Warehousing & Fulfillment

Freight Consolidation: How it Works & When to Use It

Warehousing & Fulfillment
June 15, 2022
8 min read

Learn how freight consolidation can help boost profitability and maximize supply chain performance to help SMBs navigate today’s supply chain challenges.

Freight consolidation, like co-warehousing, allows merchants to consolidate their inventory with other merchants’ to reduce supply chain costs and preserve margins. Learn what freight consolidation is and how it could create a more efficient supply chain for your business.

Today’s consumers expect fast, free shipping – even on smaller orders. This puts SMBs in a potentially unprofitable position as demand for containerized shipping rises and wait times for containers stretch longer and longer. 

Once reserved for larger companies, freight consolidation services have become an increasingly viable and accessible option for businesses of all sizes to combat supply chain risks. Gone are the days when lacking large pallet quantities and high shipping volumes left emerging brands on the outside. 

What Is Freight Consolidation?

Freight consolidation, also known as assembly service, cargo consolidation, and consolidation service, is the process of combining multiple small shipments into one large shipment. Like the cost savings and convenience of carpooling, a single company – or even several SMBs collaborating – can use one container or truck to ship their goods. 

When this combined cargo reaches the central consolidation center or distribution center, it’s separated, sorted, and combined into full truckloads (FTL) to be delivered to the fulfillment center or retailer.

As shipping volume increases, per unit shipping costs decrease, so it’s advantageous to combine shipments to boost total volume and lower overall transit costs.

What Do I Need to Know about Freight Consolidation?

Freight consolidation offers four primary benefits, especially for businesses that only send a few pallets of inventory at one time or who have a high frequency of smaller shipments

Boost Profitability – Freight consolidation significantly cuts costs since shops get the advantage of full truckload (FTL) pricing at less-than-truckload (LTL) mass. A higher volume of freight has lower shipping costs. So, working with other companies that ship to the same region to fill a truck or container will reduce the total cost of delivery. Plus, merchants will receive bulk rates if they combine multiple shipments into a single truck.

Maximize Supply Chain Performance – Complexity and unpredictable variables at each stage of a delivery’s journey increases the likelihood of delays. Consolidation alleviates this by incorporating more FTL moves, which removes the the burden of managing multiple LTL transitions. Sellers also have more control over production schedules and due dates because they’re managing the entire distribution chain themselves or through an outsourced fulfillment provider

Additionally, because multiple companies’ freight is consolidated, the carrier is responsible for the entire combined shipment. Therefore, the docking and loading process is faster, ensuring delivery schedules remain on track. On the facility management front, FTL shipments take much less time to inventory and document compared to LTL, as well. Ultimately, fewer touchpoints throughout the journey leads to faster delivery times and happier customers. 

Strengthen Customer Relationships – Since truckers see consolidated freight as a full load, it moves faster, ensuring customers routinely receive orders when promised. For instance, a cross-country shipment that’s cross-docked several times willtake 6-10 days to reach its destination, whereas a consolidated load arrives in just 2-3 days. As a result, freight consolidation ensures that customers receive orders efficiently and quickly, especially if sellers strategically forward stock inventory in advance.

More Sustainable Supply Chain – Carbon dioxide (CO2) emissions are reduced dramatically with fewer trucks on the road, idling at distribution centers, and making multiple stops. Accordingly, freight consolidation helps the environment and bolsters companies’ environmental, social and governance (ESG) plans. Further, shippers spend less on fuel and per-mile transport costs. 

What Is the Difference Between Less-Than-Container-Load and Full-Container-Load Shipments?

Less-than-Container Load (LCL) – Also known as less-than-truckload (LTL), these shipments are too small in mass to require a full container or truck to ship. Consequently, pricing for these shipments is based on volume and more expensive than freight consolidated into a full truck. 

Full-Container-Load (FCL) – Conversely, full-container-load (FCL) is when a shipment does possess enough mass to fill an entire container or truck for shipping. Thus FCL shipments are regularly priced with a flat rate and are less expensive than LCL. 

What Are the Shipping Options for Consolidated Shipping?

Ground – Less-than-truckload shipments are consolidated with other shipments to create a full truckload. While inexpensive, ground can be slow and is the most susceptible to delays. 

Air – Shipments from multiple carriers share cargo space on an aircraft. Air is the most expensive shipping option because it’s extremely fast and will get goods to their destination in the shortest amount of time. Air shipments also emit six times more CO2 than ground shipments on average.

Ocean – LCL cargo is spread into containers of varying sizes. Ocean freight is best for shipping large goods and is cheaper than shipping via air. This often makes ocean more advantageous than air for international shipping

How Can 3PL’s and 4PL’s Help Combine LTL Orders? 

Combing LTL orders via freight consolidation can be extremely difficult for businesses handling fulfillment in-house due to a lack of volume and visibility. On the other hand, a  third party logistics provider (3PL) — an outsourced logistics supplier that offers warehousing and fulfillment services — facilitates both collaboration and visibility. 

For instance, 3PLs serving clients who produce similar goods can enable the sharing of trucks going to the same region, central consolidation center, distribution center, or retailer – passing savings to all parties. 

4PLs provide the added benefit of acting as an interconnected network of 3PLs. Arranging the best rates and service level agreements (SLAs) with regional 3PLs, fourth-party logistics providers create a cost-effective nationwide distributed warehouse network that guarantees 2-day delivery. 

Besides powering coast-to-coast delivery, 4PLs optimize fulfillment in the following ways:

  • Industry expertise
  • Unbiased consultation from a strategic partner
  • Extensive carrier network and truck sharing
  • Freight consolidation services
  • Integrated technology across inventory, operations, service level and eCommerce platforms

The Bottom Line

Taking care of the heavy lifting, 4PLs reduce merchants’ supply chain and logistics costs, along with the operational burden of consolidating freight and managing multiple fulfillment solutions. This gives sellers more time and funds to spend on optimizing sourcing, R&D, marketing, go-to-market strategy, and other areas that will grow their business. 

Created by UPS, WareGo is a 4PL designed to help businesses of all sizes achieve a nationwide 2-day delivery footprint through a single alliance.

To receive regular insights, tips, and industry news, subscribe to our monthly newsletter or follow us on LinkedIn. To learn more about how Ware2Go can help you take advantage of freight consolidation, please reach out to one of our shipping optimization experts. 

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