Collaborative distribution usually involves multiple shippers combining shipments to create truckloads rather than ship individually by more expensive less-than-truckload (LTL). It is an advance 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 travelling LTL going to the same distribution center and coming from a similar origin, there is a possibility to have 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:
- Back-haul matching. The goal of this collaboration is to match different distribution legs so that costly empty back-haul movements are minimized. For instance, on the above figure two legs (A-B and D-C) are serviced independently and in both case the drivers return empty for the whole back-haul movement. By matching backhaul opportunities the length of empty trips is reduced. The range to pickup a back-haul load must be within an acceptable limit as 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 sequence which is longer but can be done more frequently. This enables lower inventory carrying costs as well as the required warehousing space since suppliers can now ship less quantities, but more frequently. Sequence matching can also involve one supplier and several customers and represents a common problem in city logistics.
The most suitable cases for collaborative distribution concern flows within a large corporation (e.g. retail or food) since the it can enforce such strategies to their 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.