CONSOLIDATION AT ORIGIN CREATES LEANER GLOBAL SUPPLY CHAINS

Consolidating many small lots of goods into fewer, larger, shipments for individual destinations or end-users is a tried and tested technique at local or country level. Less widely appreciated is the impact that consolidation close to origin can have on supply chains at the global scale. Multi Country Consolidation (MCC), as we call it at Damco, can reduce transport, handling and administrative costs and environmental impacts as well as potentially shortening overall transit times and simplifying supply chain operations.

MCC involves bringing together shipments from suppliers across a wide geographical region to a single strategically located consolidation hub. Here these goods can be combined to make up full container loads (FCL) which can be shipped to the end customer with minimal further intervention. This contrasts with the conventional approach by which individual supplies, often in small lots, are shipped between continents in half-empty containers, and customer-specific loads are only made up for delivery  in one or more distribution centres relatively close to the destination, and only when all the components of the shipment have arrived.

Some of the benefits are obvious: others less so. Shipping fewer full containers rather than many partloaded boxes on the long ocean (or air) leg reduces transport costs, not only on the outward journey but because there are fewer empty containers to return. With fewer containers in the system and part-loaded containers being released earlier in the cycle, demurrage charges can also be reduced. With fewer containers, administrative and documentation costs and complexity are also lowered. By concentrating most handling operations (of goods and of boxes) at origin hubs where labour, craneage and other costs are typically cheaper, further savings can be made.

There are further advantages. Fewer road movements between receiving port, DC, and final destination reduces environmental impacts and also mitigates the congestion problems experienced around many major ports. With less re-handling of cargo there is a lower incidence of breakage and pilferage. Value-added services such as destination-specific labelling or making up store-ready case packs can be performed both cheaply and often in what would otherwise be ‘dead time’ waiting for a sailing, thus offering time savings. With container loads already made up for the ultimate consignee, there may be the opportunity to ship to a port much closer to the end-user, rather than through a destination hub port that may still be a long way from where the goods are required, and this too can offer savings in cost, time, and environmental impact.

Optimising loads across origins and destinations

Finding the optimal shape for a supply chain using MCC is not entirely straightforward. There are many factors to be considered: the pattern of sourcing from different supply locations, the routes and services available from the consolidation hub, the location of, and frequency of service to, the end user, are just a few. Often the optimal solution may be counter-intuitive: goods may start their journey by moving a thousand miles in the ‘wrong’ direction. Comprehensive network studies will reveal the logical and effective origin-destination combinations.

A further requirement is the ability to synchronise the movement of small lot shipments from suppliers so that they arrive at the consolidation hub at much the same time, and allowing the necessary time for consolidation and any value-added activities to be carried out before loading. This creates a requirement for strong IT systems which give prior visibility, and allow control of, incoming shipments and can in turn create load plans that minimise lead times.

Too difficult? Not with Damco

This may all seem very complex, and indeed it is – but the shipper does not need to be over-concerned about the technicalities.

Damco has been creating and running MCC and related activities for several years on behalf of many world-renowned brands. We have a unique combination of technologies and human, market-related expertise, to devise versions of MCC, using the most appropriate hubs and other resources, for our customers. We also have long experience in facilitating value-added services for shippers.

In particular, Damco has invested in and developed robust, global IT platforms that can give our customers real time, unit level, visibility of their complex global supply chains. If you need to know, for example, whether the coat, the blouse, the skirt, and the handbag will all come together, from four different Asian sources, for your new season in Barcelona – we can do this. Or more accurately – you can do this: our systems, developed over many years, are designed to integrate seamlessly with those of our shippers and customers. We give you the power to stay in control of a leaner, cheaper and more effective global supply chain.

For more information please visit our MCC page on Damco.com or reach your Damco local offices here.