Consolidation of goods- (still) a hidden opportunity?
Marcin Kosewski |
22. Apr 2020
5 minutes read
Consolidation and reconstruction of goods are well-known processes in logistics. But could we use these processes in a more efficient way?
I think we all have experienced inefficiencies and started to think about how to improve our operations. So what are some of the real-life issues when it comes to consolidation? And what changes can we make to fully benefit from this process?
Let’s look at some real-life examples to begin with:
A big shipper, the leader in a specific segment of industrial components, sends out shipments per order. Sometimes they ship items valued at 30 EUR component on 1 pallet and a half-day later, several boxes on the next pallet to the same receiver. They claim they cannot consolidate on-site. They pay for handling, warehouse space, and transport. Their receivers are frustrated, empty pallets are piled up but the shipper says - “we are going to have a new dedicated corporate IT solution in a year or two and this should resolve the problem.”
A big logistics service provider once told me: “we do consolidate on the parcel level” . I thought “well that’s great!” But then in the hub I saw stretched shapeless pallets of different boxes definitely from one brand owner. The discussion went like this: Me: Are you going to send it like that? LSP: Sure, we are not allowed to break down the pallet Me: But you said you consolidate on the parcel level? LSP: Yes, but only when we receive single parcels.
And finally: “I’m not allowed to mix units from company A on the same pallet with those from company B.”
What are we so afraid of? Why do so many of us not use the power of consolidation to gain benefits?
Issue 1 - Silo-based systems
Every company has its own ERP, TMS, WMS, BI. They are all from different providers and do not talk to each other. To fully benefit from consolidation and speed up the whole process of moving goods, data needs to be harmonised. The different stakeholders need to have the same information about orders, lead times and production plans to have an overview of inbound and outbound shipments.
So we should move to open, cloud-based solutions and benefit from full scalability, low cost and flexibility in creating and tuning up our own supply chain in harmony with other stakeholders.
Issue 2 - IT solutions
With the volume we have today, we need a powerful and smart system to manage consolidation. I know many shippers do not allow to break down the pallet because they are afraid that it might interfere with the goods ending up in the right place.
But when each box is properly labeled at the place of origin with a unique ID / barcode and a cloud-based system is connecting all parties, there’s no longer any issue. One extra software layer allows us to connect (not exchange) and supplement what we have and all partners in the supply chain will benefit.
Issue 3 - Limited collaboration
In the world of logistics, we are taught to compete, and there is limited collaboration between companies. Logistics is responsible for 11% or more of global emissions. When it comes to moving goods from A to B, our main focus should be on how to process a maximum number of shipments and send them in single transport to reconstruct for final delivery as close to the destination as possible. This way we can limit the number “empty miles” and use our resources more efficiently. Better for the environment, better for your business.
We should not treat the physical movements of goods as a competitive edge in our business. It’s a cost that needs to be optimised by collaboration. And that is where we become more competitive.
Moving from supply chain to logistic networks
Greater and wider co-operation leads to higher benefits from consolidation. Cloud-based solutions create networks with the capability to process more shipments with fewer resources. And this without compromising quality, cost and time. A concept called the Physical Internet is knocking on our doors and sooner than later, moving goods will be like sending an email, because the entire logistics network will be digitally connected to process optimised flows . You don’t care where the hub is, how goods are mixed and who processes them. You just want them to show up in the right place at the right time.
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