Freight consolidation fosters more agile logistics operations and significantly reduces transportation costs

Freight consolidation: shipment grouping to facilitate transportation

21 Feb 2022

Freight consolidation is a logistics process that consists of grouping shipments to bring down transportation costs and optimise the distribution of goods.

In an increasingly globalized environment, the number of shipments from warehouses to other logistics centres has ballooned, making the operations performed in these facilities more complex, particularly goods dispatch. Freight consolidation in the supply chain makes it possible to group together different orders that share the same destination or route in order to better leverage logistics resources.

Freight consolidation definition

Freight consolidation is a logistics operation in which multiple individual orders are grouped into a single load to form a larger transportation unit and thus avoid fragmented shipments. Thanks to this logistics process, companies can maximize cargo space and cut down on goods distribution costs.

In the cargo consolidation process, shipments that share the same destination or distribution route are grouped together, minimizing transportation costs and using a single container, truck, or plane ― consolidation by sea, land, and air, respectively.

Freight consolidation can encompass orders from different suppliers that share space to optimise costs, as well as shipments from a single company based on its production, procurement, or distribution strategy.

As opposed to orders where a supplier has enough merchandise to completely fill a truck, consolidated orders divide the vehicle’s cargo space among the suppliers’ partial loads.

The freight consolidation process involves an additional operation when the products arrive at their destination: the warehouse that receives the order has to deconsolidate the unit load; that is, it is charged with separating the goods and organizing them for final delivery.

Freight consolidation is especially opportune for transportation agencies, which rely on this process to reduce costs as well as CO2 emissions in goods distribution. This is underlined in the study The Impacts of Freight Consolidation and Truck Sharing on Freight Mobility led by Oklahoma State University, which says: “Effective consolidation strategies may help to increase the efficiency of the trucking industry and decrease the amount of emissions.”

Freight consolidation consists of grouping together several small orders to create a larger transportation unit
Freight consolidation consists of grouping together several small orders to create a larger transportation unit

Freight consolidation phases

In distribution centres (DCs), freight consolidation fulfills the goal of curbing not only transportation costs but also storage fees. Depending on the warehouse layout design and sequencing of processes in the facility, the consolidation stations can be set up in different areas of the centre, usually next to the storage and order processing area.

Generally, freight consolidation can be broken down into 5 stages:

1. Goods receipt: operators receive products from one or more suppliers, together with the order dispatch documentation.
2. Product storage: the goods are stored temporarily until there is enough stock to consolidate the load and dispatch the shipment.
3. Stock management: the products have to undergo the weighing and packing processes, among others, to facilitate their distribution.
4. Grouping in a single order: in this consolidation phase, operators gather all the products with the same destination and consolidate them into the same order. They also prepare the necessary documentation to prevent administrative errors in this operation.
5. Shipment of the consolidated order: once the orders are grouped into a single transportation unit, the goods are loaded onto a vehicle and sent to the final recipient.

The freight consolidation process is divided into stages such as goods receipt, picking, and truck loading
The freight consolidation process is divided into stages such as goods receipt, picking, and truck loading

The steady increase in volumes of orders dispatched from DCs has led many companies to digitize management of the freight consolidation process to minimize goods transportation costs. A warehouse management system (WMS) ensures constant communication between the logistics centre and the different suppliers, as well as real-time stock control.

Benefits (and risks) of freight consolidation

Freight consolidation is a logistics operation that fosters the resource optimisation in the dispatch and shipment of goods to DCs or other logistics facilities. Its advantages include:

  • Lower shipping costs. Full truck loads bring down the shipping cost per order, as the shipping fee is divided proportionately among the suppliers. This advantage is crucial for ecommerce companies, which need to guarantee fast, economic deliveries to remain competitive.
  • Enhanced goods safety. Properly consolidated cargo avoids the risk of damage due to bumps and falls during product handling and transportation. This is because various smaller loads are grouped into larger units.
  • Efficient loading dock management. Goods grouping means that fewer trucks will be circulating in the warehouse yard, limiting traffic jams and delays in this area of the facility.
  • Reduced environmental impact. Freight consolidation optimises the use of transportation vehicles, consequently minimizing incomplete truck loads and moderating the number of vehicles on the road.
Freight consolidation tasks can be automated by deploying a WMS
Freight consolidation tasks can be automated by deploying a WMS

Nevertheless, the implementation of a freight consolidation and deconsolidation phase in the supply chain does have some risks. Any delay in the consolidation (or deconsolidation) process could hold up product shipments, negatively affecting the logistics service for the end customer.

Moreover, the freight consolidation process calls for seamless communication between the carriers, logistics providers, and companies participating in this operation. Establishing a planning process is essential in order for it to work well.

Freight consolidation: optimising space, time, and resources

Freight consolidation is a key phase in companies’ logistics processes: it reduces travel and enables sustainable logistics, lessening the organization’s impact on the environment.

Freight consolidation — typically employed by logistics providers — facilitates combined shipments, which can come from one or more suppliers. This logistics process depends on each company’s production, procurement, and distribution strategies.

Interested in optimising your freight consolidation processes? Don’t hesitate to contact us. An expert consultant will offer you a solution that meets your particular needs.

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