Groupage vs. Full Container Load, which is better for me?
A question that we’re frequently asked as a freight forwarder is ‘which container shipping method should I choose, FCL or groupage/LCL?’ The answer is not that one choice is inherently superior than the other. It’s more about which option is best suited to client needs and specific shipment requirements. Before we dive in, let’s briefly distinguish the terms FCL, LCL, and groupage.
Full Container Load (FCL)
As the name suggests, a full container load is exactly that. Your products are the exclusive occupants of ‘your’ container for the entire duration of the freight shipment, for which you pay a lumpsum. The major benefits of choosing FCL include less risk of damage, less handling time and direct shipping to destination. FCL shipments are loaded directly at the supplier’s warehouse and delivered straight to the recipient’s warehouse. That means uninterrupted cargo transport without any intermediary consolidation needed.
More simplistically, a full FCL container load as one shipper to one receiver. A container that has been combined with cargo from multiple shippers to one receiver is called consolidation.
Less than Container Load (LCL) and Groupage
With a less-than container load, the amount of cargo you have to ship is not enough to fill an entire container, and so your pallets are co-loaded in a shared container with other cargo. Freight costs typically depend on how many pallets you are shipping. So what’s the difference between LCL and groupage? The answer is the transport providers.
LCL services are provided by companies known as co-loaders or consolidators. These are operators that do not have a direct relationship with the freight payer and co-load pallets of all types of goods to fill the container. Whereas groupage is provided by freight forwarders like Hillebrand and we only load your pallets with other beverage products. Groupage service providers, operate warehouses where they combine cargo from several exporters, ship, deconsolidate the FCL and deliver to multiple receivers.
So which is better, FCL or LCL/Groupage?
It really depends on your need for each shipment. But most of the decision will be based upon the volume of cargo you need and/or want and cash flow availability.
The benefits of groupage and LCL shipments include cost effectiveness and the ability to choose the exact volume required for transport, without needing to wait for enough product to fill a full container before shipping. The total freight cost for transporting a pallet also being cheaper to ship than a full container, if that is the amount of product needed at destination. On the other hand, total freight cost per pallet is cheaper if you have enough product to fill a full container.
Cash Flow Benefits of Groupage
Groupage does offer major wins for the importer in terms of cash flow, as forecasting and planning are easier with fixed and regular transport departure schedules.
Let’s consider the wine and alcoholic beverage industry as one example. A full container shipment of ten pallets (20ft container) holds around 900 dozen-bottle cases. That means hundreds of bottles (and their associated cash value) will be sitting idly in a warehouse when sale of that product is slow and at risk of being unsellable or a less favourable purchase if a new label or vintage were to be introduced for example. Firstly, this is now ‘dormant’ money, having been taken out of a company’s cash flow and tied up in stock. Secondly, temperature-controlled warehouse storage is pricey; insurance and other associated costs quickly add up each month. Thirdly, if cold storage is not possible, the bottles will be subject to fluctuating and unregulated temperatures which can cause the wine to diminish in its quality.
So depending on the capabilities, storage and sales demand at destination, smaller wine shipments of bottles could be moved more frequently than one full load to minimise warehouse storage time and allowing funds to finance future groupage shipments. Moreover, less up front capital is required. Cash flow is not tied up in warehoused products, and less taxes and duties are needed to be paid since the total value being transported is less. In our wine shipping example, shipping five affordable shipments of two pallets each holding 60 cases of 12 bottles, makes more economic sense for a client that doesn’t want to overstock their warehouse, as well as saving total shipping costs. From a consumer point of view, it also allows the seller to react to market trends quicker by changing the product on offer if there isn’t a vast amount in stock that needs to be sold before a new range can be available.
Here’s an example.
You sell 2 pallets of a specific wine each month.
1 FCL of 10 pallets means you’ll be paying warehouse costs for 5 months, until all the pallets are sold, tying up cash in 10 pallets of stock.
5 groupage shipments of 2 pallets reduces significantly storage costs and if planned well, the longer transit time can be counted as ‘free storage’ whilst en route.
If you’re not sure which service is the right option for you just ask. We’re here to help you make the right decision for your business and your cargo.
Hillebrand’s beverage only groupage service
Hillebrand provides an attractive groupage offer, tailored to the wine and spirits industry. Our integrated service covers door-to-door loading and delivery, bonded warehouse operation, competitive rates and priority booking on cargo vessels due to the sensitivity of the product we carry.
With Hillebrand, cargo can be packed in insulated containers and temperature-controlled warehouses so that alcoholic beverages are kept at optimal conditions throughout their freight journey. As a specialist in the transportation of wine and other cargo that requires special care, we undertake all aspects of documentation and customs paperwork required to comply with local and global legislation and regulation. Moreover, our comprehensive cargo transport insurance policy covers the potential risks associated to sensitive product movements, and your groupage shipments can be tracked live through the myHillebrand app.
With our beverage only groupage service, you can enjoy fixed and frequent departures on multiple shipping routes to maintain a lean inventory, manage a better cash flow and preserve quality freshness.
Read more about Hillebrand’s beverage only groupage service