03 Nov Freight Consolidation and Deconsolidation in Shipping
The need to reduce freight costs was never higher. Shippers are forced to compete on a global market, and consumers expect competitive brand prices to be record-breaking. Amazon’s growth and vast shopping options for e-commerce have left many shippers in the proverbial snow.
Small and medium-sized enterprises (SMBs) may struggle proactively to manage freight spending, and some may lack the transportation and freight forwarding resources available to large box retailers and major businesses. Bad shipping strategy planning and execution would dramatically increase freight costs, so more low-volume shipping companies have turned lower than container (LCL) and lower than truck load (LTL) to minimise freight expenses.
Sadly, failure to understand proper protocols to merge and separate deliveries, also known as consolidation of freight and deconsolidation of freight, may increase freight spending unnecessarily. As a result, shippers need to understand a few things about the process of consolidating and deconsolidating cargo and freight and how to keep their costs under control.
Consolidation and deconsolidation of freight in shipping: what are your best choices?
What is integration of freight?
The consolidation of freight sounds like a clean process. Smaller shipments are combined into larger shipments to enable shipping to take advantage of less trouble. The consequence is lower costs and fast transportation. Shipping consolidation, however, represents an additional step in the shipping process of complexity.
More touch points increase risk as with any delivery, and consolidation means a specific need to increase touch points for the original shipments, Zipline Logistics reports. On the other hand, freight consolidation effectively reduces the number of touch points that a given shipment may have at the appropriate stage in the shipping process, reducing the risk.
Yes. It sounds awkward. How can consolidation simultaneously increase and decrease risk?
Let’s go back to knowing what’s involved in the integration of freight to answer that question.
Cargo can be integrated into larger shipments beginning with parcel boxes, such as making LCL and LTL shipments or Full Truckload (FT) or Full Container (FC) shipments. For companies shipping large volumes of similar products to a common destination, creating LCL & LTL shipments is simple. However, in terms of cost savings and the full scope of the shipping journey, less than container or truckload shipping has limitations.
Although shipping through LTL & LCL modes has its advantages, freight consolidation can effectively combine multiple shipments from single or multiple shippers into a more massive shipment, a service offered by freight forwarders such as Prime Freight. The crucial difference between a freight consolidation system and an LTL delivery from an in-house dock is linked to the load origination.
A comprehensive integration system for freight can include shipments from multiple carriers, shippers, and distributors. As a result, if consolidated freight contains more than in-house shipments, it is impractical for an individual shipper to handle freight consolidation. In other words, shippers may lack the means to organise freight integration with other shippers. Because of shippers ‘ lack of resources, more businesses choose to outsource the operation.
The consolidation of freight is also not isolated from LTL & LCL shipments. Consolidation can be used to create larger deliveries from combined package freight, going from parcel to less than a truck or container to a full truck or container through the natural progression of consolidating freight. This is an essential step in managing the prices of freight.
How does the consolidation of shipping benefit shippers?
The combination of shipments enables carriers to move products from smaller shipments to the next larger type, such as consolidating small packages into LTL shipments and LTL shipments into full trucks (FTs), reducing shipping costs. Although cost savings are the main benefit of consolidating freight, the system offers additional benefits, including: lower transport costs. By consolidating freight into full truck loads and combining small package freight into LTL shipments, a freight forwarder may be able to take advantage of old lower transport costs among top carriers. At the end of the day, higher freight volumes tend to ship at a lower cost. In other words, shippers are gaining the ability to leverage other shippers ‘ purchasing power to tap into lower carrier rates.
Better relationships between carrier and shipper. Consolidation of freight helps to reduce overhead costs for carriers. If shippers are able to reduce the costs of their carrier partners, the carrier will naturally see the shipper as a “Shipper of Choice” making the freight of the shipper more attractive and more likely to find capacity in times of reduced available capacity. Given the benefit of lower transport costs, a carrier is expected to make a greater profit from combined shipping freight, and consolidation reduces the number of carrier-shipper relationships. Less trouble in the scheduling and loading of freight also leads to stronger relations between carrier and shipper.
Transportation quicker. While consolidated freight during the consolidation process involves several touchpoints, the final shipment moves faster. Speed is achieved through fewer touchpoints and when the freight is in transport, it stops necessary. Thus, shipments arrive earlier at the destination.
Better control of the schedule of shipments. The schedule of shipment depends on how long a truck may sit in the yard docked or otherwise wait. Consolidated deliveries require restructuring before a shipment becomes the carrier’s obligation, which increases processes of packing, decreases fuel and enhances schedule compliance resulting in scalability to meet demand changes, including seasonal fluctuations.
Naturally, any consolidation strategy will increase the present amount of risk, but the benefits outweigh the potential consolidation hazards. Most importantly, shippers need to think about the other side of the equation; the consolidation of freight alone only accounts for half of the operation.
Upon arrival at the destination, consolidated freight must be divided into smaller shipments for final delivery to mark the end of the freight consolidation process and the start of the freight deconsolidation process.
As stated by National Retail Systems, freight consolidation is an ideal way to help retailers and suppliers shift supply closer to consumer demand and lower overall freight cost. Consolidation of freight requires its ultimate deconsolidation as a fundamental principle of physics. Deconsolidation raises a company’s uncertainty, but the risk isn’t always a threat.
The definition of deconsolidation implies a fundamental need for multi-site, multi-piece shipments created from larger, consolidated shipments that provide these companies with an opportunity to scale shipping without increasing shipping costs rapidly dramatically.
Freight forwarders may need to deconsolidate shipments at predetermined locations, re-consolidate shipments, and de-consolidate shipments at a given warehouse into individual shipments.
Why is deconsolidation of freight critical to success?
Freight deconsolidation is essential to the success of businesses in the world of e-commerce. It shares the same in 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. Consequently, the reverse process, the deconsolidation of freight, allows shippers as a strategy to reduce freight costs.
For the success of the business, some of the important factors for freight deconsolidation include the following: lower transport costs. Nearly a mirror image of the merger benefit, if properly managed, deconsolidation activities can only reduce transportation costs. In other words, the consolidation and deconsolidation of shipments must be carefully monitored by shippers and carriers, as well as by freight forwarders, to ensure timely and accurate delivery in the last mile delivery.
Better management of inventories. A robust process of deconsolidation allows better management of inventories. Through bringing freight closer to consumer demand, and in the e-commerce era, this may include regional and local distribution centres, distribution centre storefronts, digital order pick-up centres, or conventional e-commerce fulfilment 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. Shippers therefore choose to use third-party services to handle both consolidation and deconsolidation of freight. Of course, before contacting a freight forwarder, shippers retain the option of consolidating freight into LTL and full truck load shipments.
Common problems with the deconsolidation of freight
Deconsolidation of freight is not trouble-free. These common problems can be experienced by shippers including: Carrier Selection Troubles. Carrier choice in the initial merger phase is most commonly a concern. To order to take advantage of the available tracking power, shippers may need to partner with a freight forwarder or carriers may not be available to meet demand. Unlike freight brokers, freight forwarders ensure smooth flow of goods between carriers and locations, frequently taking advantage of discounted rates passed on to shippers.
Challenges in intermodal transport. Freight will switch from full truckload to LTL and small package deliveries during deconsolidation. Deconsolidation can occur at multiple locations, depending on the path, and reconsolidation may also be required. To order to avoid loss of property and freight, being able to track the movements of this freight is important.
Poor planning and coordination. To simplify the tracking and asset-monitoring process, sophisticated freight tracking tools and systems such as automatic identification and data capture (AIDC) and radio frequency identification code (RFID) technologies can be implemented. Failure to maintain correct end-to-end visibility of the freight position and status can increase the cost of deconsolidating freight, rendering it inefficient in providing shippers with benefits.
Increased risk from a higher number of touch points. Freight consolidation and deconsolidation increase the number of touchpoints per freight, and since the amount of the touchpoint is directly related to the risk of freight harm or other regulations, it is important to minimise the number of touchpoints throughout the deconsolidation process to optimise its quality. Maintaining traceability of inventory is critical to reducing risk if multiple touchpoints are required.
Potential issues related to routing. Shippers may need to use freight consolidation and deconsolidation combinations on several legs throughout the freight journey, and as a result there may be routing issues. Mother nature can cause delays, leading to delays in subsequent activities of consolidation and deconsolidation. In other words, shippers should work with freight forwarders to transfer freight before issues arise and look at forwarders with a dedicated carrier network to move freight regardless of changes to your intended route.
Lower multi-touch points prices. Multiple touchpoints in the shipping process inherently increase shipment-related costs, but effective deconsolidation can help to keep these costs under control. Maintaining strict documentation and automating as much as possible of the process of freight management. Alleviate many of the freight consolidation and deconsolidation concerns and costs.
Delays in deconsolidation or unloading. Even in the freight deconsolidation, the unloading process is subject to risk. An injury can occur, or delays in deconsolidation can result in inaccurate yard times and yard management.
It may sound like a nightmare to mitigate these risks, but freight forwarders working with freight forwarders can effectively move the risk of freight deconsolidation from their shoulders to the freight forwarders ‘ risk.
Key Considerations for Reducing Costs of Freight Deconsolidation Freight forwarders bear a significant burden of responsibility in ensuring freight security and timely arrival. The following should be considered by shippers and forwarders to streamline freight deconsolidation and approach the tactics more confidently: understand and plan accordingly for all subsequent package movements, including intermodal shipments and deconsolidation of freight in preparation for last-mile delivery.
Comprehensive documentation to prevent delays at international border crossings and take advantage of pre-approved international shipping lanes, such as those available in FreightHub’s work.
Experience working throughout the process with multiple warehouse and yard management systems and coordination with freight managers.
Maintain real-time traceability and visibility in the freight locations needed for e-commerce era product monitoring.
Package weight, length, and volume 2 freight forwarders are correct to document before scheduling a pickup. With the emergence of dimensional pricing models, accurate freight measurements are needed to ensure adequate quotation and scheduling freight as well as consolidation and deconsolidation.
Prioritization of products in the restructuring process ensures proper delivery by deconsolidation, helping to improve inventory management, increasing product quality to meet the demands of peak shopping seasons. In a way, it also makes methodologies for just-in-time inventory management, leading to lower warehouse management and shipping strategies costs.
Boosting Freight Consolidation and Freight Deconsolidation Proficiency and Efficiency with Prime Freight Today Shippers have rapid opportunities in the digital age to reduce freight spending and maximise product availability and level of customer service. Instead of trying to manage all aspects of freight management, more freight forwarders are switching to freight forwarders to improve both international and domestic shipping skills and productivity.
Due to the exponential increase in the variety of products, 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, even when it requires consolidation of shipments from multiple shippers, for shippers to take advantage of better rates with freight forwarders. Read more about how freight forwarding will support the success of your company by contacting FreightHub online today and building an account.