When shipping cargo, every piece matters.
As part of a bigger mix, or standing alone, small amounts of cargo deserve the same efficient delivery as bigger ones. When businesses don’t have shipments large enough to load a full container, international logistics can seem like a bit of a frustrating hurdle. At times, this hurdle might stop small and medium businesses from expanding their reach. In cases like these, there is a flexible, reliable, and economical solution whose growth, demand, and acceleration has risen during the COVID-19 pandemic. That solution is called Less than Container Load, or LCL.
What is the meaning of LCL and how does it work
LCL stands for Less than Container Load, meaning a shipment (e.g., pallets and boxes) that is not large enough to fill a standard cargo container, in turn referred to as a Full Container Load (FCL).
Less than Container Load can simplify and optimise supply chains, all the way from the production line to the final customer’s shelves. As mentioned by logistics magazine Global Trade, LCL shipping provides shippers with “cost and time savings”. To many businesses, LCL is a service used to penetrate new markets, reach new customer segments, and try offering new product categories. This method allows them to do so in a cost-effective way, just-in-time to keep inventories levels at a minimum and without potentially over-committing to larger volumes early on. For some, LCL is perceived as complex, with a global market that is best described as fragmented and highly competitive. Given this, competition tends to be active, with great participation by local and regional freight forwarders.
Less is more: different size and different needs
Even the smallest cargo can have the biggest impact on the supply chain of a business. From a geographical perspective, Less than Container Load volumes seem to follow the pattern of Full Container Load (FCL) shipments, however demand for LCL services in the logistics industry is growing with more companies shipping their goods in groupage containers. “LCL is a fantastic option to expand logistics beyond the standard full container and keep flexibility. Lately, we have seen a significant shift in market dynamics where goods being shipped in smaller quantities but with greater frequency, together with keeping inventory at a minimum and the grow of ecommerce, has pushed the demand for LCL shipments" explains Kasper Krog, Global Head of LCL Product Management at Maersk.
Typically, industries that need and use LCL include fashion, lifestyle, automotive, chemicals, technology, and FMCG. In terms of countries, a report by Mordor Intelligence points at Less than Container Load having a particular demand in Europe (specifically Germany, the United Kingdom, France, Italy, Spain, the Netherlands, and Poland) but LCL is also experiencing an increased demand in China, Vietnam, Bangladesh, USA, Brazil, Mexico, and India. Usually, this type of shipping solution is particularly advantageous for small and medium businesses trying to grow and optimise their logistics end to end. Additionally, at times these businesses use LCL services for door-to-door, out-of-home delivery. However, this doesn’t exclude other business types, in fact, according to their company size, there is quite a big difference in the interests and needs when using LCL.
- Small and medium size businesses don’t usually have the time or the specific capabilities for ad hoc logistics, so they are typically looking for a hassle-free logistics solution. They are interested in strategic partnerships with Less than Container Load providers that they can trust, to optimise their logistics and focus on their strategy.
- Large businesses can choose between insourcing Less than Container Load logistics (having to invest heavily on ad hoc facilities and trucking options) and are typically looking for powerful partnerships with specialized providers that can deliver best-in-class solutions in this area to optimise their supply chains.
Why use LCL for shipping cargo?
- Flexibility: Less than Container Load offers businesses several options to select pickup and delivery at specified locations, as well as choose between multiple schedules. Therefore, it allows businesses to ship goods with flexibility, as they can ship smaller quantities (such as small boxes and pallets) frequently without having to pay for a full container, if it is not needed.
- Cost-effectiveness: Price is a very important factor. Optimised small-volume shipments are convenient as businesses only need to pay for the space used for what they ship, in this case quite reduced fees compared to a standard FCL shipment.
- Digital ease and visibility: If digitally powered, LCL is even more hassle-free and powerful. By giving the opportunity of a digital self-service online journey, and with the use of use of EDI and API systems, it provides a direct information exchange for faster bookings, better visibility on cargo location, transparency on documentation (e.g., incoterms and trade policies) and on costs. A digital LCL service empowers businesses to plan and react, if necessary, directly from their phones or laptops.
- Lean inventory: When shipping small volumes or entering new markets, businesses wish to maintain a lean inventory. With Less than Container Load businesses cargo can be shipped without having to purchase a lot of space or pay for storing a large inventory, keeping logistics lean, fast, and ready for anything.
- Reliability: For Less than Container Load users, experience and reliability are key. Providers that manage LCL services excel at coordinating, consolidating, and transporting small-volume shipments with other shipments (such as cargo from other shippers), to ensure on-time departures, while offering access to thousands of trade corridors. This includes, having certainty on arrival and transit time, without issues or delays. Choosing a reliable Less than Container Load partner can therefore help with getting guaranteed loading and meeting tight deadlines.
- Convenient pairings: Finally, Less than Container Load can also be used together with other services or transports, making it an even more versatile, dynamic, and convenient. These can be air freight, consolidation (combining multiple shipments into a single truck or container), deconsolidation (dividing LCL cargo and transporting it to its final destination independently), insurance, customs, visibility services, and more.
Forecasted trends for LCL
The rise of e-commerce and cross-border trade will further contribute to the increased demand for smaller shipments, and more frequent deliveries make Less than Container Load shipments even more attractive for companies that do not have enough cargo to fill a full container.
For the rest of 2023, third party sources indicates that the industry will experience an increased demand for Less than Container Load (LCL) ocean services due to its cost-effectiveness and flexibility for smaller ocean shipments. This need is expected to grow in the coming across the globe. According to a recent report by Mordor Intelligence, from 2022 to 2027 the Less than Container Load sector is expected to gain a compound annual growth rate (CAGR) greater than 3.5% in Europe, adding that “soaring prices on the trans-Pacific and Asia-Europe air and ocean trades make LCL services a high-margin industry”. This seems to be a rising trend also in North America, where SupplyChain24/7 reports “U.S. e-commerce sales continue to grow” and “shippers are focused on importing more frequent shipments”.
The future of LCL lies in partnerships
Businesses are getting tired of dealing with multiple vendors and complicated processes for what seems like a simple small shipment.
Trends show that businesses interested in entering this space should seek to establish new partnerships with trusted providers that can offer LCL opportunities, while providing an easier experience with booking and managing these shipments digitally. The ideal option would be to work with a one-stop shop solution with the ease of a single point of contact. In conclusion, Less than Container Load can be a hassle-free and speedy process, particularly when digitally supported by an experienced provider. This gives businesses greater flexibility with shipping small cargo loads and allowing them to benefit from faster, easier deliveries.