Consolidation and Deconsolidation in Freight Shipping

Owing to the rising competition in the market, where established companies have made their mark among their consumers with fast deliveries, there are many small and medium sized businesses (SMBs) that still struggle to manage their freight shipping and logistics to gain higher customer satisfaction.

While the established giants already have elaborate volume of shipments and a well chalked out logistics, it is the SMBs and the e-commerce start-ups that need to think wisely to streamline their logistics at a cost that will not hurt their profitability and delight their customers at the same time. Businesses, here referred to as shippers, which do not usually have big volume of shipments, opt for consolidation and deconsolidation of their freight.

What Does Consolidation Mean in Freight Shipping?

The word consolidation means combining several things into one. As the very meaning suggests, in logistics also, consolidation means combining several small packages or shipments in to one big shipment. Consolidation helps shippers in lowering freight shipping costs and in reducing the transport time; but it is equally complex and at times risky. We say it is complex and can be risky, because consolidated shipments will have more handling requirements and touch points in their journey. These handling requirements and touch points depend on the number of freight or packages in a consolidated shipment, shippers and the destination of the freight. However, if planned properly, consolidation has proved to have several benefits.

What Does Deconsolidation Mean in Freight Shipping?

Once the consolidated freight shipment reaches its destination, it must be separated into smaller packages and delivered to its final destination. This is because one shipper’s cargo is sharing container space with other shippers’ cargo – separating the cargo and then sending them to their final destination is deconsolidation. This may seem to be straight forward, but there are also scenarios when the cargo requires to be deconsolidated first, then re-consolidated and further deconsolidated into individual packages – based on the shipper’s requirement, thus many shippers / businesses appoint a 3PL to handle deconsolidation of shipments.

To summarize, deconsolidation in freight shipping means separating or breaking down one big shipment into smaller packages or smaller shipments so that they can be transported to their respective destination, which could be a store, a warehouse or an end customer. Freight consolidation and deconsolidation are like two sides of a coin and are equally important. Both are a bit complex as they involve several touch points and may be risky. Here are some of the benefits shippers consider consolidating and deconsolidating their freight.

Benefits of Consolidation and Deconsolidation in Freight Shipping

  • Lesser Freight Shipping Cost – Freight consolidation is well known to have a big impact on the freight shipping costs as the shippers only pay for the amount of space booked for their cargo, as opposed to the FCL / FTL shipment, where the shippers pay for the entire container load. Similarly, freight deconsolidation, when done correctly and timely can save cost in final distribution of the goods.

  • On Time Inventory – It is easier for shippers to get a space for their cargo in LCL or LTL shipments as compared to a full container load. Also, shippers can consolidate and ship their products as soon as they want and do not have to wait for the production or procurement of goods to fill an entire container. The cargo can then be deconsolidated and stored in places closer to the market, which results in quicker inventory movement, replenishment and availability of products in the market. Having a 3PL partner to handle such shipments serves as an additional benefit to businesses. 3PL partners offer clear visibility and notifications of the cargo movement, which help businesses in better inventory planning.

  • Availability of Your Products in the Market – While many businesses wait to fill an entire container before shipping, for many businesses this could lead to non-availability of their products in the market. In such cases, shippers consolidate their freight based on the seasonal trends and market demand of their products. Thus, consolidation and deconsolidation of freight helps shippers ensure their products are available to the end consumers at all times.

While these are some of the prominent benefits, the criticalities of the process should not be undermined. Some of the issues that shippers face are:

  • It can be confusing – Getting required space for consolidation and accurate deconsolidation can be confusing as it involves several touch points, multiple service providers and various destinations. Many shippers, therefore, appoint a 3PL company like ProConnect Integrated Logistics to handle these shipments.

  • Lack of Communication – Consolidated shipments are handled at several stages depending on the mode of shipment, its route and the destination. Co-ordinating between these handling points can be overwhelming and can also lead to a lack of status visibility and communication between the shipper and the service provider. Appointing a 3PL can give you a better visibility and status reports for your shipments.

  • Poor planning and security of your cargo – Inability to have an end-to-end visibility into freight movement, right from its consolidation to deconsolidation, could prove to be risky, expensive and ineffective.

  • It can be risky – As mentioned earlier in the article, consolidation and deconsolidation of freight goes through multiple handling and touch points. As we know, more the number of handling points more could be the risk of damage or loss, unless there is a tracking or visibility at each of these handling points. Reducing the number of touch points as much as possible is vital to increasing the value of the product.

  • Delay in Delivery – Consolidated shipments cannot be completed without deconsolidation of the cargo. There could be several reasons due to which the process of deconsolidation can be delayed, resulting in delay of the final delivery to your end customer or to the next step in your supply chain. The delays could occur due to several reasons, timings and management of the yard for example.

Even though there are issues and risks in the process, if planned properly consolidation and deconsolidation provide multiple benefits to the shippers. Many shippers appoint freight forwarders like ProConnect Integrated Logistics for their shipments. For seamless services, contact us today.

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