What Is Consolidated Shipping? (With Benefits and Challenges)
By Indeed Editorial Team
Published April 26, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
The necessity for quick and efficient delivery systems for freight and individual products has led to the creation of new systems to reduce shipping costs and optimize freight loads. One popular method businesses use to achieve this is consolidating freight deliveries. Understanding consolidated shipping can give you insight into how to provide an effective shipping method for customer orders and improve a company's customer experience. In this article, we explore consolidated deliveries in freight, outline the benefits, examine some challenges you may experience, highlight consolidated service options, compare direct injection and order consolidation, and discuss some supply manager skills.
What does consolidated shipping mean?
Consolidated shipping is a method where businesses combine individual shipments from various customers into a single shipment. This delivery method can help you organize individual orders into a single shipment and generate a single tracking number for the shipment instead of multiple shipments. Then, when the single shipment arrives at its destination, it's consolidated into the original individual customers' shipments. By consolidating shipping, companies can help ensure customers receive the right orders and save money compared to sending multiple shipments through different carriers or in various loads.
Benefits of consolidated deliveries
Merging shipment deliveries may offer numerous benefits, including:
Reduced shipping costs
Consolidating multiple deliveries into a single shipment can help both a business and its customers save money on shipping costs. For example, some freight carriers may charge a flat rate for a particular group of goods or weight class, reducing the overall cost for individual items. This system particularly favours international shipping, where carriers charge different rates depending on each item's destination. Reduced shipping costs can help you improve profits for the business and provide better customer service experiences.
Improved order accuracy
Consolidating orders may help you correctly and efficiently send out the customers' orders and shipments. It can also allow you to account for and monitor each shipment easily. For instance, businesses may consider shipments as a single order, so it's easier to verify the shipments before transporting them to the freight carrier. Most customers appreciate an efficient delivery system because it leads to improved invoice accuracy and tracking numbers, timely shipments, and improved online services' integrity. Higher order accuracy may also help you improve your inventory tracking systems.
Reduced risk of damage to items
Sending multiple shipments out in a single batch may help reduce the probability of damage to individual items. When sending out multiple shipments, there's a higher probability of damage because each may have different packaging or pass through multiple touching points. Consolidated deliveries can reduce the number of people handling the shipment, consequently reducing the risk of damage and improving customer satisfaction. The package moves from the consolidation centre directly to the shopper, who sends it directly to the customers in a single delivery.
Improved quality control
It's important for you to maintain the product quality and standard of services rendered to customers. As a result, having systems in place to conduct quality control is essential for most companies. Consolidated deliveries may help you maintain a high standard and improve your quality control process by reducing the time items spend in transit. Consolidated shipping can also aid with order monitoring, allowing you to identify defective products before they leave the warehouse or production facility.
Better customer service
Consolidated deliveries typically help create a better customer service experience for individual customers. With quicker shipping times, better accountability for products, reduced shipping costs, and lower damage probability, customers may get better service and enjoy intact and high-quality products. Consequently, this can create brand loyalty and make customers refer the business to others. A good customer service system may be one of the marketing points of the business and help you attract new customers or distinguish yourself from competitors.
Challenges of consolidated deliveries
Some challenges that may arise from merging individual shipments include:
Spending more time organizing shipments
Merging multiple shipments may increase the time spent on the shipment organizing and planning process. To ensure the shipments meet the appropriate quality standard, you may spend more time checking the products before arranging them for shipping. Some companies wait to send out orders until every item is complete, so it may take longer to consolidate orders when some items aren't on the inventory. You can mitigate these effects by automating the organizing processes using inventory regulation software. For example, these programs may help generate purchase orders, create orders, and automatically start making items for different orders.
Locating the right carrier
In some cases, it may be difficult to find the right carrier for consolidated orders, as they're often heavier and require more logistical and organizational accuracy. Some freight carriers don't offer consolidated delivery services, limiting the available market for this business. You can overcome this challenge by conducting extensive research on carriers and making arrangements with them before the shipment dates. It's advisable to maintain a functional and professional relationship with carriers that offer consolidated delivery services.
Customer-driven reverse logistics
Advancements in e-commerce may increase the number of trades conducted via the internet, which can cause a higher rate of returned products. Increases in product returns can create economic and logistical problems when handling return policies. To overcome this challenge, it may be essential for companies that want to maintain a successful online shop to set up a reverse logistics program to handle customer returns. This may also provide you with a marketing point to set you apart from your competitors.
Short lead times
A major challenge for consolidated deliveries is the short lead times on shipments. Due to the high demand, you may lose customers if you don't have the product stocked. In most industries, the customers prioritize immediate fulfilment, and being unable to meet the immediate demand can create a problem. You can overcome this challenge by implementing processes and systems for quick and efficient product consolidation. For example, you can communicate within the company, hasten your processes, or develop relationships with other shippers to help you save time.
Consolidation service options
Here are the means through which you can conduct consolidated deliveries:
In this method, you send the consolidated shipments through the same aircraft. Also, you can list the shipments on the same master waybill, but individual shipments have different house waybills. While air freight consolidation is the fastest means to move shipments, it's also the most expensive delivery option.
This shipping option is most appropriate for transporting large cargo. Typically, freight transported by water moves in containers of different sizes, and you disperse the individual orders into these containers. Ocean transport is relatively cheaper than air and is suitable for shipping internationally.
In this method, shippers refer to individual shipments as "less than a truckload shipment" (LTL). This term implies that the shipments are too small to fill the truck and shippers may consolidate them with others to fill it. Shipping on the ground is the cheapest option, but this method can be susceptible to delays like traffic.
Direct injection vs. order consolidation
A direct injection is a form of order consolidation that exempts shipments from tariffs and customs duties if they meet the duty threshold. The duty threshold is for goods up to $200, but this amount doesn't include alcoholic beverages and tobacco products. Although direct injection and order consideration have their similarities, some of their key differences include:
When transporting cargo through direct injection, customs make the shipments go through electronic clearance. This process helps save money and time spent on checks and clearance. Conversely, they may not subject consolidated shipments to electronic custom checks.
In direct injection shipping, the most popular mode of transportation is air travel. The aim of shipping in bulk through airfreight is to save cost on fuel and the air staff. In consolidated shipping, you may also choose to include bulk airfreight.
Importer of record
The customer may be the importer of record responsible for the customs document in direct injection. This system places the customer in charge and removes the burden on the shipper. Conversely, in consolidated shipping, the customer isn't always the importer of record, and the shipper may bear the responsibility of the customs document.
Necessary skills for a supply manager
Here are some of the skills necessary to be a successful supply chain manager:
Analytical skills: The role of a supply chain manager involves analyzing different aspects of the business. For example, they determine suitable transportation options and the most efficient means to meet customer demand.
Interpersonal skills: This role requires a lot of interaction and negotiation with various people. To succeed as a supply chain manager, it's essential for you to know how to interact and build sustainable relationships.
Problem-solving skills: When transporting shipments, it's possible to encounter some unexpected challenges. It's essential for you to know how to apply your resources and provide the most appropriate solution quickly.
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