Despite being a relatively new concept, less-than-container load (LCL) shipping has revolutionized the world of trade, enabling more businesses and shippers to participate in global commerce.
LCL shipping allows businesses with shipments of all sizes to ship their goods worldwide without paying astronomical fees. While businesses shipping LCL can pay for the exact capacity their freight would need, carriers and freight forwarders can consolidate cargo and ship at a premium to full container load (FCL), making it a win-win for all concerned parties.
That said, LCL shipping may not be suitable for every business or shipper. For supply chains considering it, certain conditions must be met to ensure an optimized shipping experience.
In this article, we delve into the advantages and disadvantages of LCL shipping, provide a breakdown of how it is calculated, and address some critical questions about the concept.
The Process of Less Than Container Load(LCL) Shipping With LCL shipping, the shippers share a container with other shippers or businesses. The shipments are packed and delivered to a warehouse or staging place where freight forwarders consolidate containers with shipments moving towards the same destination.
In many cases, it may not be the same destination, but it could be the same shipping route. The container is meticulously unpacked at the destination, and the shipment is separated for final delivery.
How are LCL Costs Calculated? The formula will vary based on the carrier and the freight forwarder's agreement with the carriers. It will also depend on the demand and supply dynamics. However, LCL shipping costs are based mainly on how much space the cargo takes up (cubic meters) and can fluctuate depending on season and demand. Weight is less of a factor than space since ships are designed to handle a lot of weight.
An LCL cost and quotation typically include:
Pickup: The cost of collecting shipment from location or point of origin (e.g., factory) and delivering it to the warehouses and then the ship or vessel.Loading and Unloading: This is the cost of loading and unloading shipments with others into a container at the origin and destination ports.Ocean freight: This considers the transportation cost for the shipping or sea journey.Delivery: This is the cost of delivering shipments to the final destination. In some cases, the shippers may have other 3PLs handle the pickup and delivery of the shipments.Paperwork: Many freight forwarders or freight forwarding platforms will typically charge fees for handling shipping paperwork and customs clearance.Additional Costs Involved There are additional costs involved in LCL shipping, just like any other logistics processes and other aspects of the supply chain operation. However, these costs are divided into two -- the common costs and unexpected costs.
Here are some of them:
Common Costs: These will typically come up in any LCL shipment. Some are handling fees, customs duties and taxes, bonds, and security charges.Unexpected Costs: These costs are not as common and can be avoided if properly planned for. Some of these costs include per diem, demurrage, and detention.Is LCL Shipping Safe For My Cargo LCL shipping consolidates different cargo into one container to make up a full container load.
However, it doesn’t work for all cargo types. For instance, the reefer or cold chain products will not work well under LCL shipments. However, for other cargo types such as fashion, electronics, furniture, and other types of cargo that work, the following steps help ensure LCL shipping is safe for them.
Handling and Security In any LCL shipping operation, shipments will share a container with others. But it is up to the freight forwarders to expertly combine them for efficient use of space. The next phase will be to take security measures like container seals and terminal surveillance. The latter is effective for deterring theft.
Insurance and Protection Because LCL shipments have to travel with others in the same container, they are significantly more susceptible to damage or loss than full containers.
This is why insurance is crucial to protect the shipper's investment. Some options include carrier liability, which the shipping lines cover, though it is minimal. The other option is cargo insurance, which consists of tailored policies that ensure shippers are protected in the case of cargo loss, damage, and theft.
Comparative Risk of LCL and FCL Shipping Although LCL shipping has some risks, such as damages and loss of products, the question is how it compares to FCL shipping.
Risk Factor
LCL Shipping (Less Than Container Load)
FCL Shipping (Full Container Load)
Damage
Higher risk of damage due to multiple handling points and sharing space with other cargos.
Lower risk because shipments are the only ones in the container, minimizing handling and potential contact damage.
Loss
Slightly higher risk of loss due to increased handling and the possibility of cargo getting misplaced during consolidation/deconsolidation.
Lower risk as the shipper has complete control of the container.
Theft
Moderate risk as opportunities for theft exist during consolidation/deconsolidation and while sharing space with other cargo.
Lower risk as the shipper's container is sealed throughout the journey, minimizing access points.
Delays
More prone to delays due to dependence on other shipments for consolidation and potential customs issues with any shipment in the container.
Less susceptible to delays as shipment timeline isn't dependent on others. However, general port congestion or other unforeseen circumstances can still cause delays.
Paperwork and Customs
Although proper documentation is crucial for LCL and FCL shipments, the risk varies because any customs issues with any shipment in the container can delay the entire LCL shipment.
Poor documentation and customs issues could impact the FCL shipping process. However, unlike the LCL shipment, the shipper can control the entire process.
Cost Fluctuation
LCL rates are more susceptible to fluctuations based on demand for container space.
FCL rates are more stable and predictable because they are mostly based on contract rather than spot freight .
What are The Custom Procedures for LCL Shipping These are critical steps that LCL shippers must follow for a seamless logistics operation.
1. Know HS code and Prepare Documentation The shipper must classify goods and gather essential paperwork like commercial invoices, packing lists, and certificates of origin. All of this will ensure seamless customs clearance.
2. Partner with a Freight Forwarder Shippers need freight forwarders , and they can leverage their expertise to streamline customs processes and ensure a smooth LCL shipping experience.
3. Declaration The shipper, through a freight forwarder, files electronic declarations. However, the shipment may still be subject to inspections by the customs.
4. Inspection Although this doesn't always happen, shippers and freight forwarders should always be prepared. In some cases, customs officials might request physical inspections of the cargo to verify the declared information.
5. Duties and Taxes These are federally sanctioned fees levied on importers and sometimes exporters. They vary for different cargo types, destinations, and industries. It is important to find out what the duties and taxes are.
Benefits of LCL Shipping The LCL shipping has opened the door for many small and medium businesses to explore new markets. It has become much more necessary and plays a critical role in international shipping for the following reasons:
1. Cost Efficiency: It is cheaper for many businesses and supply chains, especially those that ship less than container loads. The cost efficiency means they can compete effectively.
2. Flexibility: Shippers, especially e-commerce platforms and businesses, can send out multiple shipments to multiple customers cost-effectively, offering logistics operations immense flexibility.
3. Accessibility: The LCL has allowed many small businesses to enter the international trade landscape, giving them more accessibility to global markets.
4. Reduced Inventory Costs: With LCL shipments, you can store and manage smaller quantities, minimizing storage needs and allowing for trial runs in new markets without large upfront commitments.
5. Improved Business Operations: It allows for timely updates on shipment status, enhancing scheduling and planning of business activities. The LCL rees up resources by eliminating the need for constant shipment monitoring.
6. Faster Delivery: Weekly sailing schedules and quicker turnaround times compared to waiting for a full container in FCL. This can lead to higher customer satisfaction.
Drawbacks of LCL Shipping LCL shipping also has certain drawbacks because of the number of shipments or cargo shipped together. It introduces factors or situations like:
1. Potential Delays: This is because of the consolidation and deconsolidation process. Both can lead to longer transit times.
2. Increased Handling: Too many cargo moving together will mean too many stops and parties handling the container. It exposes the shipments to unwanted risks.
3. Complexity: This is especially true when different consolidated shipments move through the same route but not at the same destination. It can make the logistics very complicated.
LCL Vs. FCL: How To Choose There are certain factors to consider when choosing between the two, and the answer depends on what the shipper is trying to accomplish. These factors are:
Factor
LCL (Less Than Container Load)
FCL (Full Container Load)
Cost
Generally cheaper per unit for smaller volumes
More expensive per unit, but total cost may be lower for larger volumes
Volume of Cargo
Ideal for smaller shipments (Doesn't fill a full container)
Ideal for larger shipments (Fills a full container)
Speed
Slower due to consolidation and deconsolidation processes
Faster - Dedicated container for your shipment
Things to Consider When Opting For LCL LCL shipping is cost-effective for cargo between 1-18 cubic meters and over 150kg (peak season) or 200kg (off-peak). It is ideal for restricted air freight items and routes with consolidator availability. It is important to consider FCL (under 6 weeks) for faster delivery needs. It also works for larger volumes exceeding 18 cubic meters. LCL offers a good balance between cost and transit times (5-7 weeks).
What You Should Do To Get The Best Shipping Rates 1. Compare quotes from multiple freight forwarders: This gives you insight into market prices and avoids outliers.
2. Consider pallet dimensions: You'll be charged for their space. Fragile items may require extra space due to stacking limitations, increasing costs.
3. Booking port-to-door service: This is a great strategy for getting upfront costs simultaneously, ensuring all charges are included.
4. Understand the interior dimensions of containers: This is a great way to determine space needs and choose between LCL and FCL. If you're an Amazon FBA shipper, stay updated on their warehouse guidelines to potentially save money by having your supplier handle them.
Following these tips can secure the most cost-effective LCL shipping rates.
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