FCL vs LCL shipments

• LCL (Less than Container Load) and FCL (Full Container Load) are the two primary container shipment methods

FCL (Full Container Load)

• The shipment occupies the entire space of a container
• The cargo does not share space with other merchandise

LCL (Less than Container Load) / Groupage

• Cargo occupies only a portion of the container
• Merchandise is shipped alongside items from other shippers within the same container.
• Consolidation refers to multi-shippers shipping to a single-consignee
• Groupage / LCL refers to multi-shippers shipping to multi-consignees

Prominent LCL Players

• The global LCL market is dominated by Vanguard Logistics, Shipco, ECU Worldwide, and CWT Globelink
• These are also known as co-loaders or consolidators
• Customer base mainly comes from overflow volumes from top 50 global forwarders and local forwarders
• Some large BCOs (beneficiary cargo owners), like Nike and Adidas, contract LCL consolidators directly.
• LCL consolidators are considered ‘neutral’
• This is due to supporting cargo for multiple forwarder competitors in consolidation boxes
• They avoid targeting the retail shipper market, preventing undermining their forwarder clients

Why LCL Shipments Exist

• Big forwarders mainly use 'gateway' (transshipment) LCL models
• Routes cargo from the region into a major port hub for re-export to final destinations
• Shipments from Bangkok to Jakarta are transhipped via Singapore
• A forwarder unable to run a regular service from Bangkok to Singapore may co-load with a consolidator in Singapore who delivers to their freight station where the forwarder handles the 2nd leg
• If the consolidator can offer a direct service from Bangkok to Jakarta, the forwarder can use that option

LCL for Far-Flung Ports

• Ports in Pacific island nations, South America, Africa and the Caribbean have low demand
• Running a regular consolidation service that is profitable requires stable cargo
• An alternative: inducement service (demand-pushed) with cargo sitting and moving only when container is profitable
• Customers avoid the inducement service due to unpredictable waiting
• Consolidators fill this niche by collecting cargo from multiple forwarders

LCL for Dangerous Goods

• Dangerous goods (DG) cargos need greater compliance and regulation for trucking, freight, storage and customs documentation.
• Complexity is managed at scale through Material Safety Data Sheet (MSDS) checks
• Fixed surcharges are implemented at destination ports for containers with DG cargo
• It makes sense to co-load DG cargo with a consolidator who has expertise and splits surcharges across shipments

When to Ship LCL

• Ship when volume is very small, use LCL for shipments under 13m³
• LCL rates are volume based, lowering shipping costs
• When cargo is too high for a container but too low for two, fill a container and ship the extra via LCL to optimize costs
• To book last-minute during peak season it is easier to secure a spot with LCL
• When the cargo is not urgent as LCL saves money compared to air freight
• When cargo is not high value, and not prone to pilferage

LCL Shipping Costs

• Pickup: Cost of collecting shipment from warehouse/factory
• Origin: Loading shipments into containers at a Container Freight Station (CFS)
• Main Leg: the cost of the sea journey, but CFS charges can be significant due to machine/manpower
• Destination: LCL shipments stop at a CFS for deconsolidation
• Delivery: Cost of trucking goods to the destination warehouse

Pricing for LCL Shipments

• Quoted per CBM rate with a minimum, including ocean freight and local charges (origin & destination)
• LCL Struggles due to overcapacity of container boxes led to freight rates dipping over the last 10 years
• In 2016, the ocean freight cost for a 20GP container from SG to HK dipped to $5 per CTN
• IA Rates have moved upwards since and hover around $100-$200
• Consolidation loads are hard to profit from because of low rates
• One profitable way to make a margin from LCL shipment is to add margin in destination port for CIF shipments
• Costs can be opaque at certain destination ports (e.g. PH, ID, Myanmar)

Benefits of Shipping LCL

• To save money on smaller shipments
• Cost savings on inventory
• To avoid high air freight prices
• To find space during peak season

Drawbacks of Shipping LCL

• Longer transit times
• Higher cost per unit
• Delays can arise
• Possibility of damage

How DHL Creates LCL Product

• DHL Expedited cuts lead times from Shanghai and any Chinese location to the East Coast by up to 20 days, which is a middle ground between air and sea freight

DSV’s Direct LCL Rail Service

• The service with consolidation box from China to Europe covers various origins across the whole China
• Rail service is ideal for businesses whose goods have a lifespan that is too short to allow shipment by sea
• It is interesting for low-margin products where air freight is too costly
• DSV offers FCL and LCL rail services which connect China and Europe

Transit Time of rail journey from CFS to CFS

• The rail journey takes between 17 - 29 days from China to Europe
• It provides multiple weekly services for high volume destinations

Large Freight Forwarders

• They can start LCL / groupage services to service existing and attract new clients

LCL Groupage vs. Buyer's Consolidation

• LCL / groupage refers to consolidating cargo from multi-shippers for multi-consignees
• Buyer's consolidation refers to consolidating cargo from multi-shippers for a single-consignee

LCL / Groupage Process Flow

• The process may operate a transload hub, where FCL are breakbulk at international hubs, introducing additional handling
• Deconsolidation center required to breakbulk and load on truck for final delivery to warehouses

Buyer’s Consolidation Process Flow

• Decon center isn’t required unless a container is loaded with cargo for different warehouses and there are sufficient volume for cross-docking

Buyer's Consolidation Applicability

• Applicable to large brands sourcing from multiple factories even within one country
• For instance, Nike has 135 factories in China, mainly located near Shenzhen, Shanghai, Qingdao, and Fuzhou
• Nike's factories in Vietnam are primarily in HCM, with a growing presence in Haiphong
• Not all factories produce full container loads of apparel every week
• Factories with smaller production volume consolidate cargo at a CFS with cargo from larger factories for FCL

H&M's Supplier Factories

• Supplier factories ship by FCL or LCL/groupage model
• This consolidates cargo with other fashion brands or acceptable cargo types.
• Other supplier factories ship by FCL and buyer's consolidation model

Case Study in Transportation Cost

• Around 20,500 cbm is delivered to Shanghai rather than the nearer Ningbo
• Factories in Zhejiang Province primarily deliver to Shanghai.
• This is vice versa for for NGB, but volume insignificant
• The potential Annual cost saving from using a alternative scenario in relation to Transportation = -22.1%
• The annual cost saving in alternative scenario in relation to CFS = -2.5%
• Compared with current total cost the Saving are mainly from the reduction of transportation cost to CFS/Port

Recommendation for Transportation Optimization

• Scenario 1 is to keep Shanghai and Ningbo CFS and cluster vendors to deliver to adjacent CFS to gain cost reduction in transportation and CFS handling fee
• It is also possible to Save Cost save Cost Through Of Use D53' Container and consolidation, however there is higher cost for outbound container because of more limited loadability.