Consolidation. It is a reality of the competitive environment that importers must abide under to source products that cannot be practically purchased in FCL quantities for multiple reasons. Perhaps, the nature of the item attributed to three possibilities: the commodity is prohibitive to shipping in FCL quantities, the production schedule does not support waiting for production in FCL quantities, or overflow cargo exists from another FCL shipment.
Regardless of the reason, LCL shipments can push your transportation costs well above the relative cost per cubic meter of your FCL cargo. In addition to the higher cost of the ocean transportation per cubic meter, LCL shipments always bear warehouse fees that must be paid. Don’t also forget the hidden costs behind damage claims due to increased cargo handling and increased Customs exam fees. Yes, U.S. Customs inspects more LCL shipments than FCL shipments. Even with these listed disadvantages, though, LCL shipments are usually just a necessary part of importing in our industry.
If shipping regular LCL cargo is required by your business model, starting a freight consolidation program can save significant money for your company.
The first important factor in starting a successful consolidation program is Communication. Shipment timing is critical to the process, but if you are already in the business of importing, you know that the one importing constant is that plans change. Production schedules, quantities, or your own product demand may change.
Therefore, you need to work with a freight forwarder that understands your company, what you are trying to accomplish, and provides you with the accurate information you need to make the correct routing decisions. Recognizing that communication is a two-way street, and your freight forwarder is only as good as the information you provide them. As long as you can effectively communicate with your forwarder, then the rest really just comes down to timing and patience.
If you know in advance that you are going to have multiple LCL orders from the same region around the same time, Group Your Orders, so the expected ship date is roughly the same to make sure you have the minimum amount of freight available to build a consol and maximize your cost savings. Except in the case of heavy freight, 40-foot consols are always going to save you more than 20-foot consols. And 40-foot high cubes can save you even more. It is also helpful if you can build a longer delivery window into your schedule. In almost every case, you will naturally gain some buffer time by simply consolidating into an FCL shipment. If you have already been shipping LCL, you know that the transit time for FCL freight is faster because you do not have to wait for the freight deconsolidation once it arrives. However, if you can add additional buffer time beyond that point, when it is possible, it will leave you with more options for consolidation at origin because you are able to hold freight and build volume with other orders.
Most warehouses at origin are pretty flexible with free storage, as long as they know that it will be part of a future consolidation that they will be loading. As with anything, there is a limit to what you can get away with. But as a rule of thumb, 2 Weeks of Storage are usually not a problem. Beyond that point, you want to talk to your freight forwarder about any potential storage charges, but the charges are generally quite small.
Often after explaining this consolidation concept to customers, they then ask what does it cost at origin for the consolidation services. The great thing about this program is that Cost is Generally Paid by Your Suppliers if you purchase on FOB terms. Since your LCL freight is already consolidated with other freight to ship as a mixed FCL load, your suppliers are already bearing this cost when you move the freight as an LCL shipment. Building your own consols usually just means that suppliers are paying the same cost to a different warehouse at the origin.
This last feature is what makes a consolidation program so successful as a cost-savings measure.
With only minor changes to your buying habits and active communications with your freight forwarder, you can save thousands in freight costs without having to drastically change the requirements you place on your suppliers