Consolidated freight solutions allow companies to reduce transportation costs by combining multiple partial loads into efficiently utilized full truckloads. Known also as freight consolidation, it is the process of collecting less-than-truckload (LTL) and partial container shipments from various companies, and consolidating them into full truck or container loads heading to similar destinations.
By grouping cargo and maximizing equipment capacity, shippers can save significantly on transportation expenses. At the same time, carriers improve efficiency through reduced empty miles and better asset utilization. This article explains how, so keep reading to learn everything you need to know about freight consolidation.
What is consolidated shipping?
Consolidated shipping services refer to the practice of combining multiple smaller LTL shipments from various companies into a single FTL (full truckload) shipment. This is done by freight forwarders, logistics providers or freight consolidation companies that act as shipping intermediaries. They collect goods from several clients in a geographic region that are all going in the same general direction and transport them together in the same truck.
One of the main benefits of shipping consolidation services is cost savings for customers. By combining partial loads and filling a complete truck, each individual shipper can take advantage of lower FTL shipping rates. The freight consolidator handles the logistics of picking up the goods from each location and getting them to their various end destinations. Consolidated freight shippers also save on having to find transportation carriers themselves or having to meet full truckload quantity minimums.
Freight consolidation services allow even small businesses the ability to ship goods almost as efficiently as large companies. Freight forwarders manage tracking shipments, negotiating rates, and dealing with the carriers on behalf of their multiple customers. Consolidation improves overall freight efficiency and reduces costs across the supply chain.
Advantages and disadvantages of freight consolidation for carriers
Determining whether consolidator shipping is right for your trucking business requires a full accounting of its advantages and disadvantages. Here are the main pros and cons of cargo consolidation services for commercial trucking companies.
Pros
- Increased profits: Consolidated freight carriers can maximize truck and container space and minimize empty (‘deadhead’) miles through improved load efficiency. This reduces operating costs and boosts revenue.
- Competitive advantage: Offering consolidated freight shipping services allows truckers to attract more small and medium sized shipper accounts by enabling access to better rates. This expands their customer base.
- Operational efficiencies: Consolidated freight trucking improves asset utilization and the ability to share resources like trucks, containers, warehouse space, etc., across shipments. This optimization reduces costs.
Cons
- Complexity: Managing shipping consolidation for multiple shippers adds complexity versus single-customer loads. This can increase overhead costs.
- Security risks: Comingling cargo raises security issues and potential legal liability if freight gets damaged or stolen. More oversight is required.
- Service risks: Pickup/delivery timing and reliability may be reduced with multi-stop consolidated loads versus direct point-to-point moves. This could hurt customer satisfaction.
- Profit margins: Cargo consolidators may earn thinner margins on consolidated freight as savings get passed through versus dedicated full truckload shipments. But higher volumes may offset this.
The advantages of consolidation shipping likely outweigh the disadvantages for most carriers if they strategically implement consolidated shipping services. The operational efficiencies and expanded customer bases offer significant bottom line benefits.
How much does consolidated freight shipping cost?
Consolidated freight costs are usually priced based on a rate per pallet, linear foot of truck space, or weight. Generally speaking, here’s what you need to know about pricing for consolidated freight services.
- Pallets typically range from $100 to $500 each.
- Consolidated freight companies typically charge around $2.25 to $4.50 per linear foot. A typical 53-foot trailer would be about $175 for a 30-35 pallet consolidated shipment.
- If you’re charging by weight, shipping costs are approximately $0.40 to $2.50 per 100 pounds, depending on distance shipped.
- In addition to the freight rate, fuel surcharges also commonly apply. These change with diesel prices but often range from 15 to 30% added onto base freight pricing.
- Compared to direct LTL shipping, consolidated freight pricing can be anywhere from 30 to 70% cheaper on average. The more volume consolidated, the better the pricing.
- Final costs also depend on extra services like lift-gate delivery, residential delivery, or special handling that may involve additional fees. Insurance, accessorials, and fuel surcharges also impact overall shipping consolidator pricing.
- A consolidated freight company generates its profit margin from a markup applied on top of the base carrier rate quoted for moving the consolidated loads. Typical margins range from 10 to 30%.
So, while exact pricing varies case by case, consolidating shipments offers large discounts by leveraging FTL scale and efficiencies. Consolidated cargo carriers pass along a portion of those savings to shippers after their markup.
Is freight consolidation right for you?
Freight consolidation allows truck driving companies to maximize cargo capacity and improve asset utilization by combining multiple partial loads headed in similar directions. Carriers should assess current empty miles traveled and explore opportunities to implement consolidated services to reduce non-revenue generating miles.
Next steps would be to analyze freight flow patterns to identify viable shipping lanes for consolidation, develop appropriate security and liability policies, and actively promote these services to expand small and medium shipper partnerships.
FAQ
A freight forwarder consolidates less-than-truckload shipments from 10 different small companies, all located in Dallas, Texas and destined for New York City, into one full 48′ trailer load. For relatively small logistics efforts and rates, each company benefits from full truckload pricing and capacity.
Freight forwarders or logistics companies consolidate multiple partial shipments from different companies into full truckload or container loads that deliver cargo to similar destinations. They actively look for complementary freight to combine in order to maximize equipment utilization and transportation efficiency on shared routes.
Shippers can access lower full truckload freight rates that their volumes alone wouldn’t qualify for since their cargo is combined with other freight. They also can potentially reduce costs by outsourcing the logistics, coordination, and carrier management to the freight forwarder or consolidator.
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