It’s inevitable. Your business will always run into problems, but some in particular are more difficult to solve. For example, what if you want to stop losing money on too many shipments which don’t fill a container (known as less than container load or LCL shipments)? Or what if you want to purchase goods from multiple suppliers, but they all require a minimum order that will fill a full container?
How are you supposed to fix these problems and keep your business running both smoothly and profitably?
These are situations where cargo consolidation at origin would help out quite a bit. Here’s why:
What Is Cargo Consolidation?
Cargo consolidation is a fairly simple concept on the whole: it’s when cargo from one or multiple shippers is combined into one shipping container. Consolidation means shippers get to pay bulk rates, since they’re shipping cargo all at the same time instead of sending a lot of smaller shipments separately.
In general, consolidation is a fantastic option for shippers who only have a few pallets of product or smaller shipments they want to package and ship in one container. Sometimes, these shipments come from multiple locations or suppliers, and need to be combined to avoid paying higher rates. When a shipper chooses to consolidate shipments, the product is brought to a consolidation warehouse (usually the one closest to the location which has the most cargo to ship), put onto pallets, and organized into one container.
Why Should You Consolidate at Origin?
Essentially, if you’re interested in reducing headaches and increasing your profitability, consolidation is right for you. Consolidation provides a lot of flexibility and options when you’re planning your upcoming shipments. For example, as already discussed, combining shipments means you can avoid sending multiple LCL shipments. But that’s not all, because the benefits of consolidation are many…
What Are the Benefits of Consolidation?
For starters, consolidation’s cost effectiveness is one of its most important benefits. In addition to helping you save money by getting bulk rates, we’ve also talked about how combining orders means you can buy from separate suppliers or locations and get your products sent to a consolidation warehouse and shipped together at any time. The ability for your business to make more frequent and smaller purchase orders means you’ll have more cash flow to work with overall.
Additionally, consolidation actually allows you to order from multiple suppliers or manufacturers when you might not have been able to previously. As mentioned above, some suppliers require full container load minimum orders. If your business doesn’t need larger orders like this, consolidation provides you the option of being able to work with these suppliers as you’ll be able to combine your separate, smaller shipments from each into one container.
By combining cargo, you’re also able to order from suppliers who wouldn’t normally sell minimum quantities internationally (like a Chinese manufacturer). For example, a supplier may have a minimum order quantity of 10,000 units when shipping internationally, but might allow an order of 100 units if shipping domestically. In this case, you’d be able to place several smaller unit orders and combine them into a full container.
For some businesses, consolidation can help keep the identity of your supplier or manufacturer a secret. While not a top priority for all companies, supplier information can be protected when products are drop-shipped from consolidation warehouses directly to customers to avoid having them start working directly with your supplier. Therefore, consolidation saves your middle-man standing (and the entire existence of your business).
Consolidation provides greater transportation, timeline, and inventory flexibility in your business, as well. Cargo that’s stored in a consolidation warehouse gives you fluid cargo-ready dates, because your shipments are ready to go just when you need them. You avoid all the variables that pop up during the entire production process, which usually hinder your ability to get products delivered to your end user with a short lead time. In essence, this also means you free up inventory space, prevent dead inventory at your domestic warehouse, and avoid the domestic problem of freight distribution.
Finally, you want to consider consolidating your shipments to help put the control of the goods into your hands sooner. For example, if quality control discovers mistakes with your order that’s already been shipped to a destination close to you, you have to wait to get replacement parts or shipments sent to you. This leaves control to the supplier, and means the timeline of delivering the product to your customer is also out of your hands. Consolidation allows you to implement quality control measures earlier on at a trusted warehouse closer to your supplier, which reduces your chances of losing time and control due to problems with your order.
Consolidation may not be the best route for all businesses, so it’s up to you to decide if the benefits outweigh the risks for your company. For the most part, though, there’s almost no reason consolidation at origin won’t help improve your business in some way. Whether you’re looking for more flexibility in your supplier options or improved cash flow and freed-up inventory, consolidation might just be the best decision you ever make.
Have you used consolidation before? In what ways did it benefit your business?