The cost of shipping freight has been on a roller-coaster ride over the past few years. Freight costs set record highs during the pandemic. After slowly dropping to post-pandemic lows in October 2023, shipping costs started rising again in 2024, hitting the highest levels on record in February.
While rates have moderated slightly, shipping and logistics continue to chew up larger portions of companies’ budgets. Managing transportation and shipping costs is crucial to reducing supply chain costs, and package consolidation is one strategy that can produce significant results.
What Is Package Consolidation in Logistics?
By combining multiple shipments into larger loads, you can minimize individual shipments and instead create a consolidated shipment. Bundling consolidated parcels can significantly reduce your overall costs. It can also reduce your carbon footprint.
Rather than sending small shipments to a region, shippers and freight consolidators can combine shipments for reduced consolidated freight costs. This may include putting multiple products on pallets or in containers and combining the pallet or container loads to fill trucks.
Consolidated freight can happen at different points in the supply chain. For example, cargo might be consolidated at the warehouse, terminals, or transload facilities.
The Process of Packaging Consolidation
To create consolidated packages, there’s a four-step process:
- Shipment planning and coordination: This initial stage involves identifying compatible shipments that can be consolidated based on factors such as destination, schedule, and shipment characteristics. Effective planning and coordination are crucial for maximizing consolidation opportunities.
- Shipment consolidation: Once compatible shipments have been identified, the physical consolidation process begins. Packages are combined into larger loads, often through containerization or palletization, using efficient loading techniques to optimize space utilization.
- Transportation: The consolidated loads are then transported via various modes, such as truckload, intermodal (combining truck and rail), or air freight. Routing optimization plays a crucial role in ensuring the efficient movement of these consolidated shipments.
- Deconsolidation and distribution: Upon arrival at the destination terminals or facilities, the consolidated shipments are unloaded, and the individual packages are sorted and segregated for final delivery to their respective recipients.
Business Benefits of Package Consolidation
Package consolidation produces a broad range of benefits, including the following.
Cost Savings
One of the biggest benefits is that your consolidated freight costs will be lower.
For example, you may be able to leverage full truckloads (FTLs) versus less-than-truckload (LTL) shipments. LTL shipping operations have multiple touchpoints, often moving goods from multiple shippers and delivering them to consolidated warehousing or distribution centers. The goods are then reloaded onto different trucks for continued routing or last-mile delivery. This can slow fulfillment and lead to increased costs.
With FTL shipments, shippers use full truckloads or container loads. This type of cargo consolidation takes goods directly from one place to another. This requires less handling and lower shipping fees. It also means fewer trucks, less fuel consumption, and greater economies of scale.
Major shipping companies use dimensional weight to calculate shipping pricing. The more efficiently you can pack your shipments, the lower your consolidated freight costs will be.
Efficient Consolidation Techniques and Strategies
Package consolidation also streamlines the logistics process. Consolidated loads need less handling. A full truckload is typically sealed and requires less unloading and reloading to reach its destination. As such, you get better efficiency and lower labor costs.
Shippers and modern warehouse companies are using techniques such as:
- Cross-docking and transloading: consolidating inbound shipments for near-immediate outbound distribution to minimize handling and storage
- Multi-client consolidation: combining shipments from multiple customers to share transport resources
- Zone skipping/hub and spoke: routing consolidated loads through terminals or hubs to reduce transit time and costs
- Reverse logistics consolidation: consolidating returns and other reverse logistic shipments to optimize the transportation process
More Sustainable Practices
When you reduce your physical footprint by combining packaging or consolidating shipments, you lower your carbon footprint as well. Road miles are reduced, helping to cut down on emissions.
Transportation is the largest contributor to greenhouse gases in the U.S. The Environmental Protection Agency (EPA) estimates that the transportation sector is responsible for 28% of the country’s total emissions, so reducing road miles is important.
Consolidation also helps reduce material usage and package waste.
Visibility
Package consolidation can also create greater visibility into your supply chain. Centralizing and tracking your shipments can improve the experience for your customers and end users. You can realize more predictable transit times and faster customs clearance for consolidated loads.
The Role of Technology in Package and Freight Consolidation
Technology plays a big role in package and freight consolidation across the supply chain, including:
- Internet of Things (IoT) devices
- Tagging technologies such as radio-frequency identification (RFID), Bluetooth, Wi-Fi, and ultra-wide band (UWB)
- Portable, handheld, and overhead readers
- Intelligence software
This provides shippers with real-time intelligence to improve their visibility and drive better operational decisions. With the right technology, you never have to worry about asset location at any stage of the supply chain. Consolidated freight tracking is easy with the right technology. These solutions also provide insights into warehouse cross-docking, lane assignments, and incoming inventory so you can get your products to where they need to be more easily.
Advanced data analytics can also uncover consolidation opportunities and model various scenarios to quantify your potential cost and efficiency gains.
What Does the Future of Consolidated Shipments Look Like?
B2B and consumer e-commerce continue to grow. In fact, analysts forecast nearly 9% growth in 2024, with the retail e-commerce market totaling $7.9 trillion by 2027.
High interest rates, fuel costs, and fluctuating capacity are driving shipping costs higher at the same time customers are demanding free or low-cost shipping. As companies try to navigate these economic conditions, consolidated shipping will only grow in importance.
Discover the Best Way to Increase Your Operational Efficiency
Embracing package consolidation and leveraging technology are key to increasing your operational efficiency, controlling your costs, and reducing the environmental impact of your shipping process. With the right strategy and tech, all businesses can future-proof their logistics.
Surgere can provide the technology you need to power your business. With solutions engineered to give you end-to-end visibility into your entire supply chain, you can make better operational decisions.
Contact Surgere today to discuss innovative solutions that can optimize your supply chain.
