Why freight consolidation? The need to decrease freight costs has never been higher. Shippers are forced to compete in a global market, and consumers expect record-breaking affordable product pricing. The rise of Amazon and significant e-commerce shopping options have left many shippers out in the proverbial cold.
Small and midsized businesses (SMBs) may struggle with managing freight spend proactively, and some may lack the transport and freight forwarding resources available to big-box retailers and major companies. Poor planning and execution of the shipping strategy will dramatically increase freight costs, so more companies with low-volume shipments have turned less than container (LCL) or less than truckload (LTL) to reduce freight spend.
Unfortunately, failure to understand proper protocols for combining and separating shipments, also known as freight consolidation and freight deconsolidation, could unnecessarily increase freight spend. As a result, shippers need to understand a few things about the cargo and freight consolidation and deconsolidation process and how to stay in control of its costs.
Freight Consolidation and Deconsolidation in Shipping: What are your Best Choices?
What is Freight Consolidation?
Freight consolidation sounds like a clean-cut process. Smaller shipments are combined into larger shipments to take advantage of less hassle in shipping. The result is lowered costs and fast transport. However, shipping consolidation represents an added step of complexity in the shipping process.
As with any shipment, more touch points increase risk, and consolidation implies a direct need to increase touch points for the original shipments, reports Zipline Logistics. On the other hand, freight consolidation at the proper step in the shipping process effectively reduces the number of touch points a given shipment may have, reducing risk.
Yes. It sounds confusing. How can consolidation increase and decrease risk at the same time?
To answer that question, let’s go back to understanding what’s involved in freight consolidation.
Starting with parcel packages, freight can be combined into larger shipments, like creating LCL and LTL shipments and Full Truckload (FT) or Full Container (FC) shipments. Creating LCL & LTL shipments is easy for companies shipping large volumes of similar products to a common destination. However, less than container or truckload shipping does have limitations regarding cost savings and the full scope of the shipping journey.
While shipping via LTL & LCL modes has their benefits, freight consolidation, a service offered by freight forwarders, like Freight Hub, can effectively combine multiple shipments from single or multiple shippers into a more massive shipment. The critical difference between a freight consolidation service and say an LTL shipment from an in-house dock lies in the origination of the loads.
A robust freight consolidation program may include packages from multiple carriers, shippers, and distributors. As a result, it is impractical for an individual shipper to handle freight consolidation when the consolidated freight contains more than in-house shipments. In other words, shippers may lack the resources to coordinate with other shippers to consolidate freight. Due to the lack of resources by shippers, more companies opt to outsource the process.
Freight consolidation is not isolated to LTL & LCL shipments either. Consolidation can be used to create larger shipments from consolidated parcel freight, moving through the natural progression of consolidating freight from parcel to less than a truckload or container all the way to a full truck or container. This is an essential step to keeping freight costs in check.
How Does Shipping Consolidation Benefits Shippers?
Combining the shipments allows carriers to move products from smaller-sized shipments to the next larger-load type, like consolidating small packages into LTL shipments and LTL shipments into full truckloads (FTs), reducing the cost to ship freight. Although cost savings make up the leading benefit of freight consolidation, the process offers additional benefits, including:
- Lower transport costs. A freight forwarder may be able to take advantage of old lower transport costs among the top carriers by consolidating freight into full truckloads, as well as combining small package freight into LTL shipments. Ultimately, a higher freight volume tends to ship at a lower cost. In other words, shippers gain the ability to leverage the buying power of other shippers to tap into lower rates offered by carriers.
- Better carrier–shipper relationships. Freight consolidation helps carriers reduce their overhead costs. When shippers can reduce their carrier partners’ costs, naturally, the carrier will see the shipper as a “Shipper of Choice” making the shipper’s freight more attractive and more likely to find capacity in times of decreased available capacity. Considering the benefit of lower transport costs, a carrier stands to make a more significant profit from consolidated shipping freight, and consolidation reduces the number of carrier-shipper relationships. Less hassle in freight scheduling and loading leads to stronger carrier-shipper relations as well.
- Faster transport. Although consolidated freight involves several touchpoints during the consolidation process, the final shipment moves faster. Speed is achieved thru fewer touchpoints and stops necessary when the freight is in transport. Therefore, shipments arrive at the destination sooner.
- Better control over shipment scheduling. The shipment schedule depends on the amount of time a truck may sit docked or otherwise waiting in the yard. Consolidated shipments involve consolidation before a shipment becomes the responsibility of the carrier, which speeds loading processes, reducing fuel and improving schedule adherence resulting in scalability to meet changes in demand, including seasonal fluctuations.
Of course, any consolidation strategy will increase the amount of risk present, but the benefits outweigh the potential dangers in consolidation. More importantly, shippers must think about the other side of the equation; freight consolidation by itself only makes up one-half of the process.
Upon arrival at the destination, the consolidated freight must be broken apart into smaller shipments for final delivery marking the end of the consolidation process of freight and the beginning of the freight deconsolidation process.
A Quick Look into the Deconsolidation Definition
As explained by National Retail Systems, freight consolidation is an excellent way to help retailers and manufacturers move distribution closer to consumer demand and lower overall freight spend. Like a fundamental principle of physics, consolidation of freight requires its eventual deconsolidation. Deconsolidation increases the risk to a company, but the risk is not always a threat.
The definition of deconsolidation implies a fundamental need for multisite, multi-piece shipments created from larger, consolidated shipments providing an opportunity to these companies, allowing them to scale shipping without dramatically increasing shipping costs rapidly.
Freight forwarders may need to deconsolidate shipments at predetermined locations, re-consolidate shipments, and further de-consolidate the shipment into individual shipments at a given warehouse.
Why is Freight Deconsolidation Crucial to Success?
Freight deconsolidation is essential to the success of businesses in the world of e-commerce. It shares the same goals of effectiveness, productivity, and cost efficiency that are inherent in freight consolidation.
Fulfilling more orders and increasing inventory availability during peak shopping seasons are the primary reasons shippers choose to consolidate freight. In the realm of freight forwarding, service providers can lower the costs of freight forwarding through freight consolidation. Therefore, the reverse process, freight deconsolidation, aids shippers as a tactic to keep freight costs under control.
Some of the critical reasons freight deconsolidation is essential to the success of the business include the following:
- Lower transport costs. Almost a mirror image of the consolidation benefit, deconsolidation practices can only lower transport costs if managed correctly. In other words, shippers and carriers, as well as freight forwarders, need to carefully monitor shipment consolidation and deconsolidation to ensure timely and accurate shipping in last-mile delivery.
- Better inventory management. A robust deconsolidation process enables better inventory management. By moving freight closer to consumer demand, and in the age of e-commerce, this may include regional and local distribution centers, storefronts as distribution centers, online order pick-up centers, and traditional e-commerce fulfillment warehouses.
- Faster speed-to-market. Achieving a faster speed to market is another critical reason shippers choose to consolidate freight, but again the deconsolidation process must not take longer than shipping freight via a costlier solution. Therefore, shippers opt to take advantage of third-party services to handle both freight consolidation and deconsolidation. Of course, shippers retain the option of consolidating freight into LTL and full truckload shipments before contacting a freight forwarder.
Common Problems Experienced in Freight Deconsolidation
Freight deconsolidation is not problem-free. Shippers may experience these common problems, including:
- Carrier Selection Troubles. Carrier selection is most commonly an issue in the initial consolidation process. Shippers may need to work with a freight forwarder to take advantage of the available tracking capacity, or carriers may be unavailable to meet demand. Unlike freight brokers, freight forwarders ensure product moves seamlessly between carriers and locations, often taking advantage of discounted rates that are passed along to shippers.
- Intermodal Shipping Challenges. Throughout deconsolidation, freight may move from full truckload to LTL and small package shipments. Depending on the route, deconsolidation may take place at multiple locations, and reconsolidation may also be necessary. Being able to track the movements of this freight is essential to preventing loss of assets and freight.
- Poor Organization and Planning. Robust freight tracking tools and systems, like automated identification and data capture (AIDC) and radio frequency identification code (RFID) technologies, may be deployed to automate the tracking and asset-monitoring process. Failure to maintain accurate end-to-end visibility into freight location and status could increase the costs of freight deconsolidation, rendering it ineffective at providing benefits to shippers.
- Increased Risk from an Increased Number of Touch Points. Freight consolidation and deconsolidation increase the number of touch points per freight, and since the amount of the touch points is directly related to the risk of freight damage or other laws, minimizing the number of touch points throughout the deconsolidation process is essential to maximizing its value. If multiple touch points are necessary, maintaining inventory traceability is critical to reducing risk.
- Potential Routing Issues. Shippers may need to utilize combinations of freight consolidation and deconsolidation at multiple legs throughout the journey of freight, and as a result, routing issues may occur. Mother nature may cause delays, causing delays of subsequent consolidation and deconsolidation activities. In other words, shippers should work with freight forwarders to move freight before issues arise and look at the forwarders that have a dedicated network of carriers to move freight regardless of changes to your expected route.
- Higher Costs in Multiple Touch Points. Multiple touch points in the shipping process inherently increase the cost associated with the shipment, but effective deconsolidation can help keep these costs in check. Maintaining stringent documentation and automating as much of the freight management process as possible. Alleviate many of the concerns and costs associated with freight consolidation and deconsolidation.
- Delays in Unloading or Deconsolidation. Even the unloading process is subject to risk in freight deconsolidation. An injury may occur, or inaccurate yard times and yard management may result in delays in deconsolidation.
Mitigating these risks can sound like a nightmare, but shippers that work with freight forwarders can effectively move the risk of freight deconsolidation from their shoulders to those of the freight forwarder.
Essential Considerations to Reduce Costs of Freight Deconsolidation
Freight forwarders bear a considerable burden of responsibility in ensuring the safety and timely arrival of freight. Shippers and freight forwards should consider the following to streamline freight deconsolidation and approach the tactic more confidently:
- Understand and plan accordingly for all subsequent package movements, including intermodal shipments and deconsolidation of freight in preparation for last-mile delivery.
- Thorough documentation to prevent delays at international border crossings and take advantage of pre-approved international shipping lanes, such as those available in working with FreightHub.
- Experience working with multiple warehouse and yard management systems and coordinating with freight managers throughout the process.
- Maintaining real-time traceability and visibility into freight locations necessary for consumer tracking in the age of e-commerce.
- Accuracy in reporting package weight, dimensions, and volume 2 freight forwarders before scheduling a pickup. With the rise of dimensional pricing models, accurate measurements for freight is necessary to ensure proper rate quoting and freight to scheduling, as well as consolidation and deconsolidation.
- Prioritization of goods in the consolidation process ensures the appropriate distribution upon deconsolidation aiding in improved inventory management guaranteeing availability of inventory to meet peak shopping seasons demands. In a sense, it also enables just-in-time inventory management methodologies, resulting in lower costs for warehouse management and shipping strategies.
Boost Proficiency and Efficiency in Freight Consolidation and Freight Deconsolidation with Forto Today
Shippers have fast opportunities in the digital age to lower freight spend and maximize product availability and customer service levels. Instead of trying to manage every aspect of freight management, more shippers are turning to freight forwarders to increase proficiency and efficiency in both international and domestic shipping.
Since the variety of products has increased exponentially, shippers need a way to improve their inventory availability and move inventory closer to end-users and consumers. Fortunately, freight consolidation and deconsolidation make this possible, on shippers to take advantage of better rates with freight forwarders by increasing the freight shipping volume, even when it requires consolidation of shipments from multiple shippers. Learn more about how freight forwarding can help your organization succeed by getting started with Forto today.