What is Parcel Consolidation?

June 14, 2016 by Amware Fulfillment

Parcel consolidation is a great way for parcel shippers to reduce freight costs by leveraging the last-mile capability of the United States Postal Service (USPS).

Parcel ConsolidationShippers consolidate many individual packages destined for a specific city into a full truckload and then deliver these packages to the USPS terminal in that city, where they are injected into the postal system for final delivery.

The strategy leverages what is best about the USPS system, final delivery of lightweight packages, while avoiding all the various hubs and hand-offs within the USPS network that make the system inefficient. Parcel consolidation is also referred to as “zone skipping” because it injects parcels directly into the freight system at the final delivery zone.

The strategy works best for packages less than 10 pounds. Small and mid-sized shippers often use a 3PL, like Amware Logistics, to manage a consolidation strategy since they would have to wait too long for their outbound volume to fill a trailer. A 3PL can combine shipments from multiple customers moving to the same region of the country.

3PLs can offer significant discounts – up to 20% below normal rates – by partnering with a USPS-approved consolidator on a zone skipping strategy

Advantages of parcel consolidation

A parcel consolidation strategy with USPS avoids many of the accessorial charges costs inherent in a major parcel carrier’s door-to-door delivery service.

  • When UPS or FedEx makes a ground delivery to a residence, the residential surcharge is $3 or more. Consolidation services do not include a residential surcharge.
  • Certain remote delivery areas will trigger a significant “delivery area surcharge.” Again, this extra charge is not incurred with a consolidation service.
  • Saturday deliveries cost extra with parcel carriers, but not with USPS.

If you need to track your package, you can use the USPS website or the consolidator’s system, which is integrated with USPS.

Parcel carriers are in on the act

Many companies offer parcel consolidation services. Check out the full list here.

Among them are FedEx, with its FedEx SmartPost service, and UPS. Leaving final mile delivery to the USPS helps these major parcel carriers be more competitive with lighter weight shipments. Since the USPS must make daily delivery stops to existing customers anyway, the incremental cost of extra packages is minimal. Sure, the parcel giants must share some of the revenue with USPS for this consolidation service, but that lost revenue is offset by the reduced cost they incur for final delivery.

Is parcel consolidation for you?

If you ship a high volume of lightweight parcels and feel that your freight costs are too high, contact one of USPS’s consolidation partners to determine what cost savings may be available. Or, talk to your fulfillment provider about using such a service.

Amware partners with OSM Worldwide to offer its parcel consolidation service.

The service is seamless for Amware customers and leverages OSM’s experience shipping for retailers, publishers, pharmaceutical and nutraceutical makers, fulfillment houses, major corporations, marketers and financial institutions.

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Filed Under: Third Party Logistics, Parcel Transportation