What is LCL Shipping?
A term often used in ocean freight, LCL denotes shipping of loads that are “less than a container load.” You must have often observed huge containers stowed on ships or shipyards and even transported via commercial vehicles. Have you ever wondered what’s inside that container? Is it a package that you ordered, or is it filled with a singular, bulk order? What you have just thought about is the very foundation behind LCL shipping.
Typically, shipping containers are sized at 20 Ft. or 40 Ft. Interestingly, 20 Ft. containers are referred to as – Twenty-foot Equivalent Unit or TEU, whereas 40 Ft. containers are known as – Forty-foot Equivalent Unit. or FEU. Hence, TEU and FEU have become the standard measurement references for the volume of cargo and the capacity of a vessel.
However, companies may not be shipping goods that occupy the entire 20 Ft. or 40 Ft. container space. LCL helps close the gap for this segment of goods transportation in an economical manner.
Thus, LCL shipping means you’re shipping with a mode where smaller shipments are grouped or consolidated with other cargo. Here, different shippers, or consignors (or the shipper who transports the goods) share one container. For this reason, it is also referred to as consolidated or groupage container shipping.
In preparation for transportation, first, the LCL cargo has to be consolidated at a freight station. Thereafter, it is transported to the destination port for further distribution, as needed.
(Interesting Fact: Loose Cargo Load is often mistakenly construed to be LCL Shipping. While LCL Cargo is usually fastened on pallets and transported via containers, loose cargo loads are transported without pallets or containers.)
What is the difference between LCL Shipping and FCL Shipping?
As seen in the previous section, LCL (or less than container load) refers to several individual shipments sharing the space of a single container with other consignors. However, FCL, i.e., “full container load,” comprises a bulk shipment from a single shipper, occupying the entire container. Consequently, the payment in both types of container services depends on the space occupied by the goods. Thus, in LCL Shipping, you pay for only the area occupied within the container, whereas for FCL Shipping, a shipper would pay for the whole container space.
If your company’s operations heavily depend on the distribution of goods, it would be essential to consider the costs related to these logistics options and select the most cost-effective option. Hence, while deliberating between FCL and LCL, two crucial factors need to be considered, weight and dimensions.
Although the LCL shipping rates are more economical for smaller loads, in certain cases, a shipper may take a call to pay for the whole container despite not having sufficient goods to fill it. For instance, if your load is below the minimum tonnage threshold while shipping goods via a container, you can opt for LCL shipping as consolidation will be a cheaper alternative. However, if cost is not a consideration, then the nature of your goods takes precedence. Hence, if your goods are fragile, bulky, hard to palletize, or you simply do not wish to share the container space with other goods, then FCL might be a better option.
The Benefits of LCL Shipping
How can LCL Shipping be advantageous to your company?
- When compared with air freight, LCL shipping rates are more economical. If the transportation of your goods is not time-sensitive, your shipping cost is dramatically cut down if you opt for LCL shipping.
- While the freight rate in FCL shipping is a flat rate, LCL shipping is based on cargo volume. LCL cargo space is shared between many shippers, and hence you are only charged for the space you occupy. The rate you pay will be based on volume instead of weight and much lower than a full container.
- With LCL shipping, you can choose to pick up and drop off your goods directly from/to the warehouse where they are being loaded and offloaded. LCL is, thus, especially beneficial for businesses who keep low inventory at the destination, either due to cost or the nature of goods.
- When you ship small quantities of goods at frequent intervals, this helps reduce your investment in inventory space. This practical, logistical solution allows businesses to allocate to other areas the resources that would have been used for inventory management.
- Since your goods are transported on a consolidated basis, there is no waiting or extended transit time. Hence, the transport of goods via LCL shipping reduces the overall lead time.
- During peak season, vessels tend to get full faster. Here LCL shipping provides a flexible and faster option for when vessels are near-full capacity.
Why is LCL Shipping not an ideal fit?
- Since LCL shipping rates are calculated based on per cubic meter as compared to the flat rate of FCL shipping, it sometimes ends up becoming more expensive.
- Typically, the transit time in both FCL and LCL shipping is the same.
- LCL Cargo is subject to more handling (i.e. consolidation, transportation, deconsolidation), which increases the risk of damage or misplacement.
- Containers sometimes undergo a thorough examination by customs and other agencies when moving in and out of the country. Even if one consignment within the container needs to be inspected, all items will undergo delays.
- During an inspection, even if one box, crate, or pallet of a consignee is flagged for further inspection, the entire container will go through scrutiny. Hence, the costs involved in the process of inspection of LCL cargo needs to be shared by all consignees of the container.
Generally, small and mid-size companies prefer LCL shipping since they are not able to meet the threshold requirements to fill a full load container. If such companies were to wait until they reach that volume would mean that they may miss delivery deadlines. Further, LCL shipping is also a preferred mode when any company enters into new markets or serves smaller ones.
However, when looking for a container service, there is no definite answer. It is essential that you examine the benefits and deliberations of the container service to make responsible choices. Furthermore, with the advent of sophisticated technology, companies are also able to have a broader view of their supply chain and demand visibility to make a tactical decision.