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.
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.
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:
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.
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:
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.
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