What Is Freight Consolidation?
Freight consolidation is the process of combining multiple small shipments into a single large shipment to maintain margins and decrease supply chain costs. When the combined shipment reaches the distribution center or central consolidation center, it is separated, organized, and combined into FTL (full truckloads). Finally, it is delivered to the retailer or fulfillment center. Other names of freight consolidation are cargo consolidation, assembly service, and consolidation service.
Significance of Freight Consolidation in an E-commerce Shipping and Delivery
Freight consolidation allows merchants to combine their inventory with other merchants’ inventory. Here are some benefits to freight consolidation.
- Increases profitability: It substantially reduces costs because merchants can transport a higher volume of freight at lower shipping costs. It also allows working with other companies that transport to the same region to fill a container or truck and thus decreases the total cost of delivery.
- Ensures customer satisfaction: Truckers consider consolidated shipment to be a full load. So, they move quickly to deliver the orders and thus keeps customers satisfied.
- Boosts supply chain performance: Freight consolidation decreases delays by implementing more full truckload (FTL) shipments. It eliminates the hassles of handling multiple less-than-truckload (LTL) movements and thus boosts supply chain performance.
Prerequisites for Freight Consolidation
Here are some of the prerequisites of freight consolidation
- The freight consolidation service depends on factors like management policies and goals, the logistics network’s topology, customers’ demands, expected transit time, and transportation and product characteristics.
- When organizing the shipment consolidation, the forwarder needs to prepare distinct waybills for every consolidated shipment. Moreover, the forwarder needs to prepare a consolidated list with a loading list.
- The consolidated list should mention the sender as a consolidation forwarder and the recipient as a reconsolidating forwarder.
Use Case With Freight Consolidation
Suppose company X is into the manufacturing and delivery of toys. It can use freight consolidation to group its shipments to that of other merchants shipping to the same region. Therefore, it can optimize the distribution of goods and benefit from reduced transportation costs.