If you have shipped small quantities of cargo across the border, you might have come across the term LCL shipping. Its mechanisms can be beneficial to save on expenses, prevent delays, and select the appropriate shipping procedure to suit your business.
In this guide, you will learn all that you need to know about LCL shipping, including its definition, operation, prices, advantages and disadvantages. By going through each section, you will be able to decide whether LCL cargo shipping will be the right one when it comes to your shipments.
It is important to know the basics of LCL and why it is so crucial in international trade before delving into the specifics.
What is LCL Shipping?
Less than container load shipping (also known as LCL shipping) is a type of shipping in which your freight is loaded into the same container with freight of other shippers. You do not have to pay the full container; instead, you only have to pay for the space that your goods take.
This type of shipping is common where the amount of cargo is low to justify a full container load (FCL). Due to this, LCL shipping is convenient and cost-efficient for small businesses with lower shipment volumes.
To further make sense of this, let us deconstruct the real meaning of LCL in shipping.
LCL Meaning in Shipping Explained
The LCL meaning in shipping is simple: your shipment does not occupy an entire container. Because of this, your products are grouped with other similar shipments to ensure maximum use of the container space.
This gives carriers the ability to effectively utilise container space and provides you with access to international shipping at no high initial cost. It also allows frequent shipping even when there is a change in volumes.
Owing to this shared structure, LCL shipping involves further processing of the shipping at the consolidation and deconsolidation points. This has the chance of affecting transit times, cost and risk factors, which we will look into later.
You have understood the meaning, so now let us explore the steps to follow in the process of LCL shipping.
How LCL Shipping Works
LCL shipping is a multiple-step process, and each stage is aimed at transporting your cargo in the most efficient manner to its destination. It can be quite complicated but it is always better to know all the steps and plan early to prevent surprises.
The workflow of the normal LCL cargo shipping is broken down into stages as follows.
Step 1: Consolidation at the CFS (Container Freight Station)
Your cargo is initially discharged to a Container Freight Station, also known as a CFS. In this case, your products are checked, registered and assembled with other deliveries in the same route.
Such a consolidation process will provide optimisation of container space. Nonetheless, this also brings with it an extra step of handling, and this may affect the timeline of the shipment.
Step 2: Consolidated Cargo Ocean Transport
After consolidating, the container is closed and loaded onto a ship that is to be transported. At this stage, your shipment is transported along with other LCL shipments in one container.
Tranist times at the sea are the same as those in FCL shipping, yet the total time also depends on the consolidation schedules. This makes the process of planning and booking ahead very crucial in LCL shipping.
Step 3: Destination Warehouse Deconsolidation
Once at the destination port, the container is transferred to a destination CFS. In this case, the container is opened, and their deliveries are divided according to their final destinations.
This deconsolidation level introduces an additional level of management and coordination. Due to this, clearance and processing times can be different based on volume and port efficiency.
Step 4: Final Mile Receiver Delivery
After being cleared and separated, your cargo is now ready to be finally delivered to your warehouse or to your customer. This last-mile movement is done by the local transport providers.
Precise documentation and effective communication will be needed at this stage in order to deliver on time. So far, the process is complete; you can do an assessment on whether LCL shipping delivered as per your expectations.
Now, we can discuss how LCL shipping has remained the preferred shipping method by many businesses, even with its complexities.
Advantages of LCL Shipping
LCL shipping can be used with a variety of advantages, particularly when the shipments are smaller or irregular. These benefits have made it a favourable option among expanding firms. Understanding these benefits will help you decide when LCL shipping can be adopted for your logistics strategy.
Small Shipments are Cost-Effective.
Cost-effectiveness is one of the biggest benefits of LCL shipping. You are charged for the amount of space your cargo holds and not for the whole container. It assists you in not needing empty containers and unwarranted freight costs.
Adjustable to Changeable Cargo Volumes.
LCL shipping is far ahead in terms of flexibility in case your shipping volumes vary regularly. You will be able to export smaller sizes without having to wait and collect enough goods to fill a complete container.
This will enable you to be responsive to the market. It also assists in keeping the inventory levels at par with no overstocking.
Perfect in the case of SMEs and Small Batch Shipments.
In the case of small and medium-sized enterprises, the LCL cargo shipping reduces the obstacle to international trade. You do not have to spend big initial shipping expenses to reach the global markets.
This makes LCL shipping highly appropriate when it comes to test deliveries, seasonal products, or product introductions.
But it is also necessary to get to know about the cons before making the shipment decision.
LCL Shipping has the following drawbacks
Although LCL shipping is flexible, there are limitations associated with it. These drawbacks may affect time frames, exposure to risks and complexity of operations. When you are aware of these challenges, it will help you to make wise decisions and plan in advance.
Longer Transit Times Due to Multiple Handling Stages
Consolidation and deconsolidation are used in LCL shipping and introduce additional stages to the voyage. Waiting time is added in every step.
Consequently, the time taken in the movement of LCL shipments is normally longer than the time used in the movement of FCL shipments. This may be a disadvantage when the speed of delivery is a priority.
Higher Handling & Damage Risk
Since your freight passes through the hands of many people, there is a higher chance of damage. Shared container space also implies exposure to the goods of other shippers.
It is necessary to reduce this risk by means of proper packaging and labelling. The selection of experienced logistics partners will also play a key role.
Logistics Complexity with Shared Container Space
LCL shipping involves the coordination of various shippers, freight forwarders and carriers. Any kind of delay to one shipment can have an effect on the whole container. This mutual dependence complicates planning and tracking. Documentation and communication are important in order to prevent problems.
The possible delays at Consolidation Points.
Delays may follow in case of a lack of matching shipments to occupy a container. Your shipment can be stored at the CFS because of the time of consolidation. The latter renders LCL shipping less predictable than FCL. In this regard, we can now consider the situations in which LCL would be most reasonable.
When Should You Choose LCL Shipping?
LCL shipping is the shipping method to use when the size of your cargo is small to occupy a container. It enables you to ship in an economical manner without additional costs.
LCL is also the most suitable in cases where the shipment rate is a more important factor than the speed. In case you want smaller, frequent shipments as opposed to bulk shipments, LCL will work.
The LCL shipping is also best suited to payment with flexible timelines. If small delays do not cause problems in your supply chain, then this option offers a high value.
Now you know when you should use LCL, it is also important to know when not opt for it.
When to Avoid LCL Shipping
LCL shipping should not be used in a scenario where your cargo is time-sensitive. The extra handling processes may cause delays with regard to urgent deliveries.
LCL would also be inappropriate for delicate/high-value products, which do not need a lot of movement. The environment of the shared container exposes the participants to risk.
FCL shipping can be cheaper if your volume of shipment is close to occupying a container. With such instances, simplicity and control outweigh the savings of LCL.
Having the decision factors in mind, it is time to deconstruct the calculation of the LCL shipping costs.
LCL Shipping Cost Structure
LCL shipping rates are usually computed on volume (CBM) or on weight or whichever is greater. This is referred to as chargeable weight.
Typical LCL cost elements are:
- Ocean freight charges
- CFS charges of origin and destination CFS fees
- Handling fees and documentation fees.
- Customs clearance costs
LCL shipping costs may be complicated at times due to several charges. Knowing every element will assist you in creating better budgets.
Next, we will discuss how it is possible to minimize risks and delays in the LCL cargo delivery.
How to Reduce Risks & Delays in LCL Shipping
In order to minimise risks in LCL shipping, you need to pay attention to proper packaging and labelling. Safe packs reduce damage to the package in the various handling processes.
It is also important to choose credible freight forwarders and carriers. Established partners are able to facilitate the process of consolidation efficiently and minimise the risk of delay.
Lastly, proper paperwork means easy clearance of customs. With proper planning and good communication, you will be able to make the best of LCL shipping.
Having covered the best practices, we can proceed to some of the questions that you might still have.
FAQs
What is LCL in shipping?
It is what is known as Less than Container Load shipping, which gives your cargo a shared container with other shipments. You pay only for the space when you use it.
The approach is widely applied when it comes to lower shipment volumes. It is a cost-efficient and flexible way to trade internationally.
What does LCL mean in shipping?
LCL means that your shipment does not fill up a container. It is instead consolidated together with other cargo. This common method works towards cost reduction, but it demands some extra handling. This trade-off is important to understand when making a selection of LCL shipping.
Is LCL shipping safe?
LCL delivery is mostly secure in the case that the services are handled by skilled logistics operators. Nevertheless, multiple handling steps increase the risk a little more.
It is much safer to use appropriate packaging and collaborate with reputable freight partners. There is also an added protection of insurance.
How is LCL cost calculated?
LCL cost is calculated on the basis of chargeable weight, which takes into consideration the volume and the actual weight. Pricing is done based on the higher of the two.
There would be other fees at the source and destination. Examining the cost breakdowns will prevent you from incurring unanticipated costs.
Conclusion
The LCL shipping is a viable option in case you have to transport smaller volumes of cargo abroad. This is because you can make better logistics decisions by understanding the LCL shipping meaning, process, cost, and risks.
LCL cargo shipping is flexible, affordable, and offers access to the market when used under the appropriate circumstances. When it is planned and you have partnered with reliable freight partners like DTDC Australia, you will be able to maximise benefits and minimise losses.
