What is consolidation in freight forwarding?
Updated: Aug 3
Freight consolidation refers to the process of consolidating multiple smaller shipments into a single container to be shipped to a single destination. Freight consolidation is a cost-cutting approach that experienced freight forwarders use to reduce total shipping costs by grouping smaller shipments from different customers with similar destinations (e.g port of discharge or destination airport) into a single shipment. Freight Consolidation for shipments usually happens for Less-than-container-loads (LCL) where freight forwarders try to combine various customers’ shipments into the same container to maximize total container space utilization and ultimately pass on cost savings to customers. Upon reaching the destination, the shipment is then deconsolidated and split into the various smaller shipments and delivered to the respective customers’ final location (e.g. office or warehouse).
Most small-medium businesses (SMEs) usually prefer freight consolidation over LCL shipments that are exclusively for their goods due to the low volume of their shipment. Freight consolidation is a common practice by freight forwarders and this article aims to explain the many benefits freight consolidation may bring to small-medium businesses.
Benefit 1: Reduced Shipping Costs
With freight consolidation, total shipping costs are reduced as small-medium businesses are able to merge their goods with other companies in a single container. With the higher weight/volume of freight in a single container, shipment costs are significantly reduced. It does not make sense for small-medium businesses to exclusively book Full-Container-Load (FCL) or Less-than-container-load (LCL) shipments if they only needed to transport 1 to 3 pallets of goods.
Benefit 2: Reduce Container Loading/Unloading Time
With freight consolidation, packages from various companies are loaded into a single container which reduces container loading/unloading time as compared to loading packages into separate containers. Experienced freight forwarding companies are able to manage the end-to-end freight consolidation process effectively with a freight management system as they are able to leverage cloud-based technology to manage all their freight data in a single system and focus on deepening relationships with their partners (e.g. carriers, hauliers).
Benefit 3: Enhanced Flexibility
Freight consolidation brings about enhanced flexibility to your shipment requirements. Depending on the consistency and volume of customer sales orders, you are able to scale your shipment in a cost-effective manner and share freight costs with other companies. In the event where customer sales orders are high enough, you can easily opt for Full-container-load (FCL) shipment.
Freight consolidation is a cost-effective method of ‘carpooling’ smaller shipments into a larger one. Despite the many benefits of freight consolidation, it can be very tricky when it comes to managing multiple smaller shipments without a freight management system. Even the most experienced freight forwarders are unable to avoid making mistakes when they attempt to store and retrieve all the shipment consolidation data on emails, spreadsheets and siloed applications. A freight management system serves as a worthy investment for freight forwarders to increase customer loyalty, streamline freight operations and centralize data storage.