If you’re sharing a 30-mile commute to work with five of your coworkers, your costs per pound to deliver the “shipment” is a lot less than if each person drove in separate vehicles. Gasoline consumption is less, wear and tear on the vehicles is less and chances are commute time is less, too.
In the logistics world, of course, carpooling is synonymous with the money saving tactic of consolidating LTL shipments. It’s simply better economics to have five full trucks on the road instead of 10 half-full trucks.
Build bigger shipments
The practice of building bigger shipments works with both inbound and outbound logistics. For instance, if your suppliers aren’t already shipping consolidated loads to you, you’re paying extra money needlessly. You’ll also save your customers’ money by shipping larger loads. The goal for both inbound and outbound shipments is to decrease dollars spent per pound.
For example, let’s say your cost per pound of a shipment that weighs 0–1,000 pounds is $.50, 1,000–2,000 pounds is $.40/pound, 2,000-3,000 pounds is $.30/pound and so on, all the way up to 10,000 pounds (See Figure 1*).
Building bigger loads may also require you to change entrenched habits. If you’re ordering parts or supplies, for instance, order larger quantities less often instead of smaller quantities more often. Bottom line: Buy in bulk, Costco-style to reduce your total number of shipments.
Beyond saving money, there are other benefits to consolidating your LTL loads:
- Increases productivity
- Increases efficiency
- Lowers carbon emissions
- Lowers your risks and insurance costs (because of fewer trucks you’ll have on the road)
- Reduces inventory costs (with cross docking)
Savings from load consolidation practices can surpass carrier discounts
When we work with customers to lower their shipping costs we almost always save them more money through load consolidation techniques versus aggressive negotiations with carriers to lower rates.
We use a handful of tactics to consolidate and optimize our customers’ LTL shipments, and you can do the same for consolidating your freight:
- Great software through the LPS transportation management system (TMS): The TMS captures hundreds of data points of trucks moving freight, finds trucks with unused trailer space and schedules multiple stops to deliver the freight. Most TMSs provide these load-building capabilities.
- A wired warehouse—think technology—automates the process of preparing your partial shipments and stages them for shipping out to the right destinations. But, If your own warehouse isn’t capable of managing your consolidation activities then consider joining forces with an independent warehouse able to handle the volume you need.
- Cross-docking is sometimes used to store freight temporarily in a warehouse (see wired warehouse above) for staging until all the pallets can be sorted and combined with other freight going to the same destination.
- Working with hundreds of carriers and partners gives us access to as many routes and options.
- Trained people are required to manage and track all the moving parts involved in consolidating LTL shipments. Even with the right tools like great software and top warehouses, you need logistics pros to navigate this battlefield.
Where to start
Perform an audit of your shipments to determine how many LTL loads are being consolidated. Identify areas that could be improved and create a plan that will address any problem areas.
If you don’t have the capacity within your company, then contact a third-party logistics company like LPS to help you implement your own LTL freight consolidation strategy.