Understanding How Package Consolidation Works

Consolidating multiple packages into a single shipment has many advantages. In this QAD Precision Report we look at the benefits of consolidation, as well as the different types of consolidation available.

Shipment consolidation is a logistics strategy that combines two or more orders, packages or shipments. As a result, the shipper dispatches a larger quantity of packages to the same vehicle. 

Shipment consolidation is nothing new. It has been around for quite a long time. However it’s a topic that has enjoyed heightened awareness lately. This is partly due to geopolitical issues like Brexit. 

Cross-border shipping into and out of the United Kingdom has become more cumbersome due to customs clearance formalities. Shippers are looking to streamline their UK cross border shipments. By combining multiple packages into one simplified movement, shippers only need a single customs declaration. 

Despite it being around for a while it is an area that is open to interpretation. Many shippers have different experiences or expectations with regard to consolidations. 

There are 3 key reasons why implementing consolidations would be of interest to many shippers. They are:

• Freight cost reduction

• Streamline customs clearance processes 

• Enhance customer satisfaction

FREIGHT COST REDUCTION

Shipping cost reduction is perhaps the biggest driver for shippers to implement consolidations. Shippers can achieve substantial savings by co-shipping multiple orders or parcels to the same customer or ship-to combination. Shipping parcels individually increases shipping costs significantly. 

Furthermore, if you induct all of your parcel shipments into a carriers’ main hub — even if that hub is in a different country/world region —  as opposed to them picking it up at your location means that you can avail of preferential freight rates. 

SIMPLIFIED CUSTOMS CLEARANCE

International hub induction is the process of dropping all of your shipments to a carrier’s main facility in that country. For example, if you are shipping multiple packages from the United States to France.

International hub induction  helps to streamline customs clearance. You only need a single customs clearance for the consolidated shipment. If you had shipped each package separately, then you would have needed an individual customs clearance for each one.

For international shipments, providing one set of export documentation for a multi-part shipment to the customer (e.g. packing lists, invoices) means that a shipper can simplify their customs clearance processes in a streamlined manner.

Furthermore, a number of the global parcel integrators offer embedded customs clearance services to streamline this cross-border trade activity. 

ENHANCED CUSTOMER EXPERIENCE

Once a package leaves your warehouse, you have outsourced the customer experience to your carrier. The customer will blame you, not the carrier, for a poor delivery experience.

Therefore, you should let your customer know when their order has been dispatched. In addition, you should tell them when they can expect to receive it. This is certainly true when your customer has placed multiple orders/packages which they expect to receive at the same time.

For many customers — indeed for most of us — it is annoying to receive shipments multiple times from the same shipper. With consolidation one shipment will contain all the orders regardless of the time the customer placed these orders. Customers, ideally, want their packages to arrive at the same time.

It is not only less efficient to send orders separately, it also creates more C02 emissions. Co-shipping orders together means a single carrier delivery instead of multiple deliveries.

Five Consolidation Options

There are many forms of consolidation to choose from. Some shippers consolidate within their WMS or ERP system. They then transmit the data to their transportation execution system leveraging a consolidated web-services API message. 

QAD Precision offers five additional types of consolidation. We examine these different options below.

END-OF-DAY (EOD) CONSOLIDATION WITH MASTER SHIPMENTS 

Let's start with Consolidation with Master Shipments. This is also known as a virtual consolidation that allows the warehouse operator to touch the package only once. 

A package is processed at 9am within the ERP/WMS application. QAD Precision generates the shipment (estimated costs, prints the carrier label and generates the license plate). QAD Precision creates the Master shipment and assigns waybill number 001.

Throughout the day as orders come in. The warehouse processes two more packages going to the same ship-to address so the first package. These are added to Master shipment with waybill number 001. 

At 4:30pm, the shipper runs the End of day Manifest. At this point we see that waybill 001 has 3 packages. 

EOD CONSOLIDATION THAT WILL VIRTUALLY CONSOLIDATE ALL PACKAGES 

This second scenario is also a form of virtual consolidation. The warehouse operator only handles the package once and does not need to rehandle it at any stage. 

An order comes in from Customer A at 9am. The package is processed within the ERP/WMS solution. QAD Precision generates the shipment transaction with estimated costs and prints the carrier label and shipping documentation. The shipment remains open until the warehouse runs the EOD manifest.

A second order comes in from Customer A at 10 am.  QAD Precision generates a  new shipment transaction, a new tracking and a carrier label for this package.

Throughout the day, the warehouse processes packages going to a number of different customers. At 4pm Customer A places a third order. Again, QAD Precision generates a  new shipment transaction, a new tracking and a carrier label for this package.

At 4:30pm we run the End of day Manifest. EOD manifest will virtually consolidate all packages going to the same ship-to location. All associated shipments are closed. The shipment details — freight costs, tracking number, carrier services — are sent back to the ERP/WMS application.

ZONE SKIPPING CONSOLIDATION

This scenario looks at multi-leg international shipping.  Imagine a shipper in Belgium that is inducting packages into a carrier hub in Germany. 

A package is processed at 9am for Customer A in Germany within the ERP/WMS solution. The routing guide identifies this as a zone skipping transaction. 

Therefore, QAD Precision generates a shipment with an inducted location in Germany. It then rates, prints the carrier label and generates shipping documentation. All labels and transportation documents have a ship-from location as Germany.

At 10am Customer B in Germany places an order. QAD Precision generates a new shipment transaction for the carrier and creates a new tracking number and label.

At 1pm Customer C in Germany places an order. Again, QAD Precision identifies this as a zone skip transaction. The solution generates a new shipment transaction for the carrier, along with a new tracking number and prints the label.

At 4pm a package is processed for Customer D, also based in Germany. QAD Precision generates a new shipment transaction for the carrier and creates a new tracking number and label.

At the same time a second package is processed for Customer A. 

Later in the day, the shipper runs the EOD for the carrier with origin “Germany”. The EOD process will manifest all associated shipments from origin “Germany” to customer locations A, B, C, D and A again. 

It will then generate the EOD batch file and submit it to the carrier. QAD Precision will create a master shipment for the EOD batch. This consolidates all packages bound for Germany, allows rating and generates transport documents for this leg. 

Shippers can use zone skipping consolidation no matter where they ship from or ship to. This can significantly reduce shipping fees for cross-border and international shipments.

MANUAL CONSOLIDATION 

From a manual consolidation perspective, packages are processed during the day within the ERP/WMS system. QAD Precision generates shipments with estimated costs, and  prints the carrier label and transport documents. 

Later on during the day the warehouse may see three packages they want to bundle into a single outer box. 

We start by filtering by ship-to then select transactions to consolidate. A new shipment is then created. We can over pack the consolidated shipment and rate it to generate new shipping labels

At this point the shipper runs the EOD for the carrier. QAD Precision closes all associated shipments. The system also sends the freight costs, tracking number, and carrier services information back to the ERP/WMS.

CARRIER CONSOLIDATION

There are a number of carrier package consolidation services available. These include UPS WorldEase, FedEx International Priority Direct Distribution (IPD) and DHL Break Bulk Express (BBX). In this example, we will look at FedEx IPD.

Packages are processed during the day within the ERP/WMS system. QAD Precision generates shipments based on the carrier service requested. QAD Precision generates the estimated costs, prints child carrier labels and generates transport documents.

When QAD Precision processes the first IPD child shipment, it creates a master shipment in the background (invisible to the user). The master shipment is effectively “package 1” of the overall shipment.  

As QAD Precision processes the child shipments, it prints a normal thermal label per package. These labels are attached to the child boxes, and contain the address of the final destination of the package.

QAD Precision continues processing child shipments until the EOD batch is created for that packing location. 

The EOD batch results in the printing of the two documents:

1. The Master Airway Bill — the document that contains the customs clearance information for the whole master shipment

2. The FedEx invoice and manifests

 All these documents print as per the normal EOD process.

Conclusion

As you can see, there are a number of different consolidation options available. Shippers do not have to choose between them. Rather, it is possible to “mix and match” consolidation strategies depending on the shipper’s needs. However, all forms of consolidation help reduce shipping costs. 

If you would like to speak to a QAD Precision expert to discuss how consolidation could work for your organization, please contact us here.

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Further Reading

Check out our consolidation infographic!

Transportation Execution: Differences Between The EU and US

Home and Away: Population Shifts and Last Mile Delivery

Is Your Parcel Shipping Strategy Working? 5 Questions To Ask