Though often overlooked, supply chain consolidation can be a very effective way for small and medium-sized businesses to save money, effort and time. In fact, many companies are surprised by the impact it has on their exporting profit margins, and on overall customer satisfaction.
What’s more, it’s far more accessible than expected — and well worth the time to seriously explore.
Overcoming the barriers of familiarity and fear
For many smaller companies, the biggest obstacles to consolidation are familiarity and fear. Indeed, the first question that comes up for many is, what is supply chain consolidation? The second is whether they have the time and resources.
Let’s start with familiarity. Supply chain consolidation is when you strategically combine shipments to reduce costs and make shipping more efficient. It typically involves multi-modal services with either train, truck or sea transport being part of the mix.
Done right, consolidating your supply chain will provide value to you and your customers — and ensure a cost/service balance more aligned to your business goals. Typically, it allows you to reduce transportation costs and maintain profit margins. In many cases, it also allows you to offer customers a broader range of services — leading to a more positive customer experience.
Having worked with thousands of small and medium-sized businesses around the world in the last 10 years alone, UPS understands that committing time and resources to supply chain consolidation can be daunting for smaller companies. But like a Formula 1 car running on fresh tires, most usually find the initial time investment worthwhile.
Finding the right partner to facilitate the process
For a small or medium-sized business with specific requirements and finite resources, a major partner is often a sensible solution. They offer the logistical experts to develop the initial strategy, the engineering expertise to build customised solutions, and the network to manage the entire process — from collection and transport to customs clearance and billing.
A smooth, seamless and affordable consolidation strategy requires the right partner — one with the expertise and resources to serve a wide range of needs. A global partner like UPS, for example, has freight operations across the Far East, North America and Europe, a fleet of operation 238 planes (plus a further 400-plus chartered aircrafts) and nearly 6,000 delivery vehicles. The result is a dizzying array of options to choose from.
Consolidating the process from door to door
The end goal of any consolidation strategy is simplicity, efficiency and cost-effectiveness. Typically, it includes combining several small orders into larger more cost-effective shipment. It may also involve using multi-modal transport to reduce costs without compromising delivery times. In many cases, that means combining air freight with rail or ocean transport to create the optimal door to door journey for each individual package.
Some of the most common ways our customers keep costs down are:
- Sending multiple packages for multiple receivers as a single consolidated shipment which clears customs as one shipment before being deconsolidated and delivered to individual receivers
- Sending package shipments as LCL (Less-than-Container Load) that are combined with shipments belonging to other exporters to make up a Full Container Load (FCL)
- Consolidating multiple LCL shipments into one FCL shipment for delivery to a single customer
Consolidating multiple LCL shipments into an FCL that’s delivered to a UPS warehouse in the destination country before being deconsolidated and distributed as individual packages to individual recipients.
The end-game: cutting costs and improving inventory management
For small and medium-sized businesses, the objective of supply chain consolidation isn’t to shorten delivery times — though that’s often one of the outcomes. Rather, it’s to develop a strategy that fulfils key business objectives. Foremost among those is cutting costs and better managing inventory levels.
Consolidating your supply chain invariably involves multiple transport modalities to create a singular solution. UPS Preferred™ multimodal freight services was developed on that premise.
Our Europe to China rail network can cut the cost of delivering to the Far East by as much as 65% compared to air freight, and is considerably faster than sea freight. Meanwhile, in the US, considerable savings can be achieved by using trucking to capitalize on the country’s comprehensive road network. So combining separate channels often yields a more efficient journey.
There are cash-flow benefits for exporter and customer alike — from reduced administration costs and a single customs clearance to lower banking fees.
A leading online Italian fashion company, YOOX grouped their deliveries for one country into a single shipment. This reduced costs for warehousing, inventory and shipping, and produced more consistent and timely deliveries worldwide, which improved customer satisfaction.
The scale of savings can be substantial. When one US SME consolidated their freight forwarding business with UPS, they realised a 30% year-on-year saving. They generated a further 15% reduction in costs when small package shipping was bundled with freight.
For small and medium-sized businesses, partnering with a large global logistics company can make sense. In addition to access to the logistical expertise, they gain immediate access to a fully integrated network that’s extremely dependable and designed to adapt to a wide range of end users. A company like UPS, for example, provides supply chain solutions to businesses around the globe in nine different industry sectors each and every year. So adaptivity is built into their network. It makes them a very practical solution for companies with changing demands and finite resources.
Leveraging technology for global reach
Supply chain management has changed radically in the last 20 years — with technology playing the biggest part.
Today, systems like UPS Quantum View Manage® and Flex Global provide instantaneous visibility for all air freight, ocean freight and small package deliveries on a global level. It’s a capability unimaginable even a decade ago. Similarly, UPS Trade Direct® allows customers to bypass distribution centres by shipping directly to retail stores or customers’ doors. It allows any shipper to consolidate international freight, air, ocean and ground transportation with customs clearance and direct delivery to multiple addresses within the destination country.
More importantly, it’s a capability that’s available to virtually any business — regardless of their size. The result is a more level playing field for companies targeting a global market.
Developing the optimal consolidation strategy
Regardless of size and industry sector, businesses looking to optimise their supply chain need to look at some key factors. These include: freight volume, origins and destination (looking for routing pairs), security needs, temperature requirements, documentation and processing.
For smaller businesses that may lack the in-house expertise to properly assess these factors, or for medium-sized businesses that lack the resources to devote to the undertaking, a major partner like UPS is usually equipped to help. They have industry-specific experts that can do the initial audit, then develop and implement the strategy. That can even include training on visibility tools, establishing a transition plan and routing instructions, and developing performance reviews to assess your strategy’s effectiveness.
Transformation is seldom effortless. Neither does it have to be painful. Done right, supply chain consolidation can provide a straightforward route for most small and medium-sized businesses to impact their bottom line.
Content on this page is paid for and provided by UPS, sponsor of the Exporting to New Markets hub on the Small Business Network.
