What Is Freight Consolidation and How It Can Benefit Your Business?

What Is Freight Consolidation and How It Can Benefit Your Business?

If you’re constantly shipping goods far and wide, you know the struggle of keeping costs down due to complex logistics. Companies are always racing to stay ahead in this competitive arena, but it often comes with a hefty price tag. However, freight consolidation is the key here, offering a solution to this costly challenge.

In fact, container shipping has seen a continuous trend of consolidation and increased competition over the years. From 1996 to 2022, the top 20 carriers’ share of container capacity skyrocketed from 48% to 91%, and this was to cope with too much capacity.

In this post, we’ll cover what consolidation is, how it works, its benefits, and challenges, and why freight forwarders are important in managing it. Stick around if you want to know how it all works!

The Importance of Freight Consolidation: Key Takeaways

• Freight consolidation involves combining multiple small shipments into one large one, similar to carpooling for cargo.
• Consolidation can be done through LCL or LTL approaches, pool distribution, cross-docking, hub-and-spoke distribution, co-loading, or multimodal transportation.
• Benefits of freight consolidation include cost savings, increased supply chain efficiency, better inventory management, reliability, operational flexibility, competitive advantage, and environmental sustainability.
• There are also challenges to freight consolidation. They include finding a good carrier, organizing logistics, risk of damage, balancing time vs. cost, tracking and customs issues, and liability concerns.
• To overcome consolidation challenges, businesses often work with freight forwarders who offer carrier connections, logistics expertise, and Less than Truckload (LTL) & Less than Container Load (LCL) shipments.
• Freight forwarders provide cost reduction, time-saving, tracking transparency, liability management, and additional benefits like storage solutions and customs navigation.

How Freight Consolidation Works?

Freight consolidation is when you pack together several small shipments going to the same place into one big one. Companies team up to use one container or truck for shipping, cutting costs and improving supply chain efficiency.

It’s exactly like carpooling for cargo. The consolidated cargo is sent to a central center for sorting. At the destination, it’s separated and delivered as needed. There are many approaches to freight consolidation:

1)   Less than Container Load (LCL)

LCL is for ocean shipping with containers. If your shipment can’t fill a whole container, it joins others heading to similar places. It’s a smart move for smaller shipments that don’t need a whole container to themselves and saves cash by splitting container space.

2)   Less than Truckload (LTL)

LTL is for land shipping by trucks. If your shipment isn’t big enough to fill a whole truck, it shares space with other shipments headed in the same direction. It’s a budget-friendly choice for smaller shipments, usually weighing between 150 and 10,000 pounds.

3)   Pool Distribution

Pool distribution involves gathering all goods meant for the same area at one spot before sending them out to their respective destinations. It’s used in retail to save money on handling and shipping, get things delivered faster, and prevent damage by minimizing how many times cargo is moved around.

4)   Cross-Docking

In cross-docking cargo comes in, gets quickly sorted, and then immediately loaded onto outgoing trucks without being in storage for too long. This saves money on warehousing, gets deliveries out faster, and keeps the whole supply chain running like a well-oiled machine.

5)   Hub-and-Spoke Distribution

The hub and spoke distribution consists of a main hub that gathers and organizes goods before they head out to different places through smaller channels.

It’s a popular method for air and parcel shipping, but it works for trucks and trains too. This model cuts down on transportation expenses and makes routes more efficient, and deliveries more reliable since everything gets sorted and handled in one central spot.

6)   Co-Loading

Co-loading is like LTL consolidation but involves combining shipments that might not fit together well or need different handling. It’s basically shippers teaming up, splitting transportation costs, and saving a bunch, especially for shipments with specific requirements.

7)   Multimodal Transportation

The multimodal transportation approach includes combining different ways of transporting cargo, like using trains, ships, and trucks all in one shipment. They gather the freight at spots where they switch modes to make it cheaper and smoother. This lets you pick the best routes and modes, saves money, especially for long hauls, and helps the environment by using more efficient transportation methods.

What Is an Example of Freight Consolidation?

Let’s take an example of ABC Widgets, a US importer from Chicago, that buys widgets from various Chinese suppliers. As their shipments aren’t big enough for a full container, they use a freight forwarder offering several consolidation services options. This is where the magic happens. An experienced freight forwarder within their niche knows where and how to save on freight volume when packaging and how to load it efficiently as LCL or Consul. 

The forwarder picks up individual shipments, consolidates them properly, and ships a single container to a US port (e.g., Los Angeles or New York). Customs clearance is handled, and upon arrival, the container is trucked to ABC Widgets’ Chicago warehouse, or, if ABC Widgets is an Amazon FBA Seller, the goods will go into a temporary warehouse for relabeling, ticketing, and other requirements, and thereof trucked to the final destination- one of Amazon’s warehousing facilities Luckily, Unicargo is a specialized freight forwarder for e-commerce business owners and Amazon FBA sellers and can handle this task with its self-owned multimodel logistics operations – flexible freight, global warehousing, and domestic trucking in the U.S.

But how do importers like ABC widgets benefit from all of this process? They save money by splitting shipments, reducing overall costs, and increasing efficiency by faster delivery times.

7 Benefits of Freight Consolidation

Here are some benefits of freight consolidation in detail.

1)   It Saves Costs

By sharing container or truck space, companies save money by not paying for unused space and getting discounts on bulk shipping rates. They get the benefit of a full truckload at a less-than-truckload shipping price.

This is especially helpful for small and medium-sized businesses with fewer pallets or frequent small shipments. Suppose an online store bundles packages for a certain area instead of shipping each order separately.

This way, they get cheaper shipping rates per item and can cut warehousing costs since they need less space to store goods before shipping. In addition, freight consolidation also saves on handling expenses, like loading and preparing goods, by reducing the number of shipments to handle.

This also means fewer documents to handle, which cuts down on errors and saves time and money. Rather than juggling lots of shipments and paperwork, one person can handle a consolidated shipment, freeing up others to get more work done.

A study suggests that cargo could be consolidated using just 67% of the current number of trucks, leading to a 23% reduction in operational costs.

2)   It Increases the Efficiency of a Supply Chain

If issues arise in shipping, it’s up to your provider to fix them, which means you won’t have control over your cargo. However, freight consolidation offers better control over due dates and production schedules. This ensures you’re notified promptly if anything goes awry, avoiding misdirection of shipments.

Freight consolidation also speeds up delivery times by sending shipments directly to their destinations without multiple stops. It allows for quality control measures at nearby warehouses, minimizing delays and maintaining order quality.

You can manage the entire distribution chain yourself or through a logistics partner like Unicargo. By tapping into our knowledge and experience you can improve your shipping, keep customers satisfied, and grow your business sustainably.

Furthermore, it boosts operational efficiency because logistics teams only have to handle one large shipment. By combining shipments, routes and schedules can be optimized, cutting travel time and lowering the chance of delays.

For example, a company like Unicargo can deliver goods to various spots in a region by consolidating shipments and planning a single route covering all locations. This saves time and reduces the risk of delays due to traffic or other issues.

We swiftly transfer cargo between different transportation modes without needing storage in between. Our service ensures freight is received and sent out within 1-2 days, emphasizing flexibility and agility.

With multiple strategically located facilities, we offer tailored transloading options to suit diverse needs. Keep your supply chain efficient and costs low with Unicargo’s transloading services – ideal for splitting shipments or adjusting delivery routes on the fly.

3)   It Leads to Better Inventory Management

If you struggle to deliver products on time or meet demand, it can hurt customer relationships, despite their love for your products. Consolidation can save you here. It improves supply chain visibility, making it easier to track goods from warehouse to delivery and manage inventory levels to avoid overstocking or stockouts. Pre-sending inventory to the consolidation facility can be of great help.

When orders come in, your partner can ship directly from there, eliminating the need for pickups from your end. This keeps you ahead of demand and attentive to customer needs.

With regular, consolidated shipments, e-commerce business owners, and importers/exporters can maintain less inventory on hand, cutting storage and management costs. By reducing excess inventory and improving control, consolidation saves costs and boosts cash flow.

Let’s assume an exporter exporting cozy blankets sources them from a manufacturer with a 30-day lead time. This covers manufacturing, packaging, shipping, customs, and domestic transit to warehouses at the destination point.

The exporter practices freight consolidation, combining multiple blanket orders into one shipment to cut costs and transit times. To determine when to reorder, they also factor in lead time, sales speed, and safety stock.

Exporting 100 blankets monthly with a 30-day lead time, they aim to restock before running out, typically when inventory hits 50 blankets. Here, freight consolidation ensures timely replenishment without unnecessary inventory buildup.

4)   It Makes a Business Ecosystem More Reliable

Freight consolidation reduces the chances of errors and delays that can happen when handling many shipments separately. This means more reliable deliveries and happier customers. With fewer shipments to manage, there’s less risk of delays or losses, ensuring goods arrive on time.

Besides, consolidation often leads to scheduled, predictable deliveries, boosting customer satisfaction. When customers can count on timely and consistent deliveries, they’re more likely to be happy with service.

This is because consistency reduces the likelihood of late deliveries, missing items, or misdirected shipments, streamlining your shipping process. Moreover, once you understand your customers’ ordering habits, you can incorporate them into your consolidation strategy.

This ensures you have stock available when needed, avoiding last-minute rushes. Maintaining a regular shipping schedule through freight consolidation also rules out the uncertainty associated with relevant overheads.

Take an online electronics seller who combines shipments from different suppliers into a single large one. This helps them secure a constant flow of diverse electronics. Even if one supplier’s shipment is late, they still get products from others, keeping their product range wide for customers.

5)   It Provides More Operational Flexibility and Adaptability

Freight consolidation gives businesses the ability to respond swiftly to changes in demand or market conditions. Unlike handling multiple smaller shipments, which can be logistically challenging, consolidation allows for quick adjustments in shipment sizes and frequencies.

For instance, businesses can opt for larger, less frequent shipments during slow periods and smaller, more frequent ones during busy times. This flexibility helps optimize logistics and cut costs. It also helps businesses adapt to seasonal fluctuations, like managing holiday demand.

By consolidating shipments, retailers ensure enough stock without compromising efficiency or facing high shipping expenses. For example, toy makers deal with big ups and downs in demand, especially during holidays when everyone wants their products.

By using freight consolidation, they can handle this surge in demand smoothly. They can group shipments from suppliers to ramp up production and make sure retailers have enough stock for the holiday rush. This way, they can meet higher demand without losing efficiency or spending too much on shipping.

6)   It Can Give a Business an Edge on Competitors

Freight consolidation streamlines logistics, making operations more efficient and effective. Cutting down on shipments can reduce costs and speed up delivery times, giving a company an edge over competitors dealing with higher costs and slower deliveries.

This can set a company apart if competitors can’t offer similarly affordable shipping. Moreover, fewer shipments mean less chance of delays or losses, boosting reliability. Reliable deliveries can lead to happier customers and a stronger market position, giving a significant competitive advantage.

Suppose you’re a US-based importer bringing in goods regularly but not in full container loads. Here Unicargo can help you. They can handle the entire process, offering freight services, temporary warehousing in strategic spots, and truck freight to your final destination within the US. Moreover, everything is streamlined under one roof, and you also get a dedicated account manager to address all your questions for every step of the journey.

With Unicargo’s efficient PO management, you can also gain a competitive advantage, speeding up lead times with timely approvals and accurate orders. Our tailored solutions and real-time tracking ensure seamless supply chain operations, while advanced automation reduces errors and delays, positively impacting your bottom line.

7)   It Can Help Businesses Reach Environmental Sustainability Goals

By consolidating freight, you need fewer trucks to move the same amount of goods, cutting down on carbon emissions since fewer vehicles mean less fuel burned. For instance, instead of five trucks each carrying a small load, combining those loads onto one truck would significantly reduce emissions.

This can boost customer loyalty and appeal to today’s eco-conscious market. A study on freight consolidation and truck sharing revealed that smart consolidation tactics could cut monetary emission costs (MEC) by about 17%.

By pinpointing the best routes and using fewer trucks for deliveries, the Emission Quantification model showed big drops in greenhouse gases like CO2, NOx, and particulate matter. This emission reduction is a major perk of efficient freight consolidation, making transportation greener and more sustainable.

What Challenges Can You Face with Consolidated Shipping?

Freight consolidation has its perks, but it’s not all smooth sailing. Doing it solo can be tough, especially for businesses new to logistics complications. Here are some challenges that you can face with consolidated shipping.

1. Finding a Good Forwarder – It’s tough to pick the right logistics partner from so many options. You must compare rates, services, and their track record with consolidated shipments. If you choose wrongly, it could mean delays, damage, and higher costs.

2. Organizing Logistics – Consolidation needs serious planning. Coordinating pickups, ensuring proper packing, and tracking shipments across different stages take a dedicated team and good systems. Unicargo’s global teams and operations offer business owners and importers/exporters an All–in–One solution for this.

It also involves coordinating with multiple parties, managing schedules, and ensuring proper packaging, especially for businesses with complex supply chains. One slip-up can mess up your whole supply chain.

3. Risk of Damage – There’s also an increased risk of damage or loss during consolidation and deconsolidation due to multiple handling. However, at Unicargo our cargo insurance services ensure your valuable items are covered against any unexpected mishaps.

So your business can keep on rolling without a hitch. We know every business is different, so we tailor our policies to fit your needs and budget perfectly. Besides, we handle all claims for you, so you don’t need to fill out any forms. We take care of everything until you get your rebate or compensation.

4. Time vs. Cost Juggle – Saving money while delivering on time is tricky. Consolidation cuts costs, but all planning and potential delays can slow down deliveries.

This is because consolidating shipments can be time-consuming, requiring gathering goods from various sources and coordinating with carriers. Delays may also occur as shipments wait for containers to fill up, potentially prolonging transit times.

5. Tracking & Customs Troubles – Keeping tabs on multiple shipments within one can be tricky. Relying only on carrier updates might leave you in the dark about where individual packages are, making it hard to handle customer questions or spot issues early.

Single customs clearance for consolidated shipments can be also challenging if not all goods have the correct documentation.

6. Sorting Out Liability – When things go south, who’s to blame? Damage, loss, or delays in a consolidated shipment can lead to a blame game between you, suppliers, and the carrier.

Sorting out who’s responsible and getting compensation can be a long and pricey process. Therefore, many businesses choose to work with freight forwarders or third-party logistics providers to effectively manage consolidated shipping.

Who Can Do Freight Consolidation for You?

While the benefits of freight consolidation are clear, tackling logistics can be overwhelming, especially for inexperienced businesses. This is where teaming up with a seasoned freight forwarder is helpful.

Here’s why:

1. Carrier Connections – Instead of hunting for carriers, freight forwarders use their network to find the best match for your needs. They negotiate favorable rates with carriers, leveraging their volume of freight to lower transport costs.
2. Logistics Expertise – They handle everything from pick-ups to customs, ensuring smooth operations.
3. LTL & LCL Shipments – Freight forwarders create LCL & LTL shipments by combining multiple shipments into larger ones, benefiting companies with large volumes of similar products.
4. Reducing Costs – By consolidating freight and combining small package shipments, they help reduce shipping costs for businesses.
5. Time Saver – They handle all interactions with carriers, saving businesses time and effort. Letting them handle logistics also frees up your team to focus on growth.
6. Tracking Transparency – Their tracking systems keep you informed about your shipment’s whereabouts.
7. Liability Management – They deal with issues and claims, so you don’t have to worry.
8. Added Benefits – They offer storage & warehousing solutions, can navigate customs regulations, provide cargo protection, and analyze shipping patterns to cut costs.

FAQs – Freight Consolidation

What is LTL Consolidation?

LTL consolidation involves combining multiple LTL shipments in a specific area into Full Truckload (FTL) shipments. For the final leg of journey to destination, shipments are switched back to LTL.

What Is Freight Consolidation Cost?

Freight consolidation costs can fluctuate depending on factors like shipment volume, distance, and chosen service provider. Overall, it’s considered a cost-effective tactic as it lets shippers access full truckload rates for less-than-truckload volumes.

What Are the Disadvantages of Freight Consolidation?

The disadvantages of freight consolidation include longer transit times as shipments wait for containers to fill up, although this is something that changes dynamically and, on many occasions, there is no delay. Planning consolidated shipments also takes more time and offers less control over schedules. Moreover, Fragile, perishable, or hazardous cargo may not be ideal for consolidated shipping.

Conclusion

Freight consolidation offers numerous benefits such as cost savings, enhanced efficiency, and environmental sustainability. However, it also presents challenges like finding suitable logistics partners and managing logistical complexities.

To overcome these obstacles, businesses often rely on freight forwarders, who provide expertise and solutions to streamline the consolidation process. By leveraging their services, companies can optimize their shipping operations, reduce costs, and improve overall supply chain performance.

At Unicargo, we provide comprehensive shipping services and solutions, tailored to importers, manufacturers, wholesalers, and e-commerce businesses. Our vast experience and deep expertise along with a close collaboration approach ensure timely receipt, shipment, and proper handling of products.

We offer inventory management solutions for efficient stock tracking and control, empowering informed supply chain decisions across single or multi-warehouse setups. With our custom centralized inventory system, you gain clear visibility into order metrics, movements, and placements.

Whether consolidating smaller shipments or breaking up larger ones, our expertise and technology streamline the process. Benefit from cost-effective shipping solutions through our in-house domestic freight brokerage and extensive warehousing and transportation network.

We optimize routes using various methods like LTL, expedited shipping, FTL, LTL shipments, and Last-mile delivery.

Contact Us now for reliable and efficient freight consolidation services.