With so many ways to move goods around the world today, choosing a solution that best meets both business and customer expectations is sometimes a challenge.
Ocean freight has often been the preferred option for businesses shipping large quantities of goods – in fact sea freight carries over 90% of the world’s economy according to figures from the UN. This is mostly due to how cost-effective this method of transport is compared to air freight.
However, as the sharing economy continues to grow across a range of industries and more businesses start working together to offer an improved service, it seems as though this trend is transferring to the world of logistics too. There has been a growth in LCL (less-than-container load) shipping, which involves consolidating several smaller shipments from different shippers into one shared container. This is particularly useful for those companies who are sending products that don’t take up much space. But what else drives the move towards this style of shipping – and what other advantages can it offer?
There may be multiple reasons to explain why LCL has seen such growth in recent times. The changing nature of trade has likely played a part in increasing the demand for these types of shipments. Regular tariff fluctuations implicate the possibility that businesses are reluctant to ship a full inventory if prices are rising on a certain goods. So splitting up their cargo is a solution to avoid the higher costs.
The rise of e-commerce has likely also played a part – China, for example, imports and exports a huge amount of goods. With such high volumes, during peak season shipping it is often easier to secure your spot with LCL shipping rather than FCL (full container load), as full containers are likely to get booked up well in advance. And as speed is of the essence, neither customers nor businesses want to be waiting around for too long. Smaller shipments will help to keep the supply chain moving.
One of the biggest advantages of using LCL shipping is the opportunity to keep inventory lean – by shipping goods in smaller quantities, more frequently. This is especially beneficial for those businesses exporting to a new market, who perhaps don’t want to send products in bulk until they know how well these are selling.
Additionally, unlike with FCL shipping, where businesses must always be able to fill a whole container and likely maintain a high inventory of goods, those using LCL save on the cost and space that normally comes with storing this larger inventory in a warehouse. LCL is in many cases also an easier and cheaper alternative to other forms of freight, such as air. Sea freight is charged by volume at a flat rate, so businesses are only paying for the space inside the container they are using and share this with others who are shipping to the same destination.
LCL is certainly not a solution for every shipper – it very much depends on the type of goods being sent. Clothes or phone cases, for example, are lower volume and therefore are more cost-effective to send via this method than large electrical items or other bulky goods. Ultimately, the decision for businesses rests on whether they will need use of a full container when shipping – if this is not the case, LCL is often a great way to keep inventory lean and costs down.