How to Reduce Shipping Costs Using a Mail or Shipping Consolidator

Shipping Consolidators Offer Value Added Services and Lower Shipping Rates to Reduce Shipping Costs

by Greg Marone

Ecommerce sales represent an increasingly important source of revenue for many businesses, making the need for affordable shipping more critical than ever. Many budget-savvy, high-volume shippers are using shipping consolidators for reduced shipping costs and reliable delivery.

But what is a shipping or mail consolidator, and when does it make sense to use one for shipping?

How Shipping Consolidation (and Consolidators) Work

Mail consolidation occurs when a shipping company picks up and processes packages from multiple customers, then sorts the parcels based on major shipping hubs of the U.S. Postal Service (USPS). The packages are then inserted into the USPS system for final delivery.

Advantages Offered by Using a Shipping Consolidator

There are many advantages to using a mail consolidator to streamline your shipping process. Shipping consolidators pick up packages from multiple different shippers and combine them into one large load that is shipped as a unit to the destinations local USPS offices. From there, the 

packages enter the local mail stream and are delivered to their final destination.

By combining these smaller groups of shipments into one larger load, the consolidator is able to take advantage of discounted shipping rates and share the savings with the individual companies, who would not qualify for discounts like these based on their own smaller volumes.

Consolidation can also save your company time and labor. Mail consolidators will generally pick up, sort and document parcels, and offer additional services such as insurance and USPS tracking. As well, by using a consolidator service from a parcel carrier that you already have a relationship with such as FedEx SmartPost or UPS SurePost, requires interaction with a single carrier instead of two or more if you were using the standard USPS service (FedEx as well as USPS for example). Instead of managing accounts with both the USPS and a private shipping company, all business can be handled through a single carrier.

Choosing a robust multi-carrier parcel shipping solution that can help you take advantage of mail consolidators can have a significant positive effect on your bottom line.

For example, rather than sending 1,000 packages via FedEx and another 1,000 packages via USPS, you could combine and ship all 2,000 via FedEx − routing 1,000 packages through FedEx and 1,000 through FedEx SmartPost (the FedEx consolidation program) for ultimate delivery by the USPS. By shipping all 2,000 under a single shipping umbrella, you will gain greater freight savings due to the larger volume discounts afforded by the single carrier.

When to Use a Shipping Consolidator

For Outbound Shipping: Consolidation makes the most sense for companies that ship high volumes of small packages (generally 5 pounds or less) to consumers. While delivery may be slightly slower than it would have been if shipped through a traditional ground service, the delay is often no more than a day or two depending on the destination’s distance from a hub. If the delay is acceptable, the freight savings you gain can be significant.

Selecting the Right Consolidator for You

In many cases, the best place to start when searching for a mail consolidator is with your current shipping partners. Find out if they offer consolidation services and what advantages they think it may offer your business. The USPS also has a list of shipping consolidators available on its website.

In general, a good consolidator will have a national presence with multiple distribution points and will offer both air and ground services so that delivery times remain similar to those associated with First Class mail. Consolidation should be one of its core business services. It should already have a large client base since its overall volume will affect the level of discount it can offer you.

Other services such as tracking, reporting, warehousing, etc., can also add value to what a consolidator has to offer.

Getting the Most Financial Value with Mail Consolidation

Many businesses are hesitant to embrace mail consolidation to ship orders because they know it isn’t the right fit for all of their shipping needs. Unfortunately, by not using a consolidator where appropriate, they may be losing thousands of dollars on excess shipping costs.

One of the best ways to address these shipping complexities is to use multi-carrier parcel shipping software. The system can automatically sort parcels into different categories. Businesses can then set parameters to identify which packages are best suited to consolidation based on the size of the package, the customer, the location (i.e., how far it is from a shipping hub) and the delivery commitment. Once these business rules are added into the shipping software the shipping process is quick, efficient and transparent to the user.

At the end of the day, mail consolidation offers significant cost-saving advantages for businesses and represents a valuable tool for operation leaders and warehouse managers looking to save money. However, which mail consolidator you choose – as well as how you implement your overall strategy for addressing shipping challenges – should be evaluated with your specific needs in mind.

Greg Marone is a shipping expert with decades of experience in warehouse management operations and technology. CLS has worked with many companies to lower shipping costs for their business through the combination of streamlined workflows integrated with multi-carrier shipping software, integrated pack/ship stations, data collection solutions and more. Contact us for a complimentary consultation.