What is freight consolidation?
Basically, a freight consolidation program involves the consolidation of multiple shipper’s freight (Multiple LTLs / parcels into truckloads). This helps lower costs tremendously & reduce the miles travelled. By building more volume destined to the same distribution center, transit time is also improved as compared to a traditional parcel / LTL service.
Major Challenges addressed by Freight Consolidators:
➙ Retailers are becoming more stringent and order sizes are getting small
➙ Lead times are shorter
➙ Compressed margins
✺ Retailers are becoming more stringent and order sizes are getting small
In today’s day and age, online shopping is all the rage. And it is definitely here to stay. Add on Social Media and you begin to see the pressures faced by retailers as they compete on multiple channels for distributions. This has lead to the consumers having high expectations both in-store & online in terms to convenience & most important of all availability of product. Suppliers are seeing an increase in their cost per pound with the retailers ordering smaller and smaller shipments.
Freight Consolidation solves this problem, as in a freight consolidation program freight is not limited to full pallet consolidation. In a freight consolidation programme, parcel shipments can be combined easily, saving time & money. Some parcel carriers charge dimensional weight for ground packages, resulting in a big increase in costs. Adding these packages to a truck that is headed to a retailer distribution center (D.C) will help reduce costs for the shipper.
✺ Lead Times are shorter
There was a time when lead times were much longer, this was a time prior online shopping & E-Commerce. The longer lead time allowed shippers to build up pallets & consolidate it into one shipment to the D.C. But today, lead times are significantly shorter as the retailers are very reactive to changes in product demand.
Due to the shorter lead times, the ability for the shipper to consolidate their freight is very limited. But in a Freight Consolidation service, consolidation occurs across multiple shippers going to the D.C . This reduces the transit time significantly as the freight is travelling directly to the D.C instead of going through multiple LTLs / parcel sort stations.
✺ Compressed Margins
While E-Commerce companies are feeling the wrath of consumer demands of free shipping to their margins. Retailers are looking to improve their profit margins by pressurising shippers to reduce their freight costs. As most shippers do not have a full truckload of shipments on a regular basis, this puts them in a constant battle with reducing their truckload rates even further.
When a shipper takes part in a freight consolidation programme, they are securing a rate below the LTL rates. As they are paying for a portion of the truckload based on the amount of space their freight occupies.
A Freight Consolidation programme can help release a lot of stress that the shippers are facing today with regards to shipping into big box retailers. This helps reduce damages to a product. It is also very good for the environment as it reduces the shipper’s carbon footprint.