LCL Consolidation: Increase Profits by Managing Freight Costs
January 27, 2012
One of the most important factors with international purchasing is how to reduce costs, specifically shipping costs. When an order is less than a full container, an effective and relatively easy way to accomplish this is through LCL consolidation, which is the consolidation of orders that are “Less-than Container Load”. In China, well-managed transportation and freight logistics can make a significant difference in the bottom line, allowing for a more profitable buying experience. One of the big advantages of having a representative sourcing company handling your shipping logistics is that shipments can actually be consolidated across clients to the same general destination. This means being able to ship at less expensive full container rates while splitting the cost savings among the clients.
Here are three advantages of proper LCL consolidation:
Save on Freight:
Shipping agents will almost always charge a higher rate for the freight when shipping LCL, which means that the price is essentially rounded up. However, with a procurement specialist managing your shipping, in many cases you should be able to consolidate your goods with other clients’ shipments meaning that you get the discounted rate of a full container and pay the percentage of the volume of the container that your goods are occupying.
Save on Customs Fees:
This mostly applies to shipments of closely related industries and similar materials. For example, at CPG we do a lot of business with construction equipment and metal accessories. By consolidating LCL shipments of construction equipment, the factories can combine the orders when notifying customs, only having to make one declaration and thus reducing the associated costs, which are split among the clients.
Save on Clearance and Port Fees at the Destination Port:
When working with an LCL shipment, the port will charge the clearance port fees for each shipment, though sometimes you will be charged a percentage of the total dollar value of the goods. However, by internally consolidating among clients, these fees can be reduced by having the fee only paid once for that container and then splitting up the costs among all the clients or orders involved accordingly.
Some points to keep in mind:
- Plan ahead: If you are interested in consolidating orders, make sure to schedule accordingly and give your sourcing team due notice to allow enough time to plan the shipments in line with the consolidation requirements.
- Use Pallets: It is generally a good rule of thumb to pack your goods on pallets. This helps with loading and can avoid problems from occurring in transit.
All major ports around the world are good candidates for consolidating shipments. If you have a product manufactured in China shipping to a major port and would like to save by having CPG consolidate your goods, send us an inquiry today to receive a quote for your goods!
- Iris Zhou – CPG Sourcing Associate