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Optimizing your global supply chain by consolidating your cargo ( Ocean Shipping Chapter)

Updated: Dec 28, 2019

For importers who bring in quantities of a few pallets but do not wish to pay for the full ocean freight container, it is very cost-effective to contact a forwarder that offer consolidation cargo services.

The entity that handles such operations are known as Consolidators (Groupage Operators). I am actually a consolidator for ocean cargo importing from German and air cargo importing from Switzerland. You could find last week's posts on this blog about air consolidation.

Most importers think LCL or consolidation cargo is the cheapest way but that is not always the case

Consolidation may not be cheap for your cargo

In shipping, there is no “one size fits all” solution, so remember, a consol box may not most cost-effective for everyone.

For example, if your cargo is more than about 12-14 CBM or heavy cargo such as Tiles etc, usually it may be cheaper to ship FCL as the per ton cost when using a consol box is higher in these cases.

This calculation is based on economies of scale.

When we speak about economies of scale it is important to remember that LCL cargoes are charged based on “revenue ton” or “freight ton” or most commonly referred to as W/M.

W/M refers to weight (unit: ton) or measure ( unit: cbm) whichever is higher.

For example $20 per w/m to California which means if your cargo is 2 tons in weight but 12 cbm in volume then the rate would be 12×20 = $240 because that is greater than 2×20 = $20.

For example, if your cargo 5 tons in weight but 3 cbm in volume (think of cargoes like Dumbells) then the rate would be 5×20 = $100 because that is greater than 3×20 = $60.

For the same reasons for economies of scale, the consolidator uses a 40′ container as much as possible for consolidation because it can carry more volume goods. Of all the container I handled, our forwarder always prefers to book 40' HQ container.

I cannot say what is optimal maximum size/ weight to achieve economies of scale but I suggest you should check forwarder the FCL cost if you have more than 10 cbm shipment. With big volume shipment, FCL may start to sound better in terms of cost.

How long does my consolidated cargo arrive at my door?

Often time I am being challenged by clients' inquiries about freight availability and arriving time. In order to set up the project timeline to make sure your supply chain efficiency, you need to understand how the consolidated cargo importation process. Let us say you will ship 100 pieces of machinery parts through a consolidation container from your German shipper to your New York warehouse in Oswego.

The transit

  1. The shippers will send their cargo to the warehouse nominated by the Consolidator

  2. Everything is ready. Vessel departs from Hamburg Port on December 26th, 2019. The ISF 10+2 filing says the vessel arrives at the port of New York on January 6th, 2020. The transit time is about 12 days.

  3. When the vessel docks at its assigned berth next to the port cranes that unload containers from the ship. Then all the port workers and equipment operators need to work together to unload all the containers from the vessel. This huge process takes 1-2 calendar days ( some ports very congested may take longer) So we assume the container is fully ready and available at the port on January 8th.

  4. Assuming my nominated warehouse has everything ready. Permit to Transfer was sent and approved by customs. There is neither delay nor custom inspection exam, the warehouse will send the dispatch team to pick up the cargo no later than January 15th as the majority of the port give 5 business days as free time to hold the cargo

  5. While the container transferred from the port to the warehouse, This warehouse center has special name CFS (Container Freight Station) because such a warehouse has the Facilities Information and Resources Management System (FIRMS) Code assigned by U.S Customs. I would be busy at securing every house cargo shipment custom release and surrender of the House Bill of Lading after payment of any destination dues. Shipment then will be unpacked and properly separated based on the documentation I provide to the CFS station manager. The devanning process takes about 2-3 business days. if everything goes smooth, cargo would be ready to be picked up by your trucker around January 18th.

  6. Normally the warehouse gives 5 business days as free time to hold the cargo until the consignee's designated courier to pick up the cargo. If your cargo is held because of payment issue or custom release issue, you will have the deadline January 25th to have your trucker to pick up shipment and delivery to your Oswego warehouse January 26th

Let us see. From December 26 to January 26th, that is about one month waiting time even the vessel is only at the water for about 12 days! Vessel from other countries certainly counts more days on the water.

Below is the picture of New Jersey Maher terminal, vessel just dock the port waiting container to be unloaded

Shared Risk

This is a very important point. Please kindly remember all the risk is shared.

If one house shipment did not properly declare its goods and value to U.S Customs, the whole container will go through the custom exams. It might be x-ray at the port or Intensive exam st CES site or something else. All the costs occurred will be exactly calculated and the bill to all the consolidated goods owners. You may feel it is unfair but this is the truth, the risk is shared together.

Final thoughts

Hopefully, I did not discourage you to ship your goods through consolidation services. If you just have a few pallets/ cartons/ boxes and it is not an urgent shipment for you, consolidation service apparently is pretty cheap in most cases.

Working with a reliable and reputable forwarder / full -service customs brokerage firm is the key to successfully ship consolidated goods. Hope you all find the right one.

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