are not shipped in truckload quantities. Less-than-truckload networks will boast that they are more fuel efficient, but in reality, each freight move on an LTL system potentially uses 15 to 50 percent more fuel than if that freight moved directly from origin to destination in a full truckload.
Walmart, with its network of distribution centers, is in a perfect position to create its own less-than-truckload network without having to be a less-than-truckload carrier. Every domestic vendor for Walmart is within the delivery territory of one of its 150 distribution centers. Walmart can back-haul the freight for the entire chain out of any vendor or back to its distribution center in a full truckload quantity. At the distribution center it can unload and re-consolidate product to be shipped to one of its other 149 distribution centers.
This is a huge game changer. From my own experience in a logistics operator's seat, we reduced our less-than-truckload spending by almost 40 percent by using a backhaul consolidation program. If Walmart can accomplish this, it will remove an incredible amount of freight volume from a wide variety of less-than-truckload carriers, saving tens of millions in freight costs.
Once the freight is consolidated into an outbound trailer, it can move over the road to a distribution center less than 500 miles away, or it can move intermodal to a distribution center across the country. Intermodal not only drops cost, it reduces the carbon footprint, thereby taking another step towards the sustainability goals that Walmart has set.
Another substantial savings to Walmart will be the efficiency that it gains in its receiving and unloading operations. Receiving less-than-truckload deliveries is typically less efficient than receiving a full truckload. While there may be less freight handled, the time during which the door is occupied is almost the same. Less-than-truckload traditionally comes in shorter trailers, creating more traffic in the yard and more congestion. In fact, with vendor controlled LTL, a typical broad-line distribution center could be visited by over 40 different regional and local LTL carriers in a single day. In a study I conducted a few years ago at a typical high volume DC, the average LTL “trailer to dock” interface delivered an average of 1.7 pallets per delivery, and deliveries took an average of 34 minutes.
By eliminating the arrival and unloading of live LTL loads and converting their operation into truckload, Walmart can see as much as a 50 percent increase in its loading-dock efficiencies.