Impact of Freight Consolidation on Logistics System Performance

Abstract

The effect of recent deregulation of the transportation industry has been to increase the relative costs of small shipments in low‐volume traffic lanes. Freight consolidation has been suggested as an effective way to reduce transportation costs and improve service levels for small shipments. Previous investigations of freight consolidation have been very general in nature and narrow in scope, even though the strategy has been suggested as useful for the design of a distribution system that deals primarily with small shipments. This paper focuses on an analysis of consolidation strategy and the impact of the number of consolidation points and special delivery requirements on various system performance elements. The special delivery requirement level is the portion of orders that must be shipped immediately without waiting for the specified holding period, thus resulting in a reduction of consolidated volume movements. The study indicates that consolidation can be used as a distribution strategy, with the prior knowledge that the level of special delivery requirement (priority shipment) can create a significant impact on system costs. The number of consolidation points, however, is not as critical to system performance as the level of special delivery requirement.