If you’ve been resisting freight consolidation perhaps it’s the idea of change itself that is the problem. You are in a comfort zone and change is risky. Stephen Hawking’s comment, “Intelligence is the ability to adapt to change,” is all the more powerful because of the changes he has seen in his life.
Read on to learn about the advantages of freight consolidation.
What is Freight Consolidation?
Freight consolidation is where small shipments are brought together and shipped to the same location. These smaller shipments may be too small to constitute a container load. Consolidation brings them together to form a container load.
The container is then shipped and de-consolidated at its destination. The individual shipments are then sent on to their final destination. This last part of the delivery, sometimes known as the “final mile” could be right to a customers’ front door.
Lower Operating Costs
Even if a container or truck trailer is not filled, shippers will often have to pay for the cost of the whole container or trailer. A full container costs the same as a half-full container. The shipper is paying to ship air.
Consolidation services overcome this problem of shipping air. They bringing together less than container loads (LCL) and less than truckloads (LTL). These shipments better use the space available reducing the costs of shipping.
These LCLs and LTLs are charged by volume rather than the flat rate for a container or trailer. There are extra costs are for shipping before and after the consolidated journey. There may be extra consolidation administration costs.
Underpinning this lower cost is a real saving in fuel and capital equipment. These cost reductions benefit the whole supply chain. They are also arguably more environmentally friendly.
Lower Capital Costs
Supporting a distribution process for LCLs can involve significant capital costs. Warehousing or distribution centers and transport can be significant capital investments. These can be reduced by using a third-party logistics operation utilizing freight consolidation.
Transportation Options
When a shipper is focussed only on their own logistics need the range of options is limited. This is because of scale. A one size fits all approach is taken.
With consolidation, there are more options. Where trucking appeared to be the only option, rail, air or sea may be available to the consolidator.
Logistics is a strategic activity for any business. It can be the key to business success or failure. Understanding and exploiting the options available is vital.
Reduced Wastage
Small, multiple shipments involve multiple touchpoints. The hub and spoke distribution process will involve much more handling than consolidation. The more times the item is touched, the more opportunity there is for damage, loss or theft.
With fewer touchpoints, a consolidator can reduce damage, loss, and theft. This is because there are fewer occasions when the consignment is at risk. A full container is a more secure entity than multiple small consignments can ever be.
Flexibility and Speed
You need to ship a consignment to a customer but the quantity or volume is too small to make it cost effective. The natural logistics based thinking is to wait until the order quantity is sufficient to make it cost effective to ship. In the meantime, the customer is waiting.
That customer may be happy with your product quality and even price. Without timely delivery, you are exposed to the risk of a more flexible and speedy competitor stealing your customer from under your nose.
A consolidation strategy provides the means of providing a more flexible response to customers. Freight consolidation makes flexible and fast delivery more economic. It also helps meet sales and marketing expectations for delivery.
More importantly, it satisfies customer expectations.
How to Take Advantage of Consolidation
Finding the right carrier to provide freight consolidation for you is the first important step. Not every carrier will or can provide this service. It takes specialized operations and expertise.
When assessing the services of a carrier offering freight consolidation, do thorough costings. Make comparisons between your current arrangements and those of the prospective carrier.
You will need to change your operations in order to make the most of the new logistics. Planning must change otherwise you will fail to realize the benefits of more flexible delivery. There may be a need to change packaging, labeling, and documentation.
Sales and marketing may need to incorporate communications about delivery methods. While you may be able to deliver in a more timely manner, the consolidation process itself may take more time than a direct delivery. This will need to be incorporated into planning and schedules.
The Right Freight Consolidator
Freight consolidation is only advantageous if it’s the right consolidator and they are right for your business. The advantages come with the following:
Right location
Check that the consolidator is located in a suitable place. The consolidator may offer great shipping rates but you need to consider the end to end costs.
Right scale
Do they have the capacity to handle your business including any future growth? Are they geared up to handle any seasonality in your business?
Right flexibility
Can they handle your changing demands and that of your customers? Can they handle the variability in your products, consignments, schedules and more?
Right reputation
Have they got a reputation for delivering on their promises? You will be partnering with them to service your customers. You need to know they will care as much about them as you do.
Check reviews, reference sites and meet their operation people, not just sales representatives.
Consider a Change
With a greater understanding of the advantages of freight consolidation and how to realize them, you can now approach making a decision. Think about your reasons for change and test your arguments.
If it’s right for you, develop a clear vision and targets for where you want to get to. Share it with others. Build your organizations capacity for change including getting the resources, time and people you need.
Make a plan and take the first few steps towards a consolidation strategy.
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