CHAPTER 1
WHAT IS A LCL / LCL SHIPEMNT?
An LCL /LCL Sea- freight Groupage Consolidation service is a combination of multiple shipments from different customers in the same container based on a cost per cubic or per ton. The Shipping Agent provides clients a weekly Container and offers importers the potential of sharing in this container at a very competitive rate.
Non -Stackable Pallets in a LCL/LCL Consolidation Box
International Shipping agents like to fill their Consolidation boxes with STACKABLE PALLETS IE : Pallets that can be loaded on top of one another. For the simple reason that they want to “maximize “the entire space in a container.
However sometimes A client might have NON- STACKABLE Pallets due to various reasons ie:
• Size or shape
• Shipping Fragile cargo which cannot support the weight of another pallet.
Additional costing on freight rates for Non stackable Pallets.
If your cargo is Non -Stackable Pallets, the cost will be more expensive, since your pallets will take over more space.
As a guide only, if the height of your NON-STACKABLE pallet is 1.5 meters, most International Shipping Agent will charge you, for Non-Stackable Pallets, based on 2.00 meters (every Freight company has its own rules ) due to the fact that they cannot fill the space on top, so they need to charge you for the “empty space “
WHAT IS FCL /FCL SHIPMENT ?
An FCL/FCL Full Container Load is a shipping option where a container is exclusively used by one shipper/exporter for one consignee/importer and there is no shared cargo in the container. FCL containers are used when an importer has enough cargo to fill a container to maximize the cost of the product.
The capacity in a container depends on the kind of product packaging, however this is a rough estimate of the cubic per container.
20 Box: between 28-33 cubic loose cargo or approx. 10Pallets
40 Box: between 55- 66 cubic loose cargo or approx. 20 Pallets
Example of what your container will look like if you send cargo as an FCL vs LCL.
PICTURE
Pros and Cons in sending cargo in an LCL Consolidation Container
PROS
It can be used for shipments as small as 1 cubic and less than 15 cubic ( depending on the current rate structure from each country )
Ideal for start-up companies who don’t have enough to fill a container.
Cost is cheaper when cargo is under 15 cubic.
CONS
There is a higher risk of damages and loss when sharing a container.
If one consignment in container gets chosen by customs for inspection it will hold the entire container
The fees on arrival can be higher for over 15 cubic.
If cargo is not stackable cost of freight is higher
The shipping Agent might not have enough cargo to fill a container and the sailing is postponed.
Pro and Cons Sending Cargo in an FCL Container
PROS
Importer fills the container with his own cargo and does not have to share.
Unit price of product is cheaper as cargo is based on a whole container rather than x cubic.
Unloading at arrival port and delivery to final client is quicker.
Local charges on arrival are cheaper as they are Fixed per Container
Lower risk of cargo getting damaged
CONS
Shipping lines only give importer a certain amount of free time to unpack container before Storage rates apply
If customs want to inspect, the whole container is held up for inspection.
Inspection costs are higher than LCL shipments.
When to move from LCL to FCL Services
Deciding when to use LCL /LCL Consolidation Services vs FCL Services can be overwhelming for new importers especially when their volumes increase , and they need to decide:
– if it is more economical to move cargo as LCL or start filling an FCL container.
– Do I have enough Cashflow to determine the additional stock and costs of moving to an FCL
There is no simple answer as there are several factors involved in this decision making. As a rule, if you can ship enough cargo to fill more than 50% of your total volume you should use an FCL container.
However, one of the most important points is to understand is to find out what is the break-even point which will determine if you are ready to move your next shipment from LCL to FCL
CHAPTER 2
UNDERSTANDING YOUR BREAKEVEN POINT
Please download your PDF Sample exercise for this chapter
The Break-even point is the Total amount of cubic meters that will determine your decision on using either an LCL Consolidation Service or an FCL Container
As a container is not filled with water, It is difficult to determine exactly how much cargo can be stuffed in a 20 ‘ FCL or 40 FCL as it depends on the dimensions and sizes of the cargo especially if filling it with pallets vs loose cargo.
A General rule is to consider the following as an “average” when deciding on how much cubic meters we can stuff a a 20 / 40 Container.
TEU – 20 Box we average around 23 cubic meters.
FEU – 40 box we average around 55 cubic meters.
How to find your break-even point?
It always depends on the current freight rates and the country of imports. However, for the sake of showing you the maths behind this concept , we shall base this exercise on 2 sample shipments from China of 13 cubic and 16 cubic meters and our terms are FOB ( Free on Board )
We now need to find your breakeven point to determine best mode of transport to use ie : LCL or FCL
Step 1 :
Ask your Freight agent to give you 3 costings ie :
– Costing from FOB Port to your warehouse for 13 cubic as LCL /LCL shipment
– Costing for FOB port to your warehouse for 16 cubic as LCL /LCL Shipment
– Costing for FOB port to your warehouse for 20 Box Container
Step 2 :
The costings you have download give you a total amount as follows:
If you bring in 13 or 16 cubic meter as LCL Consolidation Shipment the total costing is :
• 16 cubic shipment coming in as LCL Consolidation : Total Amount $ 4319
• 13 Cubic Shipment coming in as LCL Consolidation: Total Amount: $ 3573
If you bring in 13 or 16 Cubic in a 20 Box container the total costing is :
• 20 Box Container coming in a FCL shipment: Total Amount: $ 3460
These three examples tell us that anything Under 13 Cubic is our Break -even point :
This is our break-even point, and therefore it is cheaper to bring in as LCL shipment
– anything Over 13 Cubic
It is cheaper to bring as a 20 Box container
Cash flow permitting :
Should you have enough cashflow in your business to consider bringing in a 20’ Container, you can add another 8-10 cubic free of charge as you have already paid for the whole container with the first 13 cubic meters !
CHAPTER 3
UNDERSTANDING AIRFREIGHT CONSOLIDATION SERVICE
What is a ULD ( Unit Load Device )?
PICTURE
Airfreight shipments can either be transported “ LOOSE “or in a “Consolidation Box “very similar to a Sea freight Consolidation Container, with the difference that it is much smaller in size – These Devices are called ULD ( Unit Load Devise ) and they can vary in size/volume
Below and example of an ULD – LD3A Consolidation Airfreight Services combines multiple shipments from different customers as it is a cheaper option for the client than sending cargo on its own . The Shipping Agent “buys “a ULD device and offers importers the potential of sharing in this ULD Device at a very competitive rate
Shipping Agents who offer Consolidation Service have fixed departure and fixed space
Small Parcel Shipments
It is difficult to understand when to call International Shipping Agent or a or a “specialized “Small parcel International Shipping agent ” who concentrates on small parcels in airfreight
What is considered small? The guidelines vary, as it rates are always based on the frequency and final destination. However, if you have a a box /shipment which is under approx. 70 kgs in volume weight, it is much easier and sometimes more economical to use a “specialized small parcel company “that will provide you with a door to door service.
These companies due to the high volume of small parcel shipments they carry , offer, in certain countries a very quick turnaround from door to door which varies from country to country, This service is ideal if you want to start your business off with a few samples of a product you are thinking of buying.
Ratio volume to kgs : Small parcel company may use a different rate ( eg: 1 cubic : 250 kgs ) compared to a standard international shipping agent who offers 1 cubic : 167 kgs . So please make sure you always give the company your dimensions as you will then know what ration they will base the quote on .
TRICK OF THE TRADE AND RECOMMENDATIONS
FINDING THE RIGHT FREIGHT COMPANY
Another recommendation I would like to give you for LCL consolidation service is to find a freight company that offers their own consolidation container. This means that the shipping agent has enough cargo weekly or monthly to be able to give you set rates and set departures depending on the country of import for both air and sea.
Their rates might not be as cheap as the competitors but if you are starting out, regular departures and knowing when your cargo will arrive at destination is vital for the growth of your company.
If they can unpack their own consolidation boxes in their own warehouse, that would be an extra advantage, as they don’t have to rely on a 3rd party, however it is not always possible.
Not all shipping agent has their own consolidation service and the ones that don’t offer this service, then have to “buy space “through a wholesaler or what we call in our industry a “co-loader “which is a very common thing to do as not every freight company, has enough volume from every country to fill a full container box.