Freight Deconsolidation: The Benefits in Reducing Freight Costs

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Freight deconsolidation is the partner to freight consolidation. Both practices aim to lessen stress, cost, and risk to shipments by combining smaller shipments into larger ones, in the case of consolidation, or bigger shipments into smaller ones, in the case of freight deconsolidation. The process can continue throughout any mode of transportation, and failure in any part of handling consolidated or deconsolidated freight will lead to problems. Unfortunately, implementing such a program requires investment in time, money, and training, and it can seem counterproductive. However, it offers key benefits that lower cost and encourage sustainable, scalable and growing supply chains. 

What Do Novice Supply Chain Leaders Get Wrong About Supply Chain Freight Consolidation?

Few topics cause more confusion in supply chain management than freight consolidation and deconsolidation. Newer shippers may assume consolidation refers solely to consolidating individual customer’s orders into one package. Yes, this is a form of consolidation, but it has a much more significant implication in the supply chain in terms of business-to-business transactions. Besides, consolidation becomes susceptible to failure without effective deconsolidation practices. To fully understand freight deconsolidation, shippers need to consider what is necessary to break down pallets and effectively move freight from one shipment to another without causing unnecessary disruptions. In other words, they need to redefine the concept of deconsolidation.

As explained by Freight Hub, “The definition of deconsolidation implies a fundamental need for multisite, multi-piece shipments created from larger, consolidated shipments providing an opportunity to these companies, allowing them to scale shipping without dramatically increasing shipping costs rapidly. Freight forwarders may need to deconsolidate shipments at predetermined locations, re-consolidate shipments, and further de-consolidate the shipment into individual shipments at a given warehouse.”

Inbound Freight Costs: How Gaining Visibility Achieves Bottom Line Savings

How Does Effective Freight Deconsolidation Affect Costs?

Proper management of freight deconsolidation will have a dramatic effect on cost management. Since consolidation typically occurs outside of your facility, freight deconsolidation falls under your purview. In other words, shippers must approach their responsibilities for breaking down pallets and consolidated shipments with an eye on how it will affect existing operations. In other words, shippers must revisit the order fulfillment process, which may have been completed at another step or facility within the supply chain. Furthermore, competent freight consolidation helps shippers avoid missed deliveries, fulfill orders faster, streamline replenishment processes, lower inventory carrying costs, lessen disruption risk, and much more. Freight consolidation and deconsolidation benefits are similar. They include:

  • Improved pricing simplicity for inbound and outbound freight. Since freight is categorized by destination, overall costs associated with moving freight decline, reflecting the increased use of more cost-effective, affordable shipping options.
  • Faster transit times. Since consolidated freight often moves by the full truckload, it may arrive faster than other forms, but there is a caveat to this benefit. If customers are willing to pay a premium for faster, overnight, and air shipping, give it to them.
  • Higher service levels. Higher service levels often accompany fewer touchpoints and risks, which are critical goals for consolidation in freight deconsolidation programs.
  • Reduced accessorial charges. Fewer pickups by carriers may lead to reduced accessorial charges, as well as lower drayage costs for international shipments.
  • Reduced fuel and emissions. Consolidating freight into the most affordable option will naturally lead to a reduction in fuel costs and emissions, improving sustainability within the supply chain.
  • Consolidation & deconsolidation precede effective intermodal and multimodal shipping. Since freight is already going to change hands in these methods of transport, consolidation seems like an obvious way to get more bang for your buck. 

These benefits naturally carry over into deconsolidation by providing cost savings to the recipient, but even then, shippers must approach deconsolidation as if it were a typical inbound process. Moreover, optimized freight deconsolidation will help inbound shippers comply with your freight routing guide, too, improving compliance metrics and performance along the way. Therefore, the benefits of effective freight deconsolidation focus on the efficiency at which staff completes the breakdown and sends freight out to consumers, to other locations or the warehouse shelves.

A Fast Way to Improve Deconsolidation Practices

Effective freight consolidation and deconsolidation programs depend on timely communication, accurate data, proper documentation, timely arrivals, effective dock scheduling, efficient labor management, collaboration with other supply chain partners, and optimize process management. Shippers should focus on improving these areas within their operations to see meaningful benefits within deconsolidation programs.

Reap the Benefits of Consolidation and Freight Deconsolidation With the Right Partner and TMS

Consolidation and deconsolidation are two sides of the same coin of the supply chain world. Failure to properly handle one or the other will render its benefits meaningless. However, effective freight deconsolidation can help shippers bring the benefits of consolidation into fruition and improve overall supply chain management. Of course, using a common system, such as a dedicated transportation management system (TMS), is vital to making consolidation and deconsolidation successful and accountable.

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