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The benefits of consolidated shipment of goods

Jan Tore Pedersen | 23. May 2019
3 minutes read

When searching for the term “consolidation of goods”, the typical definition is that cargo consolidation bundles small shipments into a large container for delivery.

The benefits for shippers are noted as:

  • Lower transport costs: merging cargo with other shippers tends to reduce the unit cost of transport.
  • Better carrier-shipper relationships: full containers enable carriers to reduce their overhead costs - motivating carriers to form a partnership with shippers.
  • Faster transport: it is argued that fewer touch points give faster flows.
  • Better control over shipment scheduling: lowering waiting times for trucks, since consolidation is done prior to loading.

In order to get access to the individual shipments for final delivery, these containers need to be broken down in a deconsolidation process and then consolidated together. It is thus easy to understand why the combination of consolidation and deconsolidation are services often provided by logistics operators.

The aim of the process described above is that there should be as few touch points as possible when handling cargo from origin to destination.

 

How consolidation of goods leads to lower transport costs

Consolidation is essentially aimed at increasing load factors in containers and other logistics units like for instance trucks. In a master thesis written by Aiyu Wu in 2013, it was reported that load factors in container transport are around 50%. Another project, called the CO3 project, reported that 20% of all trucks in Europe are empty and the rest is only filled by 50%. The project also revealed that there were no essential changes in load factors in European trucks from the period 2001-2010.

But how, in practice, does the consolidation of cargo lead to lower costs and the increased effectiveness that we typically associate with this process?

Here is an example: 3M used to consolidate cargo at the origin, creating pallets that could go untouched from factory to customer. The result was that they achieved a fill rate in trucks and containers of only 35% - 45% since the consolidated cargo was not stackable. They realized that changes needed to be made and took a completely new approach to consolidation.

All cargo is now consolidated at factories or at distribution centers, to ensure that all vehicles leaving such premises are completely filled up. The cargo is then moved to the appropriate terminal. Here, cargo is de-consolidated and mixed together to ensure that:

  • All vehicles moving cargo between hubs are full.
  • All cargo (independent on origin) to a customer is consolidated so that the number of vehicles that need to visit each address is kept to a minimum.

The effect of this is an increase in load factors up to 90 % on average and a reduction in emissions of almost 50%. The reduction in cost was 35%, taking into account the extra cost for handling in all hubs.

 

The "risk" of cargo going through a network

Some are concerned with the risk of cargo going through a chain or a network. The experience within the 3M logistics network in Europe is that the complaints from clients after handling cargo in all hubs have decreased, rather than increased.

To perform deconsolidation and consolidation (or order reconstruction) in all hubs, 3M uses an autonomous logistics process that can be implemented in any terminal without changes to the physical infrastructure.

The MIXMOVE Match solution is used to manage all consolidation and deconsolidation activities in the hubs, ensuring efficient operations and full transparency of all operations.

 

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