17 January 2023 • 8 min read
Consolidation & Deconsolidation: Efficient Cargo Management
The quantity of freight or packages in a consolidated shipment, the shippers, and the freight's destination all affect the handling specifications and touch points.
Businesses, often referred to as shippers, choose to consolidate and deconsolidate their freight when they do not typically have a large volume of shipments.
Many small and medium-sized businesses (SMBs) still struggle to manage their freight shipping and logistics to increase customer satisfaction due to the increasing competition in the market, where established enterprises have made their mark among their consumers with quick delivery.
While the established giants already have complex volumes of shipments and well-planned logistics, it is the SMBs and e-commerce start-ups who must exercise good judgement to streamline their logistics at a cost that will not harm their profitability and satisfy their customers at the same time.
Consolidation and Deconsolidation
Consolidation refers to the merging of numerous items into one. As the name suggests, consolidation in logistics also refers to the process of consolidating multiple small packages or shipments into a single large shipment. Consolidation aids carriers in reducing the cost and duration of freight shipment, but it is also challenging and occasionally dangerous. Because combined goods will have more handling requirements and touch points during their voyage, we argue it is complex and potentially dangerous.. However, consolidation has proven to have a number of advantages when done effectively.
The consolidated freight shipment must be divided into smaller packages and delivered to its final destination after arriving at its destination. This is due to the fact that one shipper's goods shares container space with the cargo of other shippers; deconsolidation is the process of separating the cargo before sending it to its final destination. The deconsolidation of shipments may seem simple, but there are situations in which the cargo must first be deconsolidated, then re-consolidated, and then further deconsolidated into individual packages - depending on the shipper's requirements. For these reasons, many shippers and businesses hire a 3PL to handle deconsolidation of shipments.
To carry smaller packages or shipments to their specific destinations—which could be a store, a warehouse, or a customer—deconsolidation in freight transportation refers to the separation or breakdown of one large shipment into smaller packages or shipments. Both the consolidation and deconsolidation of freight are crucial and function similarly to two sides of a coin. Both are somewhat complicated because they include numerous touch sites and could be dangerous. Here are a few advantages of both freight consolidation and deconsolidation that shippers should know about.
Benefits of Freight Shipping Consolidation and Deconsolidation
- Lower Freight Shipping Costs: It is commonly known that freight consolidation significantly reduces freight shipping costs because shippers only pay for the space reserved for their cargo, as opposed to FCL/FTL shipments, in which they pay for the complete container load. Similar to this, when done correctly and on schedule, freight deconsolidation can reduce costs in the final distribution of the goods.
- On-Time Inventory: Compared to a full container load, it is simpler for shippers to find room for their cargo in LCL or LTL shipments. Additionally, shippers are not required to wait for the creation or acquisition of enough items to fill an entire container before consolidating and shipping their products. When the cargo is deconsolidated and held in locations closer to the market, inventory is moved, replenished, and products are available in the market more quickly.
- Availability of Your Items in the Market: Since many companies wait until a container is completely full before exporting, this may result in many companies' products being unavailable in the market. In these situations, shippers combine their freight based on the market's demand for their goods and seasonal trends. Therefore, freight consolidation and deconsolidation aid shippers in ensuring that their goods are constantly accessible to final customers.
Problems with Consolidation and Deconsolidation
Consolidating and deconsolidating freight is not without issues. Shippers may encounter some typical issues, including:
- Problems with intermodal shipping. Freight may switch from full truckload to LTL and small package shipments during deconsolidation. Deconsolidation may occur in numerous points along the route, and reconsolidation might also be required. To stop the loss of goods and freight, it is crucial to be able to trace the movements of this freight.
- Increasing Risk as a Result of More Touch Points The number of touch points per freight increases as a result of freight consolidation and deconsolidation. Because the number of touch points is directly correlated with the risk of freight damage or other legal obligations, minimising the number of touch points throughout the deconsolidation process is crucial to maximising its value. If several contact points are required, keeping inventory traceable is essential to lowering risk.
- Delays in deconsolidation or unloading. In the case of freight deconsolidation, even the offloading procedure carries some danger. There could be an accident, or incorrect yard timing and yard management could cause deconsolidation delays.
It may sound impossible to reduce these risks, but shippers who collaborate with freight forwarders can successfully transfer the risk of freight deconsolidation from their to the freight forwarder's.