Transloading Services – Why They’re Essential During Supply Chain Disruptions

The image of dozens of cargo ships recently stuck off the California coast illustrates the delivery disruptions eCommerce merchants are navigating ahead of the holiday shopping season. 

In fact, in our recent survey, 87% of merchants shared that they have been affected by increased freight costs this year. To offset the negative impact, 31% have raised prices for their end consumers, 18% have re-routed freight or re-negotiated with carriers, and 12% have absorbed the extra cost.

Additionally, 9% stopped offering free shipping to recover costs, while 7% held off on ordering peak inventory to see if prices would level off. 

Fallout from COVID-19 is the chief culprit behind delivery delays, rising freight bills, and sinking profitability; however, weaknesses in the U.S.’s supply chain exposed by the pandemic cannot be ignored. Merchants who have relied on the same supply chain routes season after season are rethinking their fulfillment strategies. 

Below we examine transloading services as one strategy online sellers can implement to mitigate against port congestion, limited capacity on ocean inbound vessels into the U.S., and other supply chain risks. 

What Are Transloading Services?

Common in long-haul containerized transportation, transloading is the process of transferring a shipment from one mode of transportation, such as an airplane or ship, to another, like truck or rail, to reach its end destination. 

Accordingly, transloading services are usually performed when freight is exported from the U.S. or imported to the U.S. For instance, containers are transloaded at a facility near a terminal like the Port of Los Angeles, the busiest port in the Western Hemisphere. Pallets are broken down, and contents are sorted and then re-palletized for over the road (OTR) shipping via truckload or domestic container. 

From there, goods can be taken to a warehouse for long-term storage or immediately unloaded and dispersed to fulfillment centers to be inbounded and prepared for sale. 

Two key terms to understand in transloading are reconsolidation and deconsolidation:

1. Reconsolidation – Warehouse staff combine many smaller units or pallets of goods into larger cargo units to fill trucks headed for the same region or destination.
   
2. Deconsolidation – This is the opposite scenario. Loads are broken down into smaller units for storage until the next step in the fulfillment process. 

Subsequently, transloading has two primary benefits:

1. Lower Time in Transit (TNT) – Inventory can be immediately dispersed to fulfillment centers close to end customers rather than either being sent to a centralized hub and distributed from there or simply fulfilling all orders from a single distribution center. In the former scenario, there are multiple touches on the items, and TNT is increased for products being distributed. In the latter scenario, TNT is increased on the final mile for out of region shipments.
   
2. No Warehouse Maintenance – Logistics and storage are managed by outsourced order fulfilment partners, freeing up time and funds to invest in growing the business.

What Is the Difference Between Transshipment and Transloading?

Transshipment entails the transfer of cargo or containers from only one vessel – usually a ship – to another at an intermediate destination before being shipped to the end destination. On the other hand, transloading is the transference of freight between multiple forms of transportation.

Consequently, merchants typically encounter shipping routes that feature a transshipment when shipping overseas. 

Like using a layover and catching a connecting flight to reach your destination city, transshipment occurs for two prime reasons:

1. When no direct shipping route is available to the destination
2. To save money on shipping costs

However, these savings come at the high cost of shipping delays, which are common when shipping goods overseas using a transshipment route. Unlike transloading, the transshipment process inherently takes longer because containers are unloaded and reloaded onto a different ship, which adds time. 

Due to the COVID-19 pandemic putting additional strain on supply chains and labor, we’re seeing major delays for direct shipments at ports like Los Angeles and New York. Imagine then how much longer goods are taking to pass through the Port of Singapore, often touted as the world’s busiest transshipment hub in terms of shipping tonnage. 

What Is the Difference Between Transloading and Cross-Docking? 

The terms transloading and cross-docking are often used interchangeably, but they’re quite different. 

The primary distinctions between transloading and cross-docking involve storage and deconsolidation. Transloading is the sorting and re-palletizing at each phase of intermodal shipping, whereas cross-docking is the shifting of intact pallets from one form of ground transportation to another (usually trucks) with little or no storage in-between. 

In cross-docking, small, inbound LTL shipments are unloaded from a truck or railroad car, sorted, scanned, reconsolidated with packages that have the same next destination, and reloaded onto outbound trucks or rail cars to continue their journey. Large shipments are broken down into smaller groups for faster and cheaper delivery. Plus, items going to the same destination can easily be consolidated into fewer last-mile vehicles. 

Therefore, at various point in the journey a delivery could include both transloading and cross-docking, the latter of which can be broken down into two types:

Pre-Distribution – Items are unloaded, sorted, and repacked based on pre-determined distribution instructions. The customer is known before the goods leave the supplier.

Post-Distribution – The customer isn’t known, so sorting is postponed until the proper facility and customers are chosen based on demand and location. In this scenario, inventory will spend a short amount of time in a cross-docking or distribution facility. But the added cost is more than offset by making smarter, more informed decisions about where to forward stock inventory based on demand forecasting data. 

Cross-docking provides three primary benefits:

1. Lower Inventory Levels – Storing less product equates to lower inventory storage costs and risk of damage and theft. Additionally, inventory management is simplified because large amounts of SKUs aren’t kept in stock.
   
2. Reduced Transportation Costs – Consolidating multiple, smaller LTL shipments into FTL shipments is one of the primary ways to reduce shipping costs.
   
3. Focus on Growing the Business – Similar to transloading, the reduced need for handling and storing items frees up resources for merchants to expand their eCommerce shops. 

The Bottom Line

By investing in transloading services, shops can minimize costs, delays, and disruptions in their supply chain models. Putting optimal and alternative routing in place ahead of time maximizes the likelihood products will reach their final destinations as planned. 

Transloading is a key tactic for overcoming port congestion challenges this holiday shipping season. Ware2Go is leveraging transloading services to help merchants lower their TNT into fulfillment centers by up to 2 weeks so they can start selling their holiday inventory and making returns on their capital investments quickly. To learn more about how Ware2Go can help you take advantage of transloading services to mitigate against risk and ensure an optimum customer experience please reach out to one of our fulfillment experts.