As shipping costs increase due to global factors such as increased demand and inflation, businesses who ship products need to find ways to be able to mitigate logistics costs. One strategy that has proved beneficial in reducing logistics costs is freight consolidation.
So, what is freight consolidation and what are some of the benefits businesses can gain from this strategy when planning out their logistics?
Freight consolidation is the process by which many smaller shipments that are either being sent to the same location, or region, are consolidated onto a single truck load and shipped together to their destination. By sharing a single truck, the businesses whose products are on the shipment essentially share the costs associated to the shipping. This reduces the overall costs for the businesses, but also makes the shipping more efficient for the carrier thus reducing their overall costs as well. Think of it as car-pooling, but for products.
Shipping costs are volume based. So as the overall volume of a load increases and shipments are consolidated, costs invariably decrease. The benefit to combining multiple shipments to reduce overall shipping costs are thus readily apparent as a base rate can then be applied for the entire load. This makes freight consolidation very appealing to small and medium sized businesses and companies who do not ship large quantities of product often or else those who send small quantities but with greater frequency.
In a freight consolidation model generally, the product is first shipped from a manufacturer to a main distribution center, in many cases a 3PL warehouse. At the distribution center the original loads of product are separated, then sorted and combined into what are called full truckloads (FTL) and then sent off to their final destination, whether that be a business’ fulfilment center (this could also be a 3PL) or retail location.
The cost saving benefits associated are quite obvious. Freight consolidation reduces the amount a business pays for their shipping. Beyond that it also reduces costs associated with inventory storage and facility management, along with reducing or eliminating costs related to managing and maintaining your own fleet of trucks to move product from one place to another, amongst other logistics related overhead.
Another advantage to freight consolidation will be a marked improvement with customer satisfaction. The inability to keep up with customer demand or reliability in shipping can put a strain on the business relationship. However, by choosing a freight consolidation strategy for shipping you will be able to get product, in whatever quantity, to your customers on time and reliably. When orders come through, you’ll be assured that your warehousing partners will have stock and be able to move the product without having to come to your location to pick it up and sort it later. You can then extend this strategy as you scale up to ensure your customers aren’t waiting and exorbitant amount of time for their orders.
Consolidated shipping also reduces the risk of problems arising with your shipments. Ultimately shipping is invariably open to mistakes and accidents do happen. The less steps in the journey the less chances for cargo getting lost, being late, or worse being damaged or unrecoverable due to an accident. This improves reliability while decreasing your business’ liability.
Finally, your time management and flexibility are also greatly benefitted. Rather than spending time focused on managing multiple carriers or shipments your business benefits from the fact that someone else is managing how the loads are managed, and in a consistent manner since they manage multiple customers with the same or similar needs as yours. By having your product either stored at or transited through a freight consolidation center you guarantee that your product is always ready to be transported when orders come in without impacts to your business. This improves your turn around times and offers you flexibility and the ability to react at a moment’s notice should the need arise. This takes away stress from your business and allows you to focus on the important parts of running your business.
Ultimately freight consolidation is a strategy that can help your business better manage your logistics supply chain with benefits to cost savings, logistics management, and customer satisfaction, amongst others. While each business is different and may have different needs freight consolidation is definitely a strategy that can help a business that is scaling and looking for a wider market outreach at an affordable cost.
If you’re looking to transform the way you manage your warehouse and inventory, click the link below to get in contact with us. We’d be happy to speak with you.