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What is Consolidated Freight? Remarkably Profitable Trucking & Shipping Secrets

By
Brian Smith
May 16, 2024
16 min
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What is Consolidated Freight? Remarkably Profitable Trucking & Shipping Secrets
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Consolidated freight shipping gained popularity during the mid-20th century. At that time, shippers started to take on responsibility for multiple loads from different clients. They found grouping cargo from multiple clients resulted in increased efficiency and cost savings. 

We're big on load consolidation and for good reason. In this post, we're going to lay out the advantages of consolidated trucking, run through the complex process involved, and provide a detailed account of how to get started with consolidated shipments.

The Basics of Consolidated Freight in Trucking

What is Consolidated Freight?

Load consolidation is a logistics process where multiple less-than-truckload shipments (LTL) from several shippers are combined into a single truckload or full container. This can also apply to one shipper who has multiple loads going to several different locations - they choose to combine them into one truckload with multiple stops. Each load first stops at a central hub, where they're sorted and prepared for delivery and consolidation with other shipments that have a similar destination.

The benefits of consolidated freight shipping include lower transportation expenses and enhanced overall operational efficiency. To fully grasp an understanding of consolidated shipping, we have to go further down the rabbit hole and highlight the differences between consolidated shipping, LTL (less-than-truckload) shipping, and FTL shipments (full-truckload).

FTL Shipments: Pretty straight forward, a full-truck-load is just that - a full truck. There's no room to add in more shipments as the truck moves from the pick up location straight to the delivery location.

Where it usually gets a little gray for many is LTL Shipping vs Consolidated Shipping. Ultimately, they both mean that the shipment is too small to fill a truck, but the difference lies in the definition, the process, as well as the shipper variety. Let's dig deeper:

Consolidated Shipments vs LTL Shipments

LTL and consolidated freight terms are often used interchangeably, but there are differences to consider. Both offer cost efficiency, especially for smaller businesses who don't require a full truck for their shipments.

LTL Shipments

LTL freight shipping involves cargo that simply isn't enough to fill a truck. Each shipment comes from a different shipper which is all now contained within one complete load. Each shipper will only pay for a portion of the truck their cargo fills. The important thing to consider about LTL freight consolidation is that the LTL carrier is the one responsible for taking on shipments from different shippers. The carrier coordinates the consolidation and is paid directly by each shipper.

Pricing per shipper is often determined by product dimensions, weight, distance, and freight class. More on this in our full LTL Freight Shipping Guide.

In LTL shipments, the shipper has more control over the shipping process because they have a direct relationship with the carrier (as opposed to dealing with a consolidator who deals directly with the carrier in consolidated shipments). This means more flexibility and options regarding pickup and delivery for shippers with LTL shipments.

Consolidated Shipments

The main difference between LTL and consolidated freight is that a consolidator, not the carrier, is the one coordinating the combined shipment. The coordinator, a third party service provider, matches cargo from different shippers to similar locations.

Shipping costs are often shared via a breakdown of the volume or space occupied by each shipper. Weight, distance traveled, the nature of the goods for specialized handling, and more, including fees, are considered per shipper for the payment split.

Consolidated shipping provides less control for the shipper once the consolidator takes over the process. They control how and when shipments are sent, which means the possibility of excessive handling of goods.

To wrap up this comparison, consolidated shipping is like a group of several shippers pooling their shipments and handing them over to someone who coordinates the rest of the process. LTL shipping involves one individual carrier taking on several loads from multiple shippers in a more fluid and ongoing process. Both of these avenues lead to cost savings, with LTL shipping providing more control and transparency for the shipper.

shipping consolidated VS Less-Than-Truckload (LTL)

Advantages of Consolidated Freight in Trucking

Although we recommend LTL shipping over consolidated shipments, there are advantages to the latter that we simply can't ignore. Both ultimately lead to money savings practices for shippers and more money per mile for carriers.

Important Note: With Cota Systems LTL Freight, we take a page out of the consolidated freight book and integrate it into our LTL process. We'll cover these below. 

Decreased Risk of Damage

Consolidated shipments are often associated with a decreased risk of damaged goods. That's because as a shipper, your goods are picked up and taken to a consolidation hub where they're unloaded and re-loaded into a truck with a clustered destination route. Before reloading, your load may be repackaged to accommodate the consolidation. For example, furniture might be wrapped to ensure it doesn't shift during transport.

At Cota Systems, we specialize in LTL loads and we have a higher than industry average for the number of damage-free loads (over 99% damage free loads compared to the industry's 98% damage free loads). We ensure loads are only handled when needed and trucks are loaded with a first-in-last-out approach. That means if your shipment is the last to be delivered, it's loaded into the truck first, so it stays put until delivery.

Cost Analysis and Savings for Shippers

Full container shipping can get pricey fast. Taking on the price of fuel and distance for a full truck when you only need a quarter of the space depletes your transportation resources and wreaks havoc on logistics. Working with consolidated freight shippers means you only pay for the service you need.  Shipping costs can and should be managed to optimize operations.

Here's how it works in a hypothetical scenario:

In a transportation cost analysis, the company is comparing traditional and consolidated freight in trucking from Los Angeles to New York. Traditionally, five separate shipments, each utilizing 20% truck capacity, cost $5,600 per shipment, totaling $28,000. By consolidating these into one shipment with 100% capacity utilization, the cost remained $5,600 for the entire load. This consolidation, however, led to substantial savings of $22,400.

Traditional Shipping (Without Consolidation):

  • Number of Shipments: 5 separate shipments
  • Truck Capacity Utilization per Shipment: 20%
  • Cost per Mile: $2.00
  • Total Distance: 2,800 miles per shipment
  • Total Cost per Shipment: 2,800 miles x $2.00/mile = $5,600
  • Total Cost for 5 Shipments: $5,600 x 5 = $28,000

Consolidated Shipping:

  • Number of Shipments: 1 consolidated shipment (containing all 5 shipments)
  • Truck Capacity Utilization: 100%
  • Cost per Mile: $2.00 (same as traditional)
  • Total Distance: 2,800 miles
  • Total Cost for Consolidated Shipment: 2,800 miles x $2.00/mile = $5,600

Total Cost without Consolidation: $28,000

Total Cost with Consolidation: $5,600

Savings: $28,000 - $5,600 = $22,400

Savings Breakdown:

  • Reduction in Fuel Costs: Due to fewer trips.
  • Labor Cost Savings: Less driver time required for one consolidated trip compared to multiple trips.
  • Maintenance and Wear & Tear: Reduced due to fewer trips.

Improved Utilization: Maximizing the truck capacity reduces the cost per unit of freight.

how shippers save with consolidated shipping

Flexibility for Small and Medium Shippers

When you're dealing with non-enterprise levels of stock and goods, a full truck goes way beyond the means your business requires. Consolidated shipments provide small to medium sized businesses with options that meet their criteria, at prices that match. The flexibility consolidated trucking offers businesses allows them to respond to fluctuating demands and make more agile adjustments to shipping schedules and quantities. Businesses appreciate the ability to plan shipments according to their own timelines, not be bound by the need to fill an entire truck.

Improved Efficiency in Logistics

For businesses dealing with customs clearances, consolidated freight eases the process through streamlined paperwork and documentation. Handling one consolidated shipment instead of multiple smaller shipments takes pressure off the administrative process. It also allows for more effective route planning and optimization through enhanced route planning - a key feature of consolidated freight. Carriers also benefit as they drive less empty miles and make more money in the process.

With Cota Systems, carriers can avoid deadheading by using our free load board to fill up their trailer for the ride home.

More Collaborative Opportunities

There are many ways businesses can collaborate with partners in like-industries. Partnering with others within their supply chain significantly enhances logistics and cost-effectiveness. 

Shipper-Carrier Collaboration:

Create customized consolidated shipping solutions with shipper-carrier collaborations. Discuss the frequency of shipments, destinations, and type of goods you plan to ship. This partnership can be further enhanced with sophisticated data sharing to better anticipate shipping needs, optimize routes, and reduce empty miles.

We make collaboration super simple for both carriers and shippers. Cota provides a mobile app for carriers and desktop software for shippers. Loads are optimized with admin costs reduced by 40% for carriers- shippers enjoy direct Freight of all Kinds (FAK) shipments with vetted carriers and zero re-rates on shipping quotes. Check out our Free Freightpro™ System for freight shippers to learn more.

Related Industries:

Forming relationships with partners in your field creates more opportunities for consolidated freight shipping.

If you're not using a Transportation Management System that automates the consolidation process for you, creating your own internal network will help reduce costs by coordinating your own consolidated shipments with a partner. Likewise, working with warehouses or distribution centers in your area will allow them to take on the consolidation on your behalf, although you may have to relinquish some control over delivery times.

Reduced Environmental Impact

Consolidated freight has a significantly positive impact on the environment. Consolidated shipments lower the amount of trucks on the road as well as the time those trucks spend on the road. Less miles and more efficient routing contribute to a smaller carbon footprint. 

According to a paper published in the MIT Center for Transportation & Logistics, a 32% decrease in trips via consolidated freight could lead to a 5.76 million kg decrease in CO2 emissions and 2.14 million liters of diesel saved, as well as less traffic congestion and less wear and tear on infrastructure.

Freight Consolidation Process Explained

In optimizing the transportation of goods from various shippers, consolidated trucking becomes a comprehensive multi-step procedure. To break down the full process, we'll take a hypothetical company and apply it to each step - let's call them ABC company for the purpose of simplicity:

freight consolidation process

1. Collection of Shipments

Scenario: ABC Company collects shipments from clients in the Midwest. For instance, 200 small electronic devices from Detroit, 150 automotive parts from Indianapolis, and 300 consumer goods boxes from Milwaukee. Each shipment is picked up using smaller, regional trucks equipped with proper securing equipment to ensure safe transit to the consolidation point.

The collection of smaller shipments is the first step. None of these shipments will fill a complete truck and the business owners have decided that consolidated freight is the best way to optimize their shipments. Each shipment is picked up from different locations. Shippers must ensure their products are ready for pickup on the agreed upon time to avoid any delays.

2. Grouping and Sorting

Scenario: At a temporary holding facility in Chicago, shipments are grouped by destination, size, and type. Electronics are stored in a temperature-controlled area, while automotive parts are placed in a separate, more robust storage section.

Grouping and sorting takes multiple factors into consideration. The final destination, size and weight of the goods, as well as the type of goods are assessed for maximum efficiency in the freight consolidation process. Consolidated freight shippers should clearly, and accurately, label their goods and provide detailed descriptions of all products. This is crucial for efficient consolidation and ensures that only compatible products are grouped for transportation.

3. Documentation and Compliance

Scenario: For each shipment, ABC prepares detailed documentation, including itemized lists, value declarations, and special handling instructions. Compliance checks ensure adherence to transport regulations, especially for electronics requiring special handling due to lithium batteries.

At this stage, documentation for each shipment is being prepared. This includes shipping manifests, custom documentation (if required), and a bill of lading. Choosing a consolidated freight shipper that adheres to compliance regulations, safety standards, and customs requirements is critical. Avoid delays and unfortunate legal issues with the right provider.

Cota Systems vets all carriers on our LoadBoost load board in-house to ensure that all regulations are followed.

4. Determining the Consolidation Point

Scenario: The central warehouse in Chicago is selected for its advanced sorting facilities, proximity to major transport networks, and capacity to handle large volumes of diverse goods.

In stage 4, freight consolidators select a strategic location where shipments are moved from their original location. This location, typically a warehouse or distribution center, is chosen based on its proximity to the origin of the shipments and the final destinations of each shipment. Some of the most common shipment consolidation points are located in logistics hubs like Memphis, Tennessee, which has become famous as America's distribution center.

5. Route Planning and Optimization

Scenario: Using Cota Systems™ FreightPro™, ABC plans a route minimizing travel time and fuel consumption. The software considers real-time traffic data, weather conditions, and driver hours regulations.

This is when the magic happens. With sophisticated transportation management software, load consolidation makes transportation much more efficient. By analyzing factors like distance, traffic patterns, and delivery deadlines, the most efficient route is determined via route optimization algorithms.

AI-powered shipping management software now has the capability to analyze thousands of routes within seconds, even taking expected weather conditions into consideration.

6. Loading and Consolidation

Scenario: In the Chicago warehouse, shipments are carefully loaded into a 53-foot long haul truck. Electronics are packed with vibration-dampening materials, and automotive parts are secured on pallets. The loading is done in reverse order of delivery points.

Shipments are now loaded into a truck which will deliver several shipments within its one container. Cota Systems ensures that each consolidated freight shipment is loaded strategically to decrease handling. Once your shipment has its final drop off, it will be loaded first into the truck. Consider pallet shipping to ensure your products are handled even less, lowering the chances of damage during transportation and loading/unloading.

7. Shipment Tracking and Visibility

Scenario: Each item is tagged with an RFID chip, and the truck is equipped with GPS. Clients can access a web portal to track their shipments in real-time, receiving notifications at key transit points.

Effective communication with all stakeholders is key when shipping consolidated loads. Using a powerful TMS like Cota Systems gives shippers direct communication and tracking of their shipment throughout the consolidated shipping process. Timely updates ensure your team always knows the location of your goods. This helps provide full transparency on expected wait times and increases customer satisfaction.

8. Transportation and Delivery

Scenario: The truck departs Chicago, heading towards Atlanta. The driver follows the pre-planned route on CarrierPro™, with mandatory rest stops to comply with driving hour regulations. ABC's operations team monitors the journey on FreightPro™, ready to respond to any unforeseen events.

Your goods are on their way, and that instant communication with your carrier mentioned above will come in handy here. A freight consolidation service that provides instant access to your driver lets you address issues promptly. Trucking dispatch software takes the guessing game out of transportation with advanced monitoring and tracking technology. The more ways you can ensure your cargo arrives on time, and in excellent condition, the better.

9. De-consolidation at Destination

Scenario: Upon arrival in Atlanta, the truck is unloaded at a local distribution center. Each shipment is then individually checked and prepared for final delivery. Electronics are dispatched via secure vans to retail stores, automotive parts are sent to manufacturing plants, and consumer goods are distributed to various local retailers.

When unloading consolidated freight, each shipment should be inspected to ensure it's in the same excellent condition it was in when it left your premises. If any items require transportation to another location, or to be consolidated into another shipment, this is when you can expect that to take place.

Types of Goods Suitable for Consolidation

common types of goods for consolidated freight shipping

Consolidated shipments can get complicated when it comes to the sorting stage. It's crucial to take the type of goods into account or you could end up with different products that don't mesh well. For example, a product that requires refrigeration shouldn't be paired with electronics. Let's list out the type of goods that tend to be grouped together and why.

  • Homogeneous goods:

These are items that are identical or at least similar in nature, which simplifies grouping and sorting.

Example: LED lights and light switch pallets.

  • Perishable goods:

Grouping perishable foods together takes time sensitivity into account.

Example: Flowers and Vegetation pallets.

  • Low-value goods:

Low-value goods are often grouped together to help lower shipping costs. Typically, these items are non-perishable and can be grouped with other non-perishable items of like weight and size.

Example: Novelty socks and key-chain pallets.

  • Similar size and weight:

Goods with these characteristics ensure an efficient use of space and optimize the loading process. Once again, consider pallet shipping to help cut costs and time.

Example: Pallets of books can be grouped with pallets of phone cases.

  • Bulk goods: 

Large quantities of raw materials can be sorted into one truck to maximize transportation efficiency.

Example: Wheat, sugar, corn pallets.

  • Non-urgent shipments: 

Non-urgent shipments provide breathing room in route planning. If needed, they can be pushed back with no consequence to the shipper.

Example: Non-perishable items with a flexible delivery date.

  • Small or medium-sized packages: 

Any items that don't utilize the full capacity of a truck. This leaves out large items that tend to fill the majority of a trailer.

Example: Common in e-commerce, where numerous individual orders can be combined for efficient delivery.

  • Goods with similar storage requirements: 

Products with similar storage requirements will be considered for a consolidated shipment on one truck. This ensures that products are safely stored at their required temperatures.

Example: Medicine that needs to be kept at cool temperatures.

  • Goods with similar handling characteristics: 

Grouping fragile products ensures there's no confusion during the loading/unloading steps. It's easier for a consolidated shipping service to label an entire shipment as fragile.

Example: Picture frames and glass kitchenware could be considered for consolidation.

  • Seasonal or cyclical goods: 

During holiday seasons, it makes sense to consolidate like shipments into one load.

Example: Pallets of halloween costumes and halloween decorations.

Goods That Are Not Usually Consolidated

  • Hazardous Materials: 

Flammable liquids, toxic chemicals, and explosives often require specialized handling and transportation. Consolidating these with general cargo can pose significant safety risks.

  • High-Value or High-Risk Items: 

Jewelry, art, or sensitive electronic equipment that might require dedicated transportation due to the risk of theft or damage.

  • Oversized or Overweight Items: 

Large machinery, vehicles, or construction materials that exceed standard size or weight limits for regular shipping containers.

  • Live Animals: 

Requires specific conditions and handling that are not typically compatible with freight consolidation.

  • Fragile Items: 

Goods that are extremely fragile or prone to damage may require specialized packing and handling.

  • Regulated Goods: 

Certain regulated items might be subject to specific regulations that prohibit their consolidation with other types of cargo. These include certain pharmaceuticals, food products, or items under trade restrictions.

Shippers Guide: How to Get Started with Consolidated Shipments

Getting started with consolidated shipments involves three phases: Planning, Preparation, and Evaluation. One major step in that process is choosing a consolidation service. 

Here are some of the ways that Cota Systems benefits consolidated freight shippers:

  • Guaranteed quotes for shipment prices, ensuring no unexpected costs arise during transit.
  • Time and money-saving direct shipments that avoid traditional hub-and-spoke distribution models.
  • Free use of our sophisticated Transportation Management Software.
how to get started with consolidated shipments for shippers

Phase 1: Planning

Assess Your Shipping Needs

Evaluate the volume and frequency of your shipments to determine if consolidation is a viable option. Consolidated shipping is best suited for non-perishable items with flexible delivery schedules.

Choose the Right Consolidation Services

Research carriers and third-party logistics providers with expertise in consolidated shipping. Assess their network, technology, and customer service. Check the geographical layout of their consolidation points to see if they work for your specific shipping needs.

You should get quotes from multiple consolidated shipping services to compare pricing and cost savings. Obtaining a quote with Cota Systems is easy, click this link for guaranteed freight quotes.

Phase 2: Preparation

Plan and Organize Your Shipments                                                       

Align your shipping schedule with the consolidator's timetable to reduce the consolidated freight cost. Provide packaging and labeling guidelines and make contingency plans for delays and missed shipments.

If you are shipping internationally, understand the legal and regulatory compliance of both the origin and destination countries. Be aware of tariffs, trade agreements, and prohibited items.

What strategies can shippers use to reduce costs of consolidated freight?

Use packaging optimized for maximum space utilization. Choose consolidation points strategically to minimize transit distances and schedule shipments to align with less busy transport periods.

Prepare Necessary Documentation which will include:

  • Bill of Lading (BOL): Detailed list of goods being shipped.
  • Commercial Invoice: Required for import and export clearances.
  • Packing List: Itemized list of package contents.
  • Certificate of Origin: Notes where commodity or goods were manufactured.
  • Export License: Government document authorizing export.
  • Insurance Certificate: Verifies the goods are insured.
  • Freight Insurance: A policy that protects the goods in case of damage.
  • Dangerous Goods Declaration (if applicable): Necessary if any goods are potentially hazardous

Phase 3: Evaluate and Optimize the Process

Make regular assessments of how your consolidated shipping strategy works. Keep up-to-date with the latest consolidated freight service trends and advancements in freight consolidation. Adjust your process based on feedback and changing business needs.  

 A comprehensive Transportation Management System can help you evaluate your process and locate trends to make consolidating shipments more seamless in the future. 

Carrier's Guide: How to Start Shipping Consolidation Services

There are 3 phases for carriers who want to implement consolidated freight shipping: Planning, Implementation, and Launch. Here's how Cota Systems can help you through the entire process: 

  • Eliminates the need for slow emails and complicated spreadsheets.
  • Gives you access to exclusive Cota Systems freight loads that are not available elsewhere.
  • Lets carriers sync their preferred load boards and add Cota System loads, consolidating the best options in one place.
  • Provides transparent information to avoid double brokering.
  • Simplifies the billing process with CarrierPro™, helping you manage your finances with ease.

Phase 1: Planning

Assess Your Capability and Resources

Check your trucks and storage facilities to see if your current fleet and infrastructure can support consolidated shipping. Determine the technology systems you'll need for tracking, scheduling, and managing consolidated shipments.

Develop a Consolidation Strategy

Carriers that implement effective freight consolidation strategies have a competitive edge in the market.  Develop a scheduling system that allows for flexible and efficient consolidation, and identify peak and off-peak periods. Plan efficient routes that maximize cargo space utilization and minimize transportation costs.

Ensure Compliance and Legal Requirements

Understand and comply with all relevant transportation and shipping regulations for consolidated freight services. Ensure that you have appropriate insurance coverage for consolidated shipments.

using technology to streamline consolidated shipping planning and implementation

Phase 2: Implementation

Set Up Operational Processes

Establish and enhance warehouse processes for handling and storing consolidated shipments. Set up procedures for loading, unloading, and handling consolidated cargo to minimize damage and delays. Cota Systems' driver app integrates seamlessly with our transportation management software, improving communication and efficiency for each trip.

Implement Tracking and Management Technology

Train your staff on using your new technologies and systems. Our shipment consolidation software provides real-time visibility and efficient management of shipments with a gentle learning curve.

Establish Pricing Models

Analyze the costs involved in consolidated shipping to develop competitive yet profitable pricing models. Consider flexible pricing options for consolidated freight costs based on volume, distance, and customer needs. 

Phase 3: Launch

Market Your Consolidation Services

Develop a marketing strategy that highlights the benefits of your consolidation services to potential clients. Set clear, quantifiable goals for your marketing campaigns, such as lead generation, website traffic, conversion rates, and client acquisition numbers. Introductory promotions and discounts are a good way to reach out to potential clients who would benefit most from consolidated shipping.

An online presence is crucial in today's digital world. Consider creating a well-designed website, active social media profiles, and an engaging online content strategy.

how to get started with consolidated shipments for carriers

Future Trends in Consolidated Freight Shipping

Increased Use of Technology and Automation

Advanced technologies like AI, IoT, and blockchain are becoming increasingly prevalent in consolidated freight. These technologies enhance efficiency, improve tracking, and streamline operations. Companies like Cota Systems are investing in digital solutions to optimize supply chain operations, using AI to predict the best routes and blockchain for secure and transparent documentation.

According to a report by Mordor Intelligence, the global smart fleet management market is projected to grow at a CAGR (Compound Annual Growth Rate) of 20.21% from 2024 to 2029.

Sustainability and Green Logistics

The International Transport Forum projects that CO2 emissions from freight transport could grow by 22% by 2050 based on current trends. This has led to a push for greener logistics solutions. 

There's a growing emphasis on reducing the environmental impact of freight operations, including efforts to lower emissions through more efficient route planning and the use of eco-friendly vehicles. Companies like DHL are increasingly using electric vehicles for last-mile deliveries and exploring alternative fuels for long-haul transport to reduce their carbon footprint.

Collaboration and Shared Logistics

Shared logistics, where multiple companies collaborate to consolidate shipments, are gaining traction. Consolidated trucking maximizes truckload capacity and reduces overall shipping costs. By pooling LTL shipments into shared truckloads, Cota optimizes space utilization and reduces the number of trucks on the road.

A World Economic Forum study suggests that such collaborative practices in logistics could lead to an up to 30% reduction in CO2 emissions and a 25-30% reduction in delivery costs.

Conclusion

Consolidated freight trends point toward an increased reliance on technological innovations, sustainable practices, and collaborative logistics models. Cota Systems is leading the industry in embracing these best practices. 

Our transportation management software and carrier networks are a great choice for shippers and shipping companies who want to address both economic and environmental concerns.

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