Finding cost-effective ways to deliver customer orders can have a major impact on your company’s bottom line. A 2023 survey found that 88% of ecommerce fulfillment spending in the US went to shipping costs.
If your business relies on freight shipping, you can reduce shipping costs by sharing freight space with other shippers through consolidated shipping. Learn about the different types of consolidated shipping, and the pros and cons, to see if it can benefit your company.
What is consolidated shipping?
Consolidated shipping involves combining shipments from different suppliers into a larger shipment to save on shipping costs. By consolidating multiple shipments, shipping carriers and third-party logistics providers offer lower rates for ecommerce merchants, suppliers, manufacturers, and wholesalers than if they had to pay for an entire truck or cargo container themselves.
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Types of consolidated shipping
The two primary methods of consolidated freight shipping are less-than-truckload (LTL) shipment and full-truckload (FTL).
For the LTL method, a carrier or logistics provider combines multiple smaller shipments into a single shipment at a logistics warehouse. LTL shipments range between 150 and 150,000 pounds (typically no more than 10 pallets). Once LTL shipments arrive at a distribution center, workers separate individual shipments and send them to another warehouse or fulfillment center. From there, smaller vehicles deliver items directly to customers.
FTL shipments involve a shipment from one single shipper paying for an entire truckload. Even if you don’t fill the entire truck, you pay to reserve its full capacity. As such, FTL shipments tend to be more expensive than LTL shipments where multiple shippers split the costs by sharing space.
FTL shipments are ideal for larger shipments that fill entire truckloads. FTL shipments can also have quicker delivery timelines than LTL shipments, which can be subject to multiple stops and more complicated freight consolidation procedures and organization systems.
Although LTL and FTL shipments use freight trucks, there are also two types of consolidated shipping methods for sea freight: less-than-container load (LCL) and full container load (FCL). LCL shipments include cargo from various shippers, with each paying for a portion of space in a shipping container. Similar to LTL shipments, freight consolidators put together multiple shipments into one container. By contrast, a FCL shipment is a single consolidated shipment from one sender who pays a flat rate for an entire container.
Benefits of consolidated shipping
Here are some of the benefits of using consolidated shipping:
Cost savings
Consolidated shipping methods can reduce shipping costs for merchants and manufacturers by splitting the costs of a truckload or shipping container with other suppliers. Since an entire truckload or container can cost several thousand dollars, consolidated shipping options can result in significant cost savings. If your shipments are not large enough to warrant an entire truck or container, explore how sharing space through consolidated shipping can reduce transportation costs.
More sustainable
The freight consolidation process is typically more sustainable than other shipping methods. It maximizes the space used and decreases shipments of partially loaded trucks or containers. The result? Fewer trucks on the road and reduced carbon emissions.
Operational efficiency
Consolidated loads may ship more quickly. As opposed to the LTL method, where your goods may sit idle until a truck is available, consolidated shipping ensures your load is shipped as soon as possible. Additionally, consolidated loads are sealed into a container and shipped directly to the target region (known as zone skipping). This can be an advantage over shipping parcels individually across multiple shipping zones. This process may involve frequent unloading and reloading, which can lead to higher fees.
Challenges of consolidated shipping
There are also some potential drawbacks to consider before using consolidated shipping for your business:
Availability
Merchants who want to use consolidated shipping need to research and find third-party logistics providers offering consolidation services, because not all do. Labor shortages can affect the availability of consolidated shippers, from warehouse processors to drivers. New ecommerce merchants can benefit from more flexible shipping strategies that can grow naturally with their businesses.
Complex logistics
Although the shipment consolidation process is operationally efficient, it can involve upfront work planning shipments, organizing inventory, and tracking each individual delivery. Managing consolidated shipments from different shippers requires a reliable logistics provider with a warehouse management system (WMS) designed to handle organizing inventory into different shipments and tracking shipments on their journey.
Time-consuming
Packing, shipping, and distributing consolidated cargo takes time to organize. There’s also the extra time on the back end to ensure different shipments in the same truckload are separated and sent for last-mile delivery. Although consolidated freight shipping can lower your overall shipping rates, you’ll likely need to pay for a third-party logistics company to handle the shipping for you instead of an internal team.
Longer timelines
Since it involves a time-consuming and complex process, consolidated shipping can take longer than other delivery methods. For example, most ground shipping timelines from major shipping carriers can range from two to five days depending on distance. In comparison, consolidated shipments across longer distances can take up to 10 days, or more if it’s an international shipment that needs to clear customs. Longer delivery timelines can potentially decrease customer satisfaction for ecommerce companies. In fact one 2024 survey reported that nearly two-thirds of global shoppers anticipated receiving their online orders within 24 hours.
Consolidated shipping FAQ
What is a consolidated shipment?
A consolidated shipment refers to the process of logistics providers and shipping carriers combining different companies’ shipments into one larger freight shipment to avoid wasting space.
Is consolidated shipping cheaper?
Consolidated shipping can provide a cheaper freight shipping option since merchants can split the cost of freight shipments with other suppliers. In the absence of consolidated shipping, merchants must pay for empty space if their shipments don’t fill a truck.
Does USPS consolidate packages?
Yes, the United States Postal Service offers consolidation services for merchants, manufacturers, and wholesalers who want to pay for freight shipments that can share space with other shipments.
