What Is A Consolidation Warehouse And Should I Be Using It?

Today’s markets regardless of the trade is always evolving. Such change can cause headaches for warehouse managers because the way they operate their warehouses depends on the market of their customers. Does the warehouse have customers that require them to follow a just in time shipping operation? Do their customers require a more customized operation that allows a warehouse to ship as few as one to three products? Do their customers require seasonal changes in what is shipped? The options are numerous.

Consolidation warehousing is a concept that allows a warehouse to use a minimal number of trucks to deliver goods to multiple customers at a particular location.
(Courtesy: David Valenzuela at flickr.com)

One option that warehouses today may be considering for their operations is called Consolidation Warehousing. A Consolidation Warehouse is a third-party storage resource that combines small shipments into larger and more economical truckloads destined to travel to a similar destination. This could include consolidated shipments to regional distribution centers before delivering the goods to the end user. These facilities may be strategically located to accommodate changing customer demands in a timely manner.

When Should You Use A Consolidation Warehouse?

There are a number of conditions that influence whether you should use consolidation warehousing. They include:

• Geographical Similarities Between Suppliers
• Less-Than-Truckload (LTL) Deliveries
• Keeping up with changing customer demands

Geographical Similarities Between Suppliers

If your warehouse has customers located in the same geographical region, utilizing consolidation warehousing can improve cost and operational efficiency. This is because this form of warehousing combines multiple shipments to various suppliers and combines them into larger and more economical loads. These consolidated shipments are then transported directly to the customer.

Less-Than-Truckload (LTL) Deliveries

This form of consolidation warehousing requires you to ship less-than-truckloads of goods to customers in a cost-efficient and safe method. This is because consolidation warehousing requires combining small shipments into a larger load that is delivered directly to the destination with minimal handling along the way.

Keeping Up With Changing Customer Demands

As customer demands change over time, storing products for long periods can reduce the overall value and increase your inventory carrying costs. Due to consolidation warehousing, you can source, consolidate, and send items per demand. This can lower your inventory levels.

Benefits Of Consolidation Warehousing

There are a number of advantages to consolidation warehousing. They include:

• Reduced shipping costs
• More frequent shipping
• Improved customer satisfaction
• Minimized handling and claims
• Lower levels of inventory
• Reduced fuel emissions

Reduced Shipping Costs

Consolidation warehousing can considerably minimize your shipping costs. The concept allows you to combine small loads of shipments into full truckloads and send them directly to the destination. In essence you’re piggybacking several customers’ orders into one truckload. So costs are shared among the different customers.

More Frequent Shipping

The concept of consolidation warehousing allows you to ship smaller orders more frequently and thus reduces costs. The warehouse facility is simplifying the storage and consolidation of small loads of shipments based on your customers’ requirements. This assures enhanced flexibility for your freight shipping requirements.

Improved Customer Satisfaction

Consolidation warehousing allows you the versatility to ship products in a cost-effective and frequent method enabling you to charge the customers less, thus improving customer satisfaction.

Minimized Handling And Claims

The material handling of products is minimized because the loads are combined and shipped directly to the destination. There are fewer touches and less risk of product damage and this reduces the possibility of claims.

Lower Levels Of Inventory

The consolidation warehouse is sharing space for a multiple number of customers. It allows lower levels of inventory to fulfill customers’ orders, resulting in an easier organization of goods and reduced inventory carrying costs.

Reduced Fuel Emissions

Consolidation warehousing is combining smaller shipments into larger loads resulting in the use of fewer trucks. Thus, reducing fuel emissions and costs and the eventual improvement of the environment.

Disadvantages Of Consolidation Warehousing

There really only two disadvantages to the concept of consolidation warehousing. They include:

• Inaccurate and delayed order fulfillment
• More time spent planning and organizing

Inaccurate And Delayed Order Fulfillment

One problem with consolidation warehousing is the lack of proper coordination that can lead to inaccurate and delay order achievement. Using this concept you’re required to frequently coordinate shipments among a number of customers, processing centers, and carriers to assure that products are delivered in an accurate and timely manner.

More Time Spent Planning And Organizing

You will be involved in frequent coordination, planning out the consolidations and de-consolidation of shipments. So, more time is spent organizing and executing.

A logistics service provider or coordinator can decrease the disadvantages by handling the logistics. The result is savings in costs and overall efficiency for the warehouse.

(Source: cyzerg.com)