Ever wondered what happens to your shipment when it's not quite big enough to fill a whole shipping container? That's where LCL comes in. LCL stands for "Less than Container Load," and it's a cost-effective way to ship smaller cargo volumes overseas.
With this, a few questions can be asked:
But how does it work?
Is it a good method to use?
When do I use LCL?
This blog post will explore how Less than container load (LCL) shipping works, its pros and cons, and what are the right use cases for LCL shipping in your business.
Links to topics: 1. What is Less than container load shipping (LCL)?
What is Less than container load shipping (LCL)?
LCL stands for Less than Container Load, which refers to a shipping method where multiple shippers' goods are consolidated into a single container.
This method is used when a shipper's cargo does not fill an entire 20ft or 40ft container, allowing for cost-effective shipping by sharing container space with other shipments. LCL shipments are sometimes referred to as groupage shipments.
How does the Less than container load (LCL) shipping process work?
The process for booking an LCL (Less than Container Load) shipment typically involves several steps. Firstly, you need to provide details about your cargo, such as the volume, weight, tariff code and nature of the goods, to the freight forwarder or or co-loader.
The freight forwarder or co-loader then consolidates your cargo with other shipments to fill a container. Once the container is filled, the freight forwarder books space on a vessel for the container to be shipped to its destination.
It's essential to ensure that all necessary documentation, such as a bill of lading and commercial invoice, is prepared accurately to facilitate the smooth movement of your cargo through customs and to its final destination. If you not sure how to prepare all these documents, it is best to ask a customs consultant or have a clearing agent by your side.
It is important to note that proper packaging of your goods is crucial in LCL and protects your goods from potential damage during the consolidation and transportation stages.
What is a co- loader in LCL shipping and what do they do?
A co-loader in LCL shipping is a party that accumulates LCL cargo from various shippers at the origin and then books a Full Container Load (FCL) shipment with a shipping line.
Co-loaders are used in LCL shipping to optimize the use of container space by consolidating the smaller (LCL) shipments into that full container making it one full container load consisting of multiple LCL shipments.
These shipments will either be consolidated into a 20ft or a 40ft container which will be handled by the co-loader where the container is full of varying cargo from anywhere between 2 - 20 Shippers. The co-loader is now the party your Freight Forwarder/Broker will be working alongside with your LCL shipment.
When the shipment arrives at its destination port, the co-loader will send out Arrival Notices to the various shippers and deconsolidate the cargo.
Note: Consolidation of the shipments can be done by freight forwarders themselves or they can hire co-loaders to consolidate for them. A freight forwarder can be a co-loader but a co-loader cannot be a freight forwarder.
Is LCL faster than FCL?
LCL (Less than Container Load) is not necessarily faster than FCL (Full Container Load) as there is both time and labor involved in the consolidation and deconsolidation processes of the shipments. Both methods require handling and processing time, so the speed of shipping is not significantly impacted by choosing between LCL and FCL.
However,
With LCL, the collection, consolidation, and deconsolidation can add anywhere from a few days to a week or more compared to FCL shipping. The likelihood that a full-container load would get to its destination quicker than a LCL shipment is purely due to the fact that you're not sharing container space with someone else.
When requesting quotes from freight forwarders, you can enquire about estimated transit times for both FCL and LCL options for your route. This will give you a clearer indication of the time differences of the two options.
Advantages of Less than container load (LCL)
Cheaper Than Air Freight: LCL shipping provides a more cost-effective option for non-urgent cargo, and can be cheaper than air freight. If your cargo is not dependent on a deadline and is small enough, LCL may be the best option.
Reduced Inventory Storage Costs: Shipping fewer goods in smaller quantities frequently means spending less money on extensive storage space.
Pay-Per-Volume Occupied: Unlike FCL (Full Container Load) with its flat rate, LCL lets you pay based on the exact volume your cargo occupies within the container. It's like paying for a single seat on a plane, rather than chartering the entire aircraft.
Disadvantages of less than container load (LCL)
Damage risks Damage: Your cargo shares a container with other shipments meaning it gets handled more often during loading, unloading, and consolidation. This could lead to potential damaging of the cargo through these processes. If you are shipping fragile or expensive items, it is preferred not to go with LCL.
Potentially Higher Cost per Cubic Meter: While you only pay for the space your cargo occupies, LCL shipping can sometimes be more expensive per cubic meter compared to FCL. This is because the cost of transporting the container is spread across fewer goods.
Vulnerable to Delays from Other Shipments: If any of the shipments in the container experiences customs clearance issues or delays, your cargo can be held up as well. This can be frustrating and disrupt your delivery schedule.
Less Control over Cargo Placement: In LCL shipping, you have no control over where your shipment is placed in an LCL container, unlike FCL where you can strategically position your goods within the container. This can be a concern if your cargo has specific temperature or
proximity requirements to other items.
When should you use LCL shipping?
If you're dealing with seasonal products, testing new product lines or exploring new overseas markets, LCL lets you ship smaller batches of inventory without a significant upfront investment.
Another use case for LCL shipping is for small businesses. Small businesses often don't have the inventory volume to fill a full container. LCL allows them to ship smaller quantities cost-effectively without being restricted by needing to accumulate a large amount of inventory before shipping.
Final Note: There is a tipping point where FCL (Full Container Load) becomes more cost-effective than LCL (Less Than Container Load) even if you don't fill the entire container. FCL rates offer a flat fee for the whole container, bringing down the cost per cubic meter as you utilize more space. An experienced freight forwarder will always communicate with you if there is a potential to save money by using FCL instead.