What is LCL Shipping?
One of the most common methods employed for international shipping is Less than Container Load (LCL shipping), a strategy that optimizes the utilization of shipping containers by consolidating shipments from multiple shippers into a single container.
According to a report by Technavio, the global LCL freight forwarder shipping market is projected to increase by USD 21.6 billion, at a CAGR of 5.29% between 2023 and 2028.
The growing global cross-border ecommerce, rising demand for intermodal freight transportation, and increasing number of Free Trade Agreements (FTAs) have collectively contributed to higher demand for LCL shipping.
The rise of online shopping has increased the need for efficient and affordable shipping solutions, while the growing trend of intermodal transportation has created opportunities for LCL as a component of integrated logistics networks.
What is LCL Shipping?
LCL meaning in logistics or Less than Container Load shipping is a type of sea freight used for cargo that doesn’t fill an entire 20-foot or 40-foot container.
In this method, shipments are consolidated with other goods from various shippers to fill a container efficiently.
This is a popular option for businesses that have smaller shipment volumes or require flexible shipping options.
How Does LCL Shipment Work?
LCL in logistics acts as intermediaries, collecting shipments from various shippers and consolidating them into a single container. This process involves careful planning and coordination to ensure efficient usage of space and minimize handling time.
Once the container is full, it is sealed and prepared for shipment, involving securing the contents to prevent damage during transit and verifying that the container is properly closed and sealed.
The sealed container is then transported by sea to the destination port. This leg of the journey involves going through international waters, adhering to maritime regulations, and ensuring the container’s safety throughout the voyage.
Upon arrival at the destination port, the LCL freight forwarder deconsolidates the container. This process involves carefully removing individual shipments from the container and preparing them for LCL delivery to their respective recipients.
LCL freight forwarders often have specialized equipment and trained personnel to handle this process efficiently and minimize damage to the shipments.
What is an LCL Freight Forwarder?
An LCL freight forwarder is a logistics company that specializes in handling LCL shipments,
They act as intermediaries between shippers and carriers, coordinating the entire shipping process from start to finish.
LCL freight forwarders offer a range of services, including:
Shipment Consolidation: Collecting and consolidating shipments from various shippers into a single container.
Documentation: Preparing and processing all necessary customs and shipping documents.
Customs Clearance: Handling customs procedures and ensuring compliance with import and export regulations.
Ocean Transportation: Arranging transportation of the container from the origin port to the destination port.
Deconsolidation: Removing individual shipments from the container at the destination port. Delivery: Arranging delivery of the shipments to their final destinations.
How to Calculate LCL Shipping Costs?
LCL shipping cost is typically calculated based on the volume of the shipment and the distance it needs to travel.
The more space your shipment occupies in the container, the higher the cost, because LCL freight forwarders charge based on the volume of space your shipment occupies in the container. For example, a larger shipment that takes up more space will cost more than a smaller shipment.
Shipping costs vary depending on the distance between the origin and destination ports, since the longer the distance, the more fuel and other resources are required to transport the container. Additionally, certain ports have higher handling fees or other charges.
Fuel prices can fluctuate due to various factors, such as geopolitical events, supply and demand, and economic conditions. When fuel prices rise, LCL freight forwarders may pass on these costs to shippers in the form of fuel surcharges.
If the shipment is transported between countries with different currencies, exchange rates can affect the cost. Currency exchange rates can fluctuate over time, and changes in exchange rates can impact the cost of LCL shipping.
For example, if the value of the destination currency weakens relative to the origin currency, the cost of shipping to that destination currency weakens relative to the origin currency, the cost of the shipping to that destination will increase.
The Benefits of Shipping with LCL
LCL shipping is often more affordable than FCL (Full Container Load) for smaller shipments.
Less than container load offers greater flexibility in terms of shipment size and timing. By sharing the container with other shippers, you can reduce your risk of damage or loss.
LCL freight forwarders often handle customer clearance, making the process easier for shippers.
The Cons of LCL Shipments
LCL shipments may cause longer transit times. LCL shipments can take longer than FCL shipments due to the consolidation and deconsolidation process.
With LCL you have less control over your shipment’s journey compared to FCL.
With less than container load there is a higher risk of damage during the consolidation and deconsolidation process.
Additional LCL Fees
Shippers can anticipate higher leading additional fees associated with LCL shipments.
Terminal Handling Charges (THC): These surcharges are levied by port terminals for the handling of containers, including loading, unloading, and storage. The THC can vary significantly depending on the port and the specific services provided.
Documentation Fees: The preparation and process of necessary customs and shipping documentation often leading to fees. These documents may include commercial invoices, packing lists, certificates or origin, and customs declarations.
Customs Clearance Fees: Customs authorities may impose fees for the inspection, examination, and clearance of shipments, which can vary based on the nature of the goods, the value of the shipment, and the specific customs regulations applicable to the import or export.
Security Surcharges: To enhance security measures, some shopping lines may impose security surcharges to cover the costs of additional security procedures and equipment.
Currency Exchange Fees: If the shipment involves international transactions, currency exchange fees may apply from the conversion of currencies between the origin and destination countries.
Fuel Surcharges: Fluctuations in fuel prices can impact shipping costs. To offset the increased fuel expenses, shipping lines may impose fuel surcharges.
What is the Difference Between LCL vs FCL?
Here are the differences between FCL vs LCL Shipping:
Full Container Load
In FCL shipping, a shipper charters an entire container for their exclusive use. This mode is suitable for larger shipments or when full control over the shipment is desired.
Shippers have complete control over the container’s contents, ensuring the safety and security of their cargo.
FCL shipments often have faster times compared to LCL, as there’s no need for consolidation and deconsolidation processes.
With FCL, the cargo is handled fewer times, minimizing the risk of damage or loss during transit.
FCL shipments typically involve fewer customs procedures and documentation, streamlining the shipping process.
Less than Container Load
LCL involves sharing a container with other shippers, with advantages for smaller shipments or those seeking flexibility in shipping arrangements.
Less than container load is generally more affordable than FCL for smaller shipments, allows more flexibility in terms of shipment size and timing, as shippers can consolidate smaller shipments into a single container.
Sharing the container with other shippers can distribute the risk of damage or loss across multiple parties.
LCL freight forwarders can often handle customs procedures, reducing the burden on shippers.
Key Considerations when Choosing Between FCL and LCL
For larger shipments, FCL is generally more cost-effective due to the exclusive use of the container.
FCL shipments often have shorter transit times compared to LCL, making it a preferable choice for time-sensitive shipments.
In terms of control, FCL provides greater control over the shipment, as the shipper has exclusive access to the container.
LCL can be a more affordable option for smaller shipments or those with limited budgets.