LCL: Ocean Shipping for the smaller volume shipper

LCL: Ocean Shipping for the smaller volume shipper

Screen Shot 2014-11-20 at 2.38.31 PMShippers often believe that they have to choose between enduring the high price of air freight in order to trade in small lots, or scaling up to large volumes in order to drive down per unit transport costs through containerized or bulk shipping.   There is however, a viable solution that allows companies to move product in small lots without paying the air freight premium.  Known as “LCL” or “Less than Container Load”, this mode of ocean shipping offers companies of all sizes substantial benefits and can help optimize their supply chains and international business processes.

What is LCL?

Quite simply, LCL is consolidated ocean freight.  Instead of consolidating sufficient orders to fill one’s own container, a shipper can tender their smaller lots to a freight forwarder or ocean freight consolidator who will in turn load a container with cargo booked by their other customers.  There are several advantages to having LCL as a shipping option in your firm’s logistics process including the following:

  • Shippers who do not wait to ship product until they have enough orders to fill their own container are able to supply or receive their goods much more quickly.  The benefits of this alone are significant as it can have a favorable impact on sales, profitability, order to cash realization, warehousing costs and customer satisfaction through expedited delivery.
  • Shippers who do not need the speed of air freight can realize tremendous cost savings by routing cargo through LCL ocean freight.  While the unit transport cost of LCL will not be as low as that of a full container (FCL), it can be substantially lower than that of air cargo.
  • Using LCL as a mode of transport allows shippers to engage in test marketing or perhaps even embark on a gradual market expansion.  LCL does not require a company to ship entire container loads of merchandise when such demand has yet to be established, thereby eliminating risks of overstocked merchandise, warehousing costs in the destination market, and other such carrying costs.
  • LCL is more expensive on a per unit basis than FCL shipping.  This is rather straightforward since buying part of a container will not yield the cost benefit of buying an entire one.

Small and midsized shippers are the most direct beneficiaries of the LCL mode of transport. The logic here is straightforward, as companies lacking larger volumes will simply take longer to realize enough demand/sales to fill a full container.

Large shippers also have the ability to benefit from LCL cargo in several ways.  By using LCL to reach markets that have demand, but are so small as to not justify entire container loads of volume, large companies can continue to meet their customers’ needs.  Also, large shippers may have a tremendous amount of cargo from various suppliers or going to various domestic distribution centers.  This effectively enables them to build their own consolidations across a region.  As an example, imagine a retailer with outlets throughout the United States East Coast region who sources product from 5 different suppliers in China.  The opportunity exists to consolidate cargo from all the suppliers and build one’s own container.  Upon arrival in the U.S. the container can be delivered directly to the retailers’ regional distribution center for onward distribution.  The retailer hence realizes a considerable saving by not using air freight from 5 different suppliers and by building their own consolidation.  They would have also likely realized similar savings (though somewhat less) by booking their shipments with an ocean consolidator from each of the 5 origins in China.

There are some pitfalls associated with LCL cargo, and the most notable of these is a lack of transparency.  While a full container is easily tracked, as is an air freight shipment, LCL cargo may sometimes appear to be in a “black hole” once it is loaded at origin.  This is because cargo may change hands between a few consolidators, or containers may transship through multiple ports en route to final destination which may not be apparent at time of booking.

There is also some difficulty in understanding total costs of shipment.  Due to charges incurred at destination, such as port charges, warehousing and unloading costs it can be difficult to arrive at a an accurate, consistent landed cost.

Fortunately, both of these problems can be minimized by a freight forwarder.  Freight forwarders maintain strong buying relationships with ocean freight consolidators which enables them to make pricing and routing decisions based on best practices in the marketplace.  Shippers/importers don’t have to feel like they’re taking a leap of faith with a consolidator so long as they have an experienced freight forwarder assisting with booking, documentation formalities, route optimization and tracking capabilities.

As ships sail faster, and countries develop better inland infrastructure in the form of railways and highways, LCL cargo will continue to become a more viable transport option for shippers of all sizes.  By working with a freight forwarder, shippers and importers can develop and implement a plan to ensure timely and cost effective supply of merchandise without having to incur the expense of air freight and without being forced to commit to the volumes needed to maximize utilization of a dedicated ocean container.

Some Interesting LCL facts:

As a general guideline, 10-15 cubic meters of cargo is considered the upper limit for LCL freight.  If a company is shipping more than this quantity, it is likely that they would benefit from using their own 20’ container even if the containers capacity is underutilized. 

The main unit of measure for LCL cargo is the cubic meter (cbm).  To determine the # of cubic meters you are shipping use the following calculation:

In Inches:Container Info & Spec Sheet

Length x Width x Height / 1728 = cubic feet

# of cubic feet / 35.31 = # of cubic meters

In Meters:

Length x Width x Height = # of cubic meters

By Gross Weight:

Gross weight in kilograms/1000

LCL charges will be based on the higher of the cubic meters or gross weight (kgs.) per 1000. 

 

FacebookTwitterGoogle+LinkedInPrintFriendlyGoogle GmailEmailShare

Leave a Reply

Your email address will not be published. Required fields are marked *


*

The Ever Changing Automotive Supply Chain

Supply Chain

The global automotive industry is undergoing big changes. Emerging markets, customer preferences and technology are all playing a huge role in this transformation and its effects will result in redesigning of supply chains. As the automobile industry transforms, competition will increase and from unlikely businesses such as Google and Apple along with niche automobile manufacturers such as Tesla and startup company, Faraday Future. It is likely as competition increases, consolidation and joint

read more

Your Air Freight Questions Answered–The Operations Edition (Part 2)

air freight

Your Air Freight Questions Answered – The Operations Edition

When you’ve been in the air freight business as long as we have (Established 1977 – thank you very much) you encounter nearly every scenario possible where it comes to moving goods by air. We once saw an air freight shipment of a mast for a sail boat that was so long it had to be loaded by popping out the cockpit windows, sliding in the mast and then securing it for flight. The question most asked after hearing that story is “how did they fly the plane with open cockpit windows?”

read more

Your Air Freight Questions Answered – Part 1

Loading air freight

Your Air Freight Questions Answered

Here at the Exporting Excellence™ blog we invest a great deal of time in answering questions about international air freight for our clients.  What we find most interesting is the fact that these questions don’t just come from small or mid-sized customers, but even from Fortune 500 sized shippers who have large air freight volumes.  One of the most important ways we at Crescent Air Freight add value to the business of our

read more

Small Is the New Big

“There has been an awakening.  Have you felt it?” says Supreme Leader Snoke in “Star Wars Episode VII The Force Awakens”.  He was referring to something entirely different from what I’m getting at, but there is some kind of change going on in the business world.  It’s more than a trend or fad.  The fact is that all things “small” are not just “cool”, but actually in high demand and perceived to be of higher value than “big”.  This is

read more

The Traffic Managers Tip Sheet

traffic manager shirt

Are you a Traffic Manager in the know?

Managing traffic is one of the most important roles in the logistics industry.  When a shipment of car parts is delayed, a pallet of iPhones is misrouted or the authorities come calling about a compliance issue, it’s the traffic manager who usually has to face such matters before anyone else in the organization.  A traffic manager is essential to ensure these types of incidences do not happen. To be successful, traffic managers have to juggle many

read more

Opportunities in the Ocean Freight Business and U.S. Ports

Port View _Small

Opportunities in the Ocean Freight Business and U.S. Ports

Over-capacity and falling rates define a struggling ocean freight market. According to industry analysts, the collapse in rates has not only been attributed to declining demand but also to over investment in shipping capacity by ocean carriers. Indeed, the introduction of new capacity has primarily been in the form of larger ships; however, the expected profits from these ships have yet to materialize. Meanwhile, investments in ports are underway to not only

read more

Amazon Gets Set to Disrupt the Freight Forwarding Market

amazon

Amazon Gets Set to Disrupt the Freight Forwarding Market

After building an enviable fulfillment process and network, acquiring trailers to transport goods between fulfillment and sortation centers, dabbling in its own delivery services and dipping its toes in air cargo, Amazon is now eyeing the ocean freight forwarding market. 

Should other freight forwarders be concerned?

Freight forwarders are already facing a difficult market thanks to overcapacity, declining rates and a global economy that has remained in the doldrums for several years. However

read more

U.S. Exports of Banking Equipment

U.S. Exports of Banking Equipment

Here’s What We’ve Noticed:

If you follow the world of online transactions and mobile payments, then you’ve heard about such important events as the IPO of Square, Inc. and the spinoff of PayPal from global ecommerce giant Ebay. While these startups and relative new comers to the financial markets

read more

Saudi Arabia – Not Just for Oil

oil fields

Saudi Arabia – Not Just for Oil

When one thinks of Saudi Arabia and international trade, oil typically comes to mind first, but times are changing. The price of oil has been on the decline over the past couple of years and as such Saudi Arabia has been diversifying its economy. As a result, opportunities exist for exporters.

Saudi Arabia is the 19th largest exporter and the 20th largest import market in the world. Among the top exports is of course, oil, but also plastics

read more

Trade with the largest European Economy – Germany

germany imports

Trade with the largest European Economy – Germany

As one of the largest producers of automobiles, Germany offers great opportunities for U.S. automotive equipment suppliers. It is the largest European economy and the third largest export and import economy in the world. Centrally located in Europe, Germany’s 2014 GDP was $3.8 trillion with real growth rate of 1.6%.

Germany is home to such automobile manufacturers as Adam Opel AG, BMW, Daimler AG and Volkswagen. Besides being a large producer of automobiles

read more