The topic of effective freight management and navigating the complexities of a finite capacity were already on the minds of shippers well before the COVID-19 pandemic. According to Brooks A. Bentz of Logistics Management, the turmoil of the world was a general indicator that freight rates would cause trouble in 2020, and the only way forward appeared to lie within bold moves by shippers to optimize modal use and avoid unnecessary costs. As the COVID-19 unfurled, those needs are greater than ever, and consolidation freight management is one way to increase volume and lower spend simultaneously. However, consolidation is not as simple as it seems, and shippers need to understand a few key issues and best practices with its use.
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What’s the Risk in Consolidation Freight Management
Consolidation is often touted as an integral component to managing risks deriving from limited capacity, on-site staff or drivers, but it does have an unusual standing as a potential cause of higher costs. As explained by Joseph Carnarius of FreightHub:
“As with any shipment, more touch points increase risk, and consolidation implies a direct need to increase touch points for the original shipments. On the other hand, freight consolidation at the proper step in the shipping process effectively reduces the number of touch points a given shipment may have, reducing risk. Yes. It sounds confusing. How can consolidation increase and decrease risk at the same time?”
Freight consolidation has the added benefit of lowering the risk of failure to find available capacity, especially as the country moves to find more LTL capacity and leverage FT when most shipments fall into the LTL class. However, poor consolidation freight management practices will lead to poor allocation of freight, poorly consolidated freight, and unnecessary delays. Moreover, consolidation requires a larger volume of smaller packages. Thus, individual shippers may lack the volume necessary to effectively leverage consolidation in freight management. Now, that paints a dire picture, but imagine the possibilities if Shipper John were to work with Shipper Anna to bring their parcel shipments together and secure LTL freight rates, which are historically more affordable than parcels.
Consolidated Freight Increases Available Capacity Across Trade Lanes and Modes
Consolidation freight management is an essential practice for companies that are looking to further refine warehousing and distribution strategies, such as Kenco Logistics and DSC Logistics, reports Daniel P. Bearth of Transport Topics. As these companies look to expand into the transportation management world, they will be well poised to tap the value of freight consolidation. As more companies turn to freight consolidation, its top benefits will become clearer. These benefits include:
- Increased ability to move freight faster.
- Decreased risk of damage to freight resulting from movements as a group when consolidated.
- Greater carrier diversity that provides a protective effect against changing freight rates, especially spot trucking rates.
- Ability to unify supply chains to avoid unnecessary risks, ranging from bad weather to traffic congestion.
- Mergers and acquisitions that occur later in the life of the company will naturally benefit from the use of consolidation and deconsolidation practices.
- Access to more trade lanes and modes, which through consolidation freight management and subsequent deconsolidation, will help turn the tide against potential disruptions.
Yes, consolidation does disrupt traditional supply chain operations, but its benefits outweigh the risks of doing nothing to combat limited capacity and even geographic travel restrictions. In a sense, freight consolidation is a win-win for companies that need a forward-looking view of the supply chain through 2020 and beyond.
Best Practices for Consolidated Freight Management
Whole books have been written to offer insight into the best ways to achieve consolidation freight management. Instead of spending years reading about it, shippers must know that freight consolidation’s efficacy boils down to following these best practices:
- Increase compliance with the inbound freight routing guide.
- Work directly with suppliers to avoid bringing freight into the facility, such as using cross-docking or dropshipping.
- Create a dynamic, adaptable routing guide.
- Automate data capture and analysis.
- Put the burden of consolidation and deconsolidation in the hands of a third party, such as Cerasis.
- Integrate supply chain systems.
- Rate all shipments across all modes before deciding to consolidate or deconsolidate freight.
Leverage Consolidation to Endure Stressful Supply Chain Events
Consolidation freight management is a critical component of a distributed, successful supply chain management strategy. It overcomes the obstacles presented with more traditional shipping options, including using a single mode for most shipments, and it helps shippers maintain operability through uncertainty. Of course, consolidation does mean more processes to manage freight, but its benefits are simply too great to ignore in 2020 and beyond.