What You Need to Know About Freight Consolidation

In a changing world with ever more options in managing your supply chain, shippers need strategic solutions to move freight more efficiently. At the most basic level of logistics, the more you can ship at once, the better—but that's often easier said than done. Welcome to the world of freight consolidation, where logistics, negotiation, transportation, and freight management converge to unlock optimization.

It's best to engage a 3PL like ODW Logistics to design and implement an effective consolidation strategy for your business. It's also helpful to have some baseline knowledge of freight consolidation so you're speaking the same language and envisioning the right roadmap for your unique needs.

What Is Freight Consolidation?

Our working definition of freight consolidation is, “the process of combining freight from multiple shippers to build more efficient full truckloads.” That means assembling various less-than-truckload (LTL) shipments into a full truckload (FTL) shipment. This is especially useful for small and medium-sized businesses that can't realistically ship in FTLs and simultaneously meet customers' expectations for fast shipping. Meanwhile, tendering to an LTL provider may not be feasible or sustainable due to costs. 

Freight consolidation is oftentimes the only way to compete with the larger household brands that have the volume to fill trucks daily. “For many shippers, it is hard to compete with a Fortune 500 company that has a trucking cost per unit of 10 cents, when your customer orders in smaller quantities, potentially resulting in a cost of 25 cents,” says Dave Giblin, VP of operations at ODW. “Supply chain software has been evolving, and companies can now rapidly gather and analyze data across multiple shippers to bundle their outgoing shipments into full truckloads. The goal is to bring down transportation costs for all shippers and reduce the number of trucks on the road.”

What Are the Benefits of Freight Consolidation?

Freight consolidation can transform your transportation program. First and foremost, it improves customer satisfaction by enabling reliable, timely, and cost-effective shipping. It also increases consistency in your supply chain and creates relationship synergies that a 3PL like ODW can identify and leverage. Freight consolidation achieves scale and cost savings. Quite simply, it's a means of shipping smarter and maximizing every inch of a trailer.

To recap the benefits above, freight consolidation allows you to:

• Improve your customers' satisfaction
• Increase consistency in your supply chain
• Take advantage of relationship synergies
• Achieve scale and cost savings
• Ship smarter and maintain your relationships

Read more about each of these benefits of consolidation, and also consider the environmental impact of fewer trucks and lower emissions. Giblin explains, “According to the Environmental Protection Agency (EPA), there are more than 300 trillion miles run on heavy and medium-duty trucks in the United States. A one-tenth percent decrease in miles traveled as a result of collaboration would reduce that figure by 314 billion miles. That would equate to more than 60 billion gallons of diesel saved or almost $200 billion in domestic diesel cost.”

Does Freight Consolidation Cut Costs?

Cost savings are at the core of any freight consolidation strategy and reducing the number of LTL shipments going out can make a noticeable impact both immediately and over the long haul. It's how small and medium-sized businesses scale. 

Many new and emerging brands have all the stars aligned for success—great product, investment, marketing, and leadership—but struggle to get their delivery costs down. In the same way people pool money together to enjoy a vacation or expensive meal, shippers can combine their shipments to reduce transportation costs by way of replacing LTLs with multi-client FTLs. See how freight consolidation delivered a substantial decrease in LTL shipments for our customer, SOLUT! Rate negotiation led to freight optimization and, ultimately, consolidation. 

Do My Customers Care About Consolidated Freight?

On the surface, your customers might not seem to care how you get their orders to them so long as the deliveries are on time and the shipping costs are affordable. That doesn't mean they're not interested in seeing the benefits of consolidation for your business indirectly. A discount for larger orders can potentially help you achieve larger shipments with higher ticket values, so consolidation becomes easier as your program grows. The sustainability message in freight consolidation may also be appealing to customers.

How Do Freight Consolidation Services Work?

Not all freight consolidation companies are created equal. It's important to choose a reputable provider that has the technology, volume, personnel, and perhaps most importantly, relationships, to truly optimize your freight. At ODW, we take a strategic and collaborative approach to logistics. Consolidated freight is only one piece of a streamlined transportation program. Learn more about our transportation management services.