What is Freight Consolidation?

May 27, 2022

For businesses looking to improve operational efficiency, freight consolidation is an excellent place to start. Many small to medium-sized companies struggle to ship their goods in a way that is both cost-effective and timely, as their shipment volumes are usually less than container load (LCL) or less than truck load (LTL). In other words, their shipping volume is too small to fill up an entire truck or container.

Businesses often fall into the trap of either:

  • Paying for a full container load (FCL), meaning they’re paying for both the space that the cargo takes up and the empty space that isn’t being used.
  • Opting for traditional the LTL/LCL method, which, while a better option than FCL shipping, still isn’t the most effective way to ship small volumes of cargo.

So, what is the most effective shipping option for LTL/LCL cargo? Enter: freight consolidation. In this guide, we outline what freight consolidation is and explain how this shipping method can benefit your business. 

What Is Traditional LTL And LCL Shipping?

Before we dive into freight consolidation, we need to unpack the original LTL/LCL shipping method. Traditionally, LTL/LCL are shipped using a hub and spoke system.

It works like this: the freight is collected from the shipper and delivered to a local warehouse (known as the ‘spoke’). Within the warehouse, the carrier aggregates cargo from various shippers that are shipping to similar locations, and sends this load to a larger warehouse (or ‘hub’) nearer to the destination. This process is repeated until the truck or container reaches the hub closest to its final destination, from which the cargo is delivered.

This original method of LTL/LCL shipping has the benefits of faster pick-up times, more frequent deliveries, and is most useful when covering short distances.

However, the key drawbacks are that the freight is handled numerous times, which increases the risk of misplacing or damaging cargo. Additionally, this method results in longer delivery times. It’s also a more costly method than freight consolidation due to increased handling and stops. 

What Is Freight Consolidation? 

Freight consolidation is a logistics method where companies in a particular geographical area collaborate to combine their shipments onto the one container or truck.

This truck or container is taken to a destination point, where the cargo is deconsolidated and the individual shipments are sent out for delivery to their final destination. Alternatively, if the shipments are headed to the same location, they will remain on the same truck until they reach the final delivery point.

The cargo may come from the same supplier, or may be sourced from multiple suppliers in different locations in order to fill the truck or container.

This method lowers the total shipping cost due to less handling and less stops along the way, and can also increase the security of the cargo being shipped.

Let’s take a closer look at the advantages of freight consolidation below. 

Benefits Of Freight Consolidation

While we’ve mentioned that freight consolidation is beneficial for reducing handling and stops at various points, there are a number of additional benefits to this shipping method. 

You’ll Save Costs 

Higher freight volumes mean lower shipping costs.

By merging shipments, you won’t have to worry about paying for an entire container or truck that you’re not completely filling. The freight consolidation method allows you to combine the costs with other companies and only pay for the space your cargo takes up.

The overall shipping charge will also be lower, as you’ll save additional costs on inventory, management, fuel, and tariffs. 

Your Cargo Will Be Safer

Unlike with traditional LTL/LCL shipping, consolidated freight isn’t continually loaded and unloaded. This means that the odds of damage or loss from repeated handling is significantly reduced. 

Improves Transit Times

It takes less time for a single container or truck to transit goods than it takes multiple trucks or containers to do so. Faster shipping means lower costs, which makes the method a more cost-effective one. This also means consumers will receive their goods faster, which is great for user experience.

Improves Working Relationships With Carriers And Other Businesses

Aggregating freight allows companies associated with one another to improve their professional relationships by working together to create mutually beneficial shipping arrangements.

Freight consolidation also often leads to better relationships between shippers and carriers, thanks to reduced costs and logistical improvements for all involved.

For example, consolidated freight helps to minimise dock congestion, as instead of multiple carriers clogging up the shipping dock, just the one shipment will arrive with a full load of goods. This keeps shippers happy, and also ensures your goods are quickly processed. Everyone wins! 

Improved Customer Experience

In addition to your customers receiving their goods sooner, freight consolidation can improve the customer experience in a couple of ways.

When you have a clear picture of your customer’s purchasing patterns, you can work your freight consolidation plan around this. So, you’ll be able to ensure that you have your inventory immediately available for your customers, rather than reactively filling orders.

A consistent shipping process and working with trusted carriers will also reduce the risk of misplaced cargo or delivery mistakes (such as delivering items to the wrong address).

Essentially, freight consolidation helps to create a smooth and seamless shipping process from start to finish.

You’ll Have Better Tracking Visibility 

Tracking traditional LTL/LCL shipments can be difficult, as each shipment has its own unique tracking number.

With freight consolidation, the shipments spend most of their journey on the same truck or container, so you’ll require just the one tracking number for the majority of the journey. Only at the very end of the journey will your cargo be separated out for delivery to its final destination. 

You’ll Be Doing Your Bit For The Planet

Freight consolidation reduces the number of trucks on the road and ships in the sea, therefore reducing greenhouse gas emissions. So, by using this method, you’re limiting your business’s carbon footprint. 

Downfalls Of Freight Consolidation

While the pros of freight consolidation certainly outweigh the cons, it’s important to take a look at situations where consolidation may not be the right shipping method for your business.

Potential cons include:

  • Scheduling a consolidated shipment can be difficult. All shippers and carriers must be operating on the same timeline, so communication and careful planning is essential. While the process can be challenging to set up initially, once the system is clearly outlined, the process should run smoothly. 
  • As customer demand rises, lead times decrease. This means that shippers and carriers need to work effectively to fill and ship orders as quickly as possible. Organisation and structure is essential to ensure consumers and retailers are satisfied with the shipping process and timeline.

Freight consolidation isn’t recommended if you are shipping:

  • Large cargo that incurs extra handling charges.
  • Potentially dangerous or hazardous items that could cause harm if the truck were to be involved in an accident.
  • Cargo that needs special attention. For example, freight that is sensitive to contamination and needs to be kept at a particular temperature. 

Choosing The Right Carrier

When it comes to freight consolidation, one of the most important elements to get right is choosing a trustworthy carrier.

At Couriers & Freight, we’re committed to ensuring businesses make smarter shipping decisions that will cut costs, transit times and keep their customers happy.

You can visit our website to learn more about shipping with us or book in a call to speak with the Couriers and Freight Team.

Takeaways

Freight consolidation is perhaps the most effective shipping strategy for companies with small shipping volumes. It’s a mutually beneficial, cost-saving, and efficient method for both carriers and shippers.

The key benefits of freight consolidation is that it leads to quicker delivery times, better tracking visibility, improved coverage of your cargo, and increased customer satisfaction.

Have a question about what shipping method is right for your business? We’re here to help. Get in touch with us today.

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