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LCL Services are taking over the market: More and more groupage shipments by sea freight

Demand for LCL services in the logistics industry is growing: more and more companies are shipping their goods by sea freight in groupage containers. The Covid-19 pandemic is accelerating this development.

Demand for LCL services in the logistics industry is growing
Demand for LCL services in the logistics industry is growing

In times of globalization and e-commerce, companies are facing ever-increasing competitive and performance pressure. Efficient logistics management, optimum processes, and punctual, cost-effective deliveries are becoming more and more important. Companies are analyzing their supply chains and increasingly shifting to sea freight. Sea freight groupage, or less-than-container load (LCL), in particular has developed into a proven and cost-effective alternative to air freight. Many companies, especially in the automotive, life science and healthcare sectors, use these groupage shipments by sea. “This lets even larger senders react to seasonal fluctuations in volume by splitting their extensive transport volume into smaller shipments,” says Frank Huster, Managing Director of the German Association for Freight Forwarding and Logistics (DSLV).

Volume in the LCL sector has been growing for years, as illustrated by data from the port of Hamburg: “Despite rather stagnating numbers in TEU handling, customs authorities report that clearance figures have risen over the last five years,” Frank Huster says. “Today, countless freight forwarders and specialty carriers serve as Non-Vessel Operating Common Carriers (NVOCCs) and operate global groupage networks with destinations all over the world. In this respect, there is probably hardly a country today that is not already served by a logistics network.”

Stronger LCL demand in the time of the coronavirus

The global spread of the coronavirus is reinforcing the high demand for LCL services. With disruption in the global economy and declining import volumes, more and more companies are opting for groupage shipments. “Covid-19 has changed the entire world of logistics,” says Andreas Saleske, Department Head Global Sales Development ASL at DACHSER. “Air traffic has shrunk to an unprecedented minimum, which is forcing customers to switch to alternatives. We also have to recalculate delivery times. Provided the product type and delivery time allow, LCL is a cost-effective and eco-friendly way of transporting goods.” Michael Reink, Head of Location and Transport Policy at the German Trade Association (HDE), also sees an increasing demand for LCL services in the time of the coronavirus: “Covid-19 is intensifying many trends, which is making market changes more apparent. Companies are taking a long, hard look at their supply chains and logistics structures.”

Air traffic has shrunk to an unprecedented minimum, which is forcing customers to switch to alternatives. We also have to recalculate delivery times. Provided the product type and delivery time allow, LCL is a cost-effective and eco-friendly way of transporting goods.

Demand for accelerated LCL services in particular is rising during the Covid-19 pandemic as more and more companies reduce their inventories to a minimum. As a result, transport shipments are becoming smaller and fast transport of time-critical shipments is necessary. Although accelerated LCL services are more expensive than their conventional counterparts, they are still cheaper than air freight.

LCL services as alternative to air freight
LCL services as alternative to air freight

Intelligent logistics solutions are becoming more important

Nevertheless, demand for conventional LCL services will continue to grow as well. “We’re confident that LCL will play an important role in the future,” Andreas Saleske from DACHSER says. “The consumer and industrial goods sectors especially need LCL.” That’s why DACHSER, as market leader in the German and European groupage markets, is constantly working hard to expand its LCL network. This network has excellent LCL connections around the world, serving the US, India, Hong Kong, and more. In March 2020, the company extended its LCL service by adding a new route from Europe to Chile. The effects of the pandemic in particular have shown how advantageous it is for a company to have its own international groupage network. “Having our own network meant we could react flexibly in terms of coverage – Chile, for example – and also adjust the necessary capacity at short notice,” says Rolf Mertins, Head of Global Management Ocean at DACHSER.

But how does the groupage get from the port to its destination safely? This is where DACHSER sees great potential in the service DACHSER Interlocking: with this comprehensive concept, customers can rely on fully integrated logistics solutions consisting of transport by truck and ship, warehousing, and value added services – all from a single source. Intelligent logistics solutions such as Interlocking will play a crucial role in the future and provide customers with a cost advantage. “We look at what customers appreciate about DACHSER regarding groupage services in Europe and transfer that to our international network,” Rolf Mertins adds. “The events of this year have reinforced this process.” 

“Managing supply chains to reduce their vulnerability to disruption is becoming more and more difficult for logistics companies that operate worldwide,” Frank Huster says. “Especially regarding international projects, they will have to keep a tighter grip on supply chain costs and capacity and minimize risks. To achieve predictive logistics, close monitoring with clear contractual arrangements and transparency in the supply chain will become even more important than before.”

Contact Natalia Olawella