Order consolidation is a newer industry trend in eCommerce. As such many retailers are familiar with split shipments, and they may have missed out on order consolidation. This article elaborately discusses order consolidation and how it can improve your customer experience.
Order Consolidation: A Way Towards Sustainable Shipping
Order consolidation refers to a process of combining multiple orders or large quantities of freight in a single shipment. The necessary condition for order consolidation is that all the products must be intended for the same recipient and in a single location.
Order consolidation has been a prevalent process in the shipping industry, where suppliers consolidate large volumes of cargo for a vendor. Doing so helps reduce the lead time in long-haul transportation.
With the passage of time, eCommerce companies saw the potential of order consolidation as a sustainable method of order fulfillment. They rest the case for optimizing last-mile delivery, a phase that burdens retailers with a series of problems. One, there is a high transportation cost, and two, there are inefficiencies in delivery caused by delays.
In such circumstances, consolidating products dispatched to the same shipping address can, in turn, reduce the number of transit times. This helps leverage economies of scale or the cost advantage of bulk transport.
An example of order consolidation for eCommerce Shipping:
Say a customer places multiple orders with an eCommerce cosmetics and lifestyle brand like Nykaa. They order a kit of matte lipstick, a box of vitamin E supplements, and a hair dryer. All these products are stocked in Nykaa’s warehouse or fulfillment center.
There are two ways Nykaa can fulfill this customer order. One way would be to pick and pack each product as an individual order and ship them to the customer with different delivery timelines. This is generally true when inventory is split and distributed across different fulfillment facilities.
However, if all the products are stored under one roof, it is convenient for Nykaa’s pickers and packers to combine every product into one box. In doing so, Nykaa can fulfill three orders simultaneously in the time interval needed to do one. Moreover, it can leverage the dimensional weight (DIM) of the shipment to hold three items and ship them at a relatively lower cost.
With order consolidation, Nykaa gets to minimize shipping charges, especially in packaging and carrier surcharges. Furthermore, it can eliminate prolonged wait times for customers to receive their orders.
5 Steps to Get Started with Order Consolidation
Order consolidation can be a tricky strategy to implement if you have inventory spread across multiple distribution hubs. It usually requires the concerted efforts of different business and logistics partners.
In this section, we highlight a trajectory you can take to start your order consolidation plan:
1) Begin by Mapping your Fulfillment Process
Order consolidation is no different from a regular fulfillment process. It follows the same workflow- picking the items, packing them, and shipping them to the customer.
To start with order consolidation, plan how and where you receive your inventory. SMBs usually keep their inventory in-house in a leased warehouse or private space. As all their merchandise is under one roof, they can implement order consolidation earlier in their business practice.
However, retailers shipping large order volumes and operating in omnichannel mode store their inventory in several distribution hubs. To consolidate orders arriving from different warehouse locations, they will need additional infrastructure. This can be a consolidated warehouse or a distribution center near the customer location offering order consolidation.
Next, you can practice order consolidation by making kits or bundles with products that are frequently bought together. The items should be strategically stored to be easily accessible to pickers. After your pickers do their job, packers can combine the bundled products into a single parcel. It is important to have sturdy packing material that securely holds the items.
Along this, you can consider which are the potential carrier partners or freight companies based on feasible DIM weights and shipping costs. You would also be required to generate shipping labels or return labels beforehand. Therefore, mapping your fulfillment process and all its minute details can help you ensure smooth order consolidation.
2) Select the right partners
Order consolidation is a concerted effort of multiple stakeholders, starting with a fulfillment center or a 3PL partner. Many eCommerce businesses rely on third-party warehouses, a 3PL-led fulfillment center, or a distribution center to manage inventory and ship orders.
All these logistics facilities perform the hefty task of order fulfillment, but they differ in the degree of functionality. Take a warehouse, for example. It is typically used for receiving and storing inventory, especially in bulk but ensuring its safety. They are good places to keep inventory in stock, irrespective of demand fluctuations.
On the other hand, a fulfillment center or a distribution center specializes in picking, packing, and shipping orders directly to customers or other businesses. They also have contracts with shipping companies and come in handy during negotiations over shipping rates and getting shipping discounts. They are also skillful in packaging, keeping an optimum DIM weight.
eCommerce retailers wanting to consolidate orders will have to gauge the capacity of their warehouse provider or fulfillment partner.
For example, partnering with a 3PL company that has multiple warehouses or fulfillment centers across a country or even in multiple countries. This can help businesses consolidate orders in a station nearest to the customer, thereby reducing transit time and cost further.
3) Devise a strategy for consolidating orders
As hinted in the above paragraphs, order consolidation requires robust planning in inventory management, picking-packing, and shipping. There are a considerable number of factors that businesses need to take into account. For example, not all orders are fit to be combined together, especially fragile items with special packaging requirements.
eCommerce merchants should first identify the conditions to offer order consolidation. Here are three circumstances that commonly warrant order consolidation:
It is ideal for products that are usually sold together. It can be in the form of kits. For example, a diffuser and essential oils.
It is an excellent option for shipping small-sized products in bulk to optimally use DIM package weight.
It is beneficial to consolidate orders when shipping individual items costs more, especially since consolidating orders reduces shipping costs related to fuel surcharges.
Apart from these, a retailer, along with their fulfillment partner, can work out a plan in order for picking and packing. For example, in cases of order consolidation, pickers can assemble multiple items with wave-picking or batch-picking methods. Similarly, the packing team can strategically place products to use the space available in a packaging box optimally.
Furthermore, retailers can consider alternatives to fulfillment centers or warehouses as order consolidation stations. In a joint research conducted by the Universities of Dalian and Zhejiang, China, the authors found that order consolidation can be optimized if done in distribution stations.
In this case, individual parcels arrive at a distribution station at different times, and the station workers then package them into consolidated shipments. This can help resolve the problem of split inventory.
4) Digitize order consolidation
Digitization and automation have become a norm in the logistics industry for enhancing labor-intensive processes like manual stock keeping. To ease the time consumed in order consolidation, retailers can use a warehouse management system (WMS) and multi-carrier shipping software.
There are multiple benefits of digitizing the order consolidation process with a WMS and shipping SaaS tool, here are some of them:
Locate the SKUs in the storage shelves or racks so pickers can easily find the item and arrive at the consolidation area on time.
Identify the products for consolidation and inform the packer of the shipment units and load.
Generate and print shipping labels, return labels, and airway bills in bulk.
Assign each consolidated shipment to the best carrier partner for on-time delivery.
5) Implement the set process
After all the aforementioned steps are completed, the business can now focus on implementing the set processes. First of all, the retailer should create an agreement with all the partners involved in the consolidation process. This involves reviewing and creating a contract establishing the roles and responsibilities of each stakeholder, service levels, and costs.
Thereafter, the business owner can start the testing phase to identify and rule out risks like picking delays and delivery disruptions. This way, they can also enact corrective measures like using an accurate tracking service to inform customers about early shipment arrivals or late deliveries.
Finally, the company can run audit test transactions, understand its 3PL capacity and establish security compliance and quality control measures.
How Can Order Consolidation Improve Customer Experience for eCommerce Companies?
Now that we have a fair knowledge of how you can build an order consolidation strategy, let’s take a quick look at the benefits it can offer you:-
1) Lowers Shipping Costs
Shipping costs incurred in the last mile are a serious source of anxiety for many retailers. One of the reasons why companies accumulate high shipping costs is multiple order deliveries in the same location at different time intervals.
With order consolidation, the number of transit trips to the same customer with multiple orders is reduced. The shipping carrier can deliver all the items in one go, thereby reducing fuel surcharges and the base charge per package.
2) Reduces Lead Time and Customer Wait Time
One of the main determinants of customer satisfaction is the speed with which orders reach the customer location. Without order consolidation, individual orders are picked, packed, and shipped separately. Each item has its own arrival time, own tracking ID, and accompanying customer wait time.
Retailers can lessen customer wait time and fulfillment lead time by combining all the items into one box and shipping them with one tracking ID. This not only makes it easier for customers to track all of their ordered items but also offsets any anxiety with one order arriving late than the rest.
3) Promotes Green Shipping Business Practices
We started this article by saying that order consolidation is one of the most preferred green shipping strategies other than carbon offsetting. First of all, it's an eco-friendly option considering it significantly reduces packaging waste. Secondly, it helps businesses lower their carbon footprint by eliminating unnecessary delivery trips.
Moreover, it helps businesses cater to the sentiments of millennials and GenZ consumers who prefer climate-conscious brands. Take the case of 52% of U.K. and U.S. buyers who prefer recycled packaging and less plastic usage.
4) Improves Order Tracking and Accuracy
One of the by-effects of order consolidation is simplified order tracking accuracy estimation. Since one tracking ID is issued for the entire shipment, the customer can track them conveniently without juggling multiple tracking numbers.
At the same time, they can review all the products when they arrive, examining if the parcel contains all the right products.
5) Positive Impact on Order Fulfillment
Order fulfillment is a strenuous process, particularly when businesses have a high monthly shipping volume. Order consolidation can take away the stress from the system since it merges multiple products into one. Pickers can pick all the items in one setting, and packers can pack them together. This reduces the chances of lead time in the warehouse.
Order consolidation has become a well-received trend in the eCommerce industry. It offers generous benefits to both businesses and warehouses, like lowering order dispatch time and practicing sustainability. Moreover, a significant section of customers feel the positive impact order consolidation has on the environment. Therefore, it is a good strategy to invest in and adopt for retailers with online stores.
1) How is order consolidation different from cargo consolidation?
In order consolidation, the main focus is on fulfilling orders in manageable parcels to customers directly from the warehouse of fulfillment centers of the online retailer. However, in shipment consolidation, the suppliers or distributors merge large volumes of cargo or bulky freight and ship them to either the retailer’s warehouse or brick-and-mortar stores.
2) Is order consolidation beneficial during the holiday season?
Order consolidation is especially beneficial during the hectic holiday season. Customers usually tend to place multiple orders. So in consolidating each item into a single sturdy package, retailers can save time and money spent in order dispatch and shipping. Moreover, online retailers hesitant to implement order consolidation in the regular season can try it during holidays to large order volumes.