Freight consolidation is the process of consolidating multiple shipments of freight into a larger shipment. This assembly service allows a single company or a few small to medium-sized businesses to use a singular shipping container or truck.
From there, the companies can offset their costs and ship everything all at once instead of individually. To better understand freight consolidation and what it is, you also need to understand how it all works.
How Does Freight Consolidation Work?
From a macro level, freight consolidation works by combining smaller shipments into a singular large shipment. On the granular level, freight consolidation ships the combined cargo to a distribution or consolidation center, where everything is separated and sorted.
From there, it is all recombined into full truckloads and then sent off to all of their final destinations. This increased volume of shipping, with a decreased volume of smaller shipments, leads to a transit cost deficit, resulting in a higher profit margin.
Benefits of Freight Consolidation
Though this already might sound like a no-brainer, here are some reasons why you should consolidate your LTL shipments to a freight consolidation plan.
Significant Cost Advantages
The most obvious advantage of shipment consolidation is its cost-benefit. Outside of the obvious, there are other avenues in which cost can change within a shipment consolidation model.
Every shipper that uses LTL can improve cost with consolidation, which will drive profit and efficiency. This counterbalanced shipping process will remove the burden and stress of getting your wares to where they need to be without interrupting the flow of your fulfillment process.
This shipment process removes empty space from your cost equation, which then changes your overall cost for shipping the same amount of product. Optimizing the amount of space you use in a truck directly affects your bottom line and your logistics processes.
Outside of you saving yourself money, if your shipping cost goes down, your buyer’s cost will likely go down as well. This will similarly decrease the likelihood they’ll have excess product sitting in their inventory.
Plus, it allows both of you to understand the frequency of when orders will be made and how much will be ordered, which hopefully resolves costly inventory management nightmares.
Increased Safety Advantages
By using consolidated shipping, your packages will be handled by fewer people, or less frequently, and in more experienced hands as well. By having your shipping consolidated, sorted and distributed, your shipments end up on fewer trucks.
Furthermore, the chances of loss and damage typically decrease as well. An added bonus of shipment consolidation is timeliness. Since your shipment isn’t the only freight onboard, consolidation shipping is less likely to be late.
Better Management of Entire Shipping Process
Freight consolidation can help you control more of your shipping process by scaling your production process back to what’s necessary and nothing else. This will give you far more flexible lead times. With the use of the distribution centers, your supply and distribution chains will likely no longer be clogged.
Whether you have an in-house logistics team or an external third-party 3PL, you will be notified along the lines of your distribution pipeline. Since things have to be sorted into smaller batches, quality control comes from a warehouse level that is far closer to end destinations which will be able to remedy problems succinctly.
Increased Consistency and Improved Customer Service
Shipping consolidation can be a dream for shippers because demand can be tracked. Plus, shipments will already be on hand in areas where the demand dictated it once your processes are put into practice.
This will reduce the strain of inventory management while minimizing the need to have customers wait until items are restocked as well. This is because smaller batching should be able to ensure that you fill a truck with exactly what you need — no more, no less.
Better Time Management and Flexibility
Freight consolidation allows carriers to have fewer dead miles due to LTL shipments. This, in turn, can ease the timeliness of your shipments because they’re already ending up at distribution centers paired with other priority shipments in your destination area.
This, paired with having some shipments stored at consolidation centers, will make your orders far more timely and efficient. The hope is that it does not adversely affect inventory management along the way.
Risks of Freight Consolidation
Though freight consolidation is great for certain companies, there are still many risks involved. Let’s take a look at some of the less-than-favorable situations that might arise if you decide to implement freight consolidation.
Short Lead Times
Due to the demand that ecommerce has created, consolidated shipping can have far shorter lead times. Plus, you need to know what’s flying off of the shelves.
There also needs to be someone present the next time a customer is looking for your product. Otherwise, they’ll just get the next best thing available. As a result, shippers need to quickly figure out what their consolidated shipments should contain.
Complicated Scheduling
Since you are a piece of the puzzle within a truckload, scheduling a consolidated freight shipment isn’t an exact science. To actually make consolidated freight shipments work, shippers and carriers need to become a team that works together.
The process involves clear communication and collaboration from beginning to end. Though this might be a headache to figure out at the start, once your system is in place, the process should become second nature very soon.
Customer Driven Reverse Logistics
The internet is a double-edged sword. Year after year, more and more items are being purchased online than ever before. However, that also means more items are being returned from various locations than ever as well.
Due to this, companies in the ecommerce space need to have a reverse logistic process in place. This can help them figure out the logistics of accepting returns, like what to do with the packages once a product has arrived. With big box retailers having to go up against the endless void of online retailers, carriers are working to make returns possible on both sides of the shipping process.
Improving the Flow of Shipments With Freight Consolidation
Consolidating shipments can be a logistical nightmare if you or your company is not prepared. That said, if your systems are firmly in place or you have partnered with a reputable 3PL, you will save your company time, money, inventory damage and customers.
FAQ
Consolidated shipping is a great option for any company that uses LTL shipping options.
Small shipments are consolidated into larger shipments from different shippers and then sorted and consolidated for FTL shipments from distribution centers.
Consolidation warehousing is used for distribution or quickly warehousing consolidated shipments to be distributed to local retailers.
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