Consolidated shipment

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Consolidation shipment it is according to the Dictionary of International Trade the combining of less than truckload (LTL) shipments of cargo form a number of shippers at a centrally located point of origin by a freight consolidator, and transporting them as a single shipment to a destination point. Consolidation of cargo often results in reduced shipping rates [1]. Consolidation points is a terminal, container yard, loading dock or other physical location where the consolidation of freight takes place [2].

Transport implementation process

First step to movement goods in consignment assembly. When transacting business in the international trade, one should use Incoterms 2010 rules. Incoterms are international commercial terms. They define costs, risk and practical aspects of carriage of goods between the buyer and the seller. Applying these rules enables one to mitigate any misunderstandings resulting from a lack of precise knowledge of trade practices. A transaction means movement of goods and services between the seller and the buyer. What is more, these are all the actions undertaken in order to buy or sell goods [3]. Importers must take into consideration date of readiness for all his goods. Importing entity establishes cooperation with a logistics agency- forwarder - that will be responsible for transport planning. After providing all necessary information to the forwarder, such as type of cargo, weight, volume and contact details, the forwarder submits the so-called Booking to the agent. Freight forwarding companies cooperate with their agents, whose scope covers a specific area. Booking is otherwise declaring the goods for transport. It starts the agent operation on the freight consolidation facility. All goods that will be consolidated to one container are brought to this facility. After delivery the LCL shipment to the port, exporters receives Order routing, confirming organization of the transport by the agent. The correct end of this stage is loading consolidated shipment into the ship.

Benefits of consolidated shipments

There are many advantages behind consolidation shipments,they are summarized as follows [4] :

  • Cost reduction - Consolidated shipments can reduce the number of individual shipments and take advantage of lower cost transportation. At the destination, the consolidated shipment is separated back into the original individual shipments for delivery to consignees. A consolidation service will combine smaller shipments and then ship them together to achieve better freight rates and cargo security.
  • Reducing stocking locations - Consolidation is also used in the context of reducing the number of stocking locations (e.g., warehouses) and consolidating the "spend" on just a few suppliers for each commodity group.

Examples of Consolidated shipment

  • Air cargo consolidation: Air cargo consolidation is a process used by airlines to consolidate multiple shipments into one larger shipment. This is done to reduce the cost of shipping by allowing multiple packages to be shipped together, reducing the overall cost per package.
  • Ocean Freight Consolidation: Ocean freight consolidation is the process of combining multiple shipments into a single shipment. This is done to reduce the cost of shipping. By combining multiple shipments into one larger shipment, the cost of shipping each individual shipment is reduced. This type of consolidation is often used for international shipping, where multiple shipments can be combined into one container to save on shipping costs.
  • Rail Freight Consolidation: Rail freight consolidation is the process of combining multiple shipments into a single shipment. This is done to reduce the cost of shipping. By combining multiple shipments into one larger shipment, the cost of shipping each individual shipment is reduced. This type of consolidation is often used for international shipping, where multiple shipments can be combined into one container to save on shipping costs.

Limitations of Consolidated shipment

Consolidation shipments can have a range of limitations, including:

  • Longer shipping times, as the freight consolidator must coordinate pickups and drops offs from multiple shippers.
  • Limited space in the truckload, so smaller shipments might be combined with larger shipments and the small shipments may not get the same care and attention.
  • The freight consolidator may not be able to send a shipment until the truckload is full, so there could be delays in shipping.
  • Consolidation shipments may be subject to additional fees, such as storage fees, to cover the costs of the consolidator.
  • It is possible for cargo to be lost or damaged in transit due to the complexity of the process.

Other approaches related to Consolidated shipment

To further understand the concept of Consolidation Shipment, it is important to consider other related approaches such as:

  • Cross-Docking: This is a logistics operation where products from different suppliers are transferred from inbound to outbound trailers without being stored in a warehouse. This approach helps to reduce the complexity of the supply chain and provides faster delivery.
  • Pool Distribution: This is a supply chain operation where a group of suppliers combine their shipments into a single order. This helps to reduce transportation costs and minimize the risk of lost shipments.
  • Backhauling: This is the process of transporting goods from a destination point back to its origin. Backhauling is often cheaper than regular freight forwarding as it takes advantage of empty space in a truck.

In summary, Consolidation Shipment is an important logistics concept which can be applied in different ways to reduce transportation costs and simplify supply chain operations. Other approaches related to this concept include Cross-Docking, Pool Distribution and Backhauling.


Consolidated shipment — recommended articles
General cargo — Door to door service — Freight prepaid — Free carrier (FCA) — Direct delivery — Transloading — Container lease — Combined transport — Advice of shipment

References

Footnotes

  1. ↑ Hinkelman E.G., (2008)
  2. ↑ Hinkelman E.G., (2008)
  3. ↑ Kadłubska J., (2016)
  4. ↑ Wilson R., Hill A.V., Glazer H. (2013)

Author: Aldona Pająk

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