In this article, learn about:
What consolidated freight is
The pros and cons of freight consolidation
Off-shore versus on-site consolidation
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Shipping small quantities often presents a challenge. A supplier might have a few boxes or partial pallets ready, but not enough to fill an entire truck. Paying for unused space can drive up costs quickly. That’s where freight consolidation offers a smart solution.
What is Consolidated Freight Shipping?
Freight consolidation is the process of combining many dispersed shipments into a single freight container. In this way, more than one supplier can supply these collective shipments. There are many ways consolidated freight can be transported. For example, UPS transports consolidated freight by air, ocean, and across borders.
No matter which type of freight the supplier uses, consolidated shipping moves in the same direction to a defined waypoint. This destination is where the transportation company divides the combined load and ships it to its final destination, such as a retailer or distribution center.
Small businesses using this logistics approach can make better freight decisions and avoid spending more on partial loads. Freight consolidation can occur no matter how many packages are in a shipment.
Types of Consolidated Freight Shipping
There are several types of consolidated freight shipping, each catering to different needs and scenarios:
Less Than Container Load (LCL): This type involves consolidating multiple small shipments into a single container, which is then shipped to its destination. It is ideal for businesses that do not have enough cargo to fill an entire container.
Full Container Load (FCL): In this type, a single shipper’s cargo fills an entire container. While not a traditional form of consolidation, it can be used in conjunction with LCL shipments to optimize space and reduce costs.
Air Freight Consolidation: This involves combining multiple small shipments into a single air freight shipment. It is suitable for businesses needing faster delivery times for smaller quantities of goods.
Truckload Consolidation: Similar to LCL, this type involves combining multiple smaller shipments into a single truckload. This method is ideal for domestic shipping and helps reduce transportation costs by maximizing truck capacity.
The Freight Consolidation Process
Consolidated freight shipping, also known as cargo consolidation, aims to reduce shipping costs and increase efficiency by maximizing the use of transportation capacity.
The process of consolidated freight shipping typically involves the following steps:
Multiple shippers send their small shipments to a consolidation center or warehouse.
The shipments are sorted, grouped, and loaded onto a single truck or container.
The consolidated shipment is transported to its destination, where it is sorted and delivered to the individual recipients.
Domestic and International Applications
Consolidated freight shipping is versatile and can be applied to both domestic and international shipments. For domestic shipping, consolidated freight can be transported by truck, rail, or air, depending on the distance and the type of cargo. In international shipping, consolidated freight can be transported by air or ocean, often involving multiple modes of transportation to reach the final destination.
This method is particularly useful for businesses that need to ship small quantities of goods to multiple locations. It also allows companies to combine shipments from multiple suppliers or manufacturers into a single shipment, streamlining the supply chain and reducing overall shipping costs.
Off-Shore vs. On-Site Freight Consolidation
Consolidating shipments occurs in two formats: off-shore freight consolidation and on-site freight consolidation.
Off-shore Freight Consolidation
Off-shore freight consolidation involves putting together often uncategorized shipments in large quantities bound for different sites. Consolidators classify and aggregate these shipments with others going to the same destination.
Pros of Off-Shore Consolidation
Off-shore consolidation is best for suppliers with less knowledge of the kinds of orders they expect to receive. This type of consolidation increases flexibility with deadlines and lead times.
Cons of Off-Shore Consolidation
However, additional expenditure and management of the shipment are necessary to ensure the freight arrives at the consolidator’s facility.
On-Site Freight Consolidation
On-site freight consolidation involves putting together shipments at the items’ origins, such as the factory or source, instead of the warehouse. This method decreases the number of shipping points an order must go through, thus reducing the cost and increasing its efficiency.
Pros for On-Site Freight Consolidation
On-site consolidation is best for consumables and items with expiration dates because the product moves through the process faster. This method is also best for suppliers with visibility into their supply chain, as they can see when consolidation is necessary.
Cons of On-Site Freight Consolidation
However, this system may require more staging space inside the facility and an increased workforce at the point of production.
Pros of Freight Consolidation
Freight consolidation has the following advantages:
Inexpensive shipping charges: With combined freight, small suppliers typically pay a reduced bulk rate for shipping. Consolidation is less expensive than LTL shipping, as the logistics company does not have to wait to fill a container.
Related Reading: What is LTL Shipping?
Better relationships with carriers: Redirecting freight enhances the relationship between carriers and suppliers by creating long-term collaborations and lower costs for all parties.
Time savings and better productivity: Consolidation saves time and increases overall productivity by reducing how long it takes for a container to reach its destination. Consolidation also decreases the standby time for shipments.
Freight consolidated for efficiency: Consolidating freight improves efficiency and reduces costs by combining multiple shipments into a single load. This process allows businesses to share shipping expenses and optimize logistics, particularly in terms of LTL and Less than Container Load (LCL) shipments.
Fewer upsets in the supply chain: Selecting a dependable consolidator reduces potential issues in shipping over the supply chain by ensuring that the cargo reaches its destination on time.
Protection against damage: Consolidating freight means more protection against potential damages to the order. Reducing the transport of cargo from one truck to another means that there is less opportunity for mishandling.
Low ecological consequences: Lowering the number of individual loads means fewer truck emissions and fuel consumption, resulting in a more green transportation system.
Cons of Freight Consolidation on Shipping Costs
However, there are some drawbacks of freight consolidation to consider:
Extra time: Consolidating (and sorting) freight takes time. These activities cause extra work for logistics companies, and suppliers must account for these delays in lead time calculations.
Does not fit every shipment category: Products that are delicate, consumable, or volatile do not fit the bill of consolidated freight. Breakable and short shelf-life items that are prone to damage may result in loss. Hazardous materials can lead to lethal accidents if not isolated from other cargo.
Planning the supply chain: Suppliers must carefully research and vet consolidators to ensure they comply with retailers’ receiving requirements, such as OTIF or ORAD. Additionally, suppliers must create a plan of action when issues occur.
Even though freight consolidation may not be the right option for every company, it has excellent benefits. Freight consolidation is beneficial for smaller suppliers or suppliers with smaller shipments because it makes the process cheaper and more efficient.
Most businesses rely on freight consolidation to regulate their shipping process, quicken the product’s delivery to customers, and support the establishment and maintenance of customer relationships.
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