Reduce Shipping Costs With Order ConsolidationWritten by Neal Willis
Businesses have traditionally had the mindset that they must engage carriers in rate negotiations and lower their truckload, parcel and LTL freight rates if they’re aiming to reduce shipping costs.
However, shipment consolidation in logistics is often overlooked by companies as a means by which to reduce shipping costs. Combining several smaller orders into one larger order could potentially translate into larger shipments that are processed and sent to customers less frequently.
For example, paying for several LTL shipments for multiple orders may be more expensive than combining those orders into one larger shipment and sending it out via truckload. If less expensive, utilizing truckload for the mode of transportation versus LTL would reduce shipping costs for the same freight.
Processing a smaller amount of orders can also mean less paper being used for printing invoices and bill of lading, and fewer envelopes and stamps being used for mailing a smaller quantity of invoices.
Another benefit of lower shipment and order volume can be a reduction in the amount of time spent processing orders in the warehouse and back office operations, which ultimately helps to lower costs as well.
Companies who pay the freight for customer orders may find it beneficial to offer a slightly deeper discount on bulk purchases to customers as an incentive for them to place a larger order, especially businesses who tend to frequently ship smaller shipments to their customers on a regular basis.
Instead of the customer placing several smaller orders, it’s possible that there are enough freight cost savings through less frequent and larger shipments to offset and even outweigh added discounts for the merchandise if purchased in one larger consolidated order.
The same basic order consolidation principles can also be applied to inbound freight for reducing shipping costs from suppliers and vendors. For example, rather than placing several smaller orders of office supplies over the course of a given time period that you typically receive via small parcel freight, consolidating those smaller orders into one larger order may mean that it qualifies as an LTL freight shipment that can move under your LTL freight rates, which could reduce shipping costs. A bonus could also be the larger sized order yields better pricing for the commodity being purchased from the vendor.
Fewer shipments doesn’t have to mean fewer sales. With order consolidation through a combination of different avenues, including customer and supplier negotiations, companies can lower not only freight costs but other costs as well.
Assessment of opportunities for order and shipment consolidation in logistics is a never-ending process, but it’s one that may offer an opportunity for savings in several departments without having to renegotiate freight rates. For consultation on your shipping options, contact ReTrans Freight today.