Collaborative distribution usually involves multiple shippers combining shipments to create truckloads rather than shipping individually by more expensive less-than-truckload (LTL). It is an advanced form of cargo consolidation often requiring Third Party logistics providers (3PLs) since the cargo can involve several suppliers, customers, and freight forwarders. For instance, instead of having two trucks traveling LTL going to the same distribution center and coming from a similar origin, there is a possibility of having that load consolidated into a single full load. At start, there must be a match between the type of cargo being transported since, for instance, refrigerated cargo loads cannot be effectively combined with non-refrigerated cargo. There are two main categories of collaborative distribution:
- Backhaul matching. This collaboration aims to match different distribution legs so that costly empty back-haul movements are minimized. For instance, in the above figure, two legs (A-B and D-C) are serviced independently, and in both cases, the drivers return empty for the whole back-haul movement. By matching backhaul opportunities, the length of empty trips is reduced. The range to pick up a back-haul load must be within an acceptable limit; otherwise, the benefits of getting a back-haul movement as opposed to an empty trip could only be marginal.
- Sequence matching. The goal of this collaboration is to match trips towards a customer (e.g., a distribution center) that are done separately and less frequently into a longer and more frequent sequence. This enables lower inventory carrying costs as well as the required warehousing space since suppliers can now ship fewer quantities but more frequently. Sequence matching can also involve one supplier and several customers, representing a common problem in city logistics.
The most suitable cases for collaborative distribution concerns flow within a large corporation (e.g., retail or food) since it can enforce such strategies on its transport service providers. It is also particularly suitable for city logistics since the proximity of suppliers and customers offers opportunities for consolidation, particularly sequence matching.