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LCL Consolidation: The Cost-Saving Advantage for Shippers

Did you know that thinking small can lead to bigger returns? Every inch of unused container space is money lost. Yet, countless freight forwarding companies pay for what they don’t use and end up with just razor-thin margins. The emergence of LCL (Less-than-Container Load) consolidation has been a boon for shippers facing mounting pressure to reduce costs. It is ideal for small cargo shippers who would never like to pay high costs for a full container.

Traditionally, logistics was a straightforward concept: one shipper and one container. This conventional approach often left small and mid-sized exporters struggling with high costs for underutilizing a full 20-foot or 40-foot container. Today, we have a more dynamic approach that allows multiple shippers to pool their smaller shipments in a single container. You can now move your goods in the same space as other global shippers, and share the freight cost while enjoying the same competitive advantages that come with full container shipments. 

Let’s dive into a deeper understanding of what LCL consolidation entails, its benefits, and how to leverage it effectively. Read on!

 

Breaking down LCL Consolidation

At first glance, LCL consolidation may appear to be just about optimizing space within a container. But in reality, it’s much more than a ‘space sharing’ exercise. LCL has evolved into a powerful strategy for fine-tuning your entire freight forwarding. Think about it - splitting shipments across various destinations can allow you to maintain greater control over your distribution channels. 

 

  • Small shipments to distant markets can be transported at a fraction of the cost and in a much shorter time. All while reducing the risk of holding onto too much-unsold inventory.

 

  • High-volume shippers are also increasingly turning to LCL consolidation to stay agile. You can scale your shipments to match real-time demand, which helps keep your inventory levels in check.

 

Instead of committing yourself to large containers that might potentially be underutilized, LCL allows you to ship only what’s necessary at any given time. You’re only paying for the portion of the container that’s actually in use. It’s about keeping things lean, fast, and on-demand.

 

The Cost-Saving Advantage of LCL Consolidation

The global LCL shipping market is set to grow from USD 9.41 billion in 2023 to USD 13.21 billion by 2030. (Source: ScikIQ). Why has it gained so much traction lately? Let’s see where it actually helps.

 

Effective Cost Control in Volatile Markets: 

When we talk about Full Container Load (FCL), it often locks you into fixed costs, regardless of what’s happening in the market. This predictability can put a lot of strain on operational budgets, especially if there’s a demand slump. LCL consolidation flips this situation by turning shipping costs into scalable and variable costs. You can adjust shipment sizes to align with real-time demand, eliminating the financial drag of half-empty containers.

As a result, you can quickly pivot when there’s a market demand slowdown in any region. You can also consider shipping high-return products that don’t require a full container. Undoubtedly, the ways in which you can plan logistics with LCL consolidation would get multiplied. 

 

Smart Capacity Management to Tackle Space Shortages:

Do you know what has been a never-ending challenge in global shipping - The shortage of containers, even in India. When it’s the peak season of the year, General Rate Increases (GRIs), Peak Season Surcharges (PSS), and Emergency Bunker Surcharges (EBS) tend to touch the sky. The available container space becomes more and more limited. However, LCL consolidation can bypass the real financial impact of these surcharges with lower storage fees.

For instance, we all saw how the holiday season increased the number of consignments being shipped. With LCL, freight forwarding companies can maximize every inch of container space. When multiple shippers split the costs of fuel, labor, and logistics, everyone wins with a much lower per-unit shipping cost. The ones who play smart will opt for LCL consolidation.

 

Accelerating Freight Forwarding with Shorter Lead Times:

The notion that LCL consolidation is slower no longer holds true. To be fair, when you have an optimized consolidation schedule and strong logistics network, it guarantees even frequent sailings and better transit times. If you’re someone relying on a Just-In-Time (JIT) inventory model, wherein inventory is replenished exactly when needed. LCL consolidation keeps your supply chain running smoothly. Your products can move from warehouse to store, port to destination as and when demand arises.

This can prove to be one of the most strategic ways to cut down on overall logistics costs without compromising on quality. By shipping in smaller, more frequent batches, businesses can avoid overstocking, free up valuable warehouse space, and keep cash flow steady. Plus, faster restocking means shelves stay full, customers stay happy, and your operations keep scaling.

Breaking into Niche and Emerging Markets:

One of the standout advantages of LCL consolidation is the ability to access markets that might be too costly to reach with FCL. LCL consolidation provides a way to scale shipments more flexibly, helping you enter new markets without committing to larger shipments. Sharing container space allows businesses to test new markets, launch limited product lines, or cater to regions with erratic demand. 

Plus, smaller shipments make it much easier to handle customs and local distribution in emerging markets. This smart, low-risk approach helps you stay ahead of the competition and seize growth opportunities in underserved regions. The possibilities attached to LCL consolidation are endless.

 

Staying Resilient Against Supply Chain Disruptions:

Geopolitical tensions, the Red Sea conflict, US port strikes, and trade wars – these unpredictable events can really shake up your supply chain. However, when you consolidate with LCL, you can bring the impact to the minimum. LCL consolidation makes your supply chain more responsive and less vulnerable to sudden interruptions.

You can reroute or redistribute your cargo with minimal disruption. Since you're sharing space with other shippers, it’s easier to tap into broader carrier networks and alternate sailing schedules, giving you more options to stay on track. LCL consolidation ensures a steady flow of goods and safeguards your bottom line during times of uncertainty.

 

Don't believe us? Here's the real-time impact of LCL Consolidation!

Challenge:
A customer needed freight forwarding to ship 2 tonnes (15 CBM) of garments to Barcelona. Although they initially considered a Full Container Load (FCL), the shipment volume was too small to justify the high cost associated with FCL.

Solution:
Kenshine recommended switching to an LCL consolidation option, consolidating the customer’s shipment with other cargo going to Barcelona. This provided a more economical alternative to a 20-foot container.

Results:

  • Cost Efficiency: The LCL solution costed them just under $450, significantly lower than the $1800 FCL option, resulting in a 75% cost reduction.
  • Streamlined Logistics: LCL allowed for better optimization of shipping space, making it a perfect match for the customer’s shipment volume.
  • Greater Flexibility: The LCL consolidation provided the customer with more flexibility in shipment size and scheduling, ensuring shipments could be made more frequently and at the right time.

 

Final Thoughts

LCL consolidation needs smooth coordination of loading and unloading, careful cargo handling, and, above all, an efficient scheduling and routing system to ensure freight forwarding runs on time. In fact, you need to have a detailed understanding of cargo compatibility, transit times, and potential bottlenecks in the distribution network. 


Kenshine brings unmatched expertise to LCL consolidation, ensuring seamless coordination with a focus on maximizing cost savings and minimizing lead times. By leveraging our extensive local network and proactive strategies, we transform every shipment into an opportunity to enhance operational efficiency.