DHL rides LCL wave
Global supply chain power grows its LCL network to take advantage of a surge in volume.
By Eric Johnson
As demand for containerized goods recovers, a new trend is emerging, according to global supply chain powerhouse DHL: more less-than-containerload shipments.
'It's not that we see a downward trend' in full containerload, said Clas Thorell, head of LCL management in Asia-Pacific for DHL Global Forwarding, in an interview. 'It's that customers are diversifying their supply chains. Instead of holding back and waiting for a full load, they are moving some product LCL.'
Thorell said shippers are finding LCL makes more sense as the product options grow to suit their needs.
'With LCL, you pay for what you ship,' he said. 'You don't need to pay for empty air. You can have a more regular shipment pattern, rather than holding back. That allows you to have a smoother production line if you're an importer. The importer is buying what they need instead of what they need to fill a container.'
DHL has been at the forefront of LCL growth, rapidly expanding its LCL network the past few years through the introduction of port pair services. The company is not only introducing new services every couple months, it is aggressively marketing them.
'LCL is something we've been doing for many years,' Thorell said. 'In recent years, it's become a core product for us.'
Thorell said DHL has focused on expanding its network and operating services between niche port pairs, as well as simplifying service for its customers. It links 45,000 point pairs and handles nearly 2 million cubic meters of LCL volume annually.
Just this year, the company has launched direct LCL service from Chicago to Busan, Shanghai to Valparaiso, Colombo to Montreal, and Hong Kong to Guatemala. In each case, DHL said its LCL service typically shaves three days off previous transit times.
'As an example, cargo between Hong Kong and Guatemala had primarily been transshipped,' Thorell said. 'Now we're giving more opportunity to customers to use services they want to use, when they might have had to use FCL before.'
Thorell said DHL has expanded its network of port pairs based on customer need and its own forecasts.
'It's two-fold: when a customer has their supply chain architecture in a certain niche trade; and when we foresee there will be demand between two port pairs,' he said. 'We try to be the first operator in a market. We think, as DHL, we can sell value-added services beyond LCL services, and there lies the advantage.'
Of course, DHL isn't the only forwarder in the LCL segment. Global competitors UPS and FedEx (through its FedEx Trade Networks business unit) offer their own LCL networks.
UPS operates LCL consolidations at 1,000 facilities in 180 countries. FedEx, meanwhile, has been ramping up its forwarding capabilities in recent years, opening 25 new foreign offices globally under the FedEx Trade Networks banner. It now offers LCL services from nine cities in China, as well as Singapore, Taiwan, Hong Kong, India, Vietnam, United Arab Emirates, Poland, Belgium, the United Kingdom, the Netherlands and France.
Aside from pure LCL services, UPS also offers a day-definite hybrid ocean/less-than-truckload service (UPS Trade Direct Ocean) designed to compete against those developed by APL Logistics-Con-way Freight, Old Dominion Freight Line-Hanjin Logistics, and Averitt Express. Those services are not strictly LCL, but appeal to the same service requirements of shippers who want a single point of contact for shipments comprising less than a container full of goods.
According to Averitt, the difference (aside from a higher cost) between LCL and the guaranteed delivery services is that 'with most traditional LCL services, cargo is consolidated at origin and deconsolidated at the first port of entry, increasing the odds of delay.'
The world's biggest logistics companies also offer thorough LCL networks. Panalpina earlier this year began offering direct LCL service from Antwerp to Houston and from Ningbo to Wroclaw, Poland. Both new services were designed to take advantage of specific market developments. In the case of the Antwerp/Houston service, the link was aimed at the oil and gas sector, as well as a connection for cross-border shipments into Mexico.
'Contrary to the overall market development, the demand for additional in-network LCL ocean freight services continued to grow throughout 2009 as the customer focus on safe solutions from door-to-door provided and controlled by one party remained high,' Peter Herling, Panalpina's global head of product and procurement ocean LCL, said in February. 'As changes in order frequency and size in many cases no longer justified an FCL shipment, it became even more important to the customers that their goods now shipped as LCL shipments were handled by the least number of parties, be it trucking companies, warehouse operators, handling agents or shipping lines.'
But no one's network has been expanding as fast as that of DHL. Thorell said integrating the company's blueprint across a growing number of markets is not too much of a challenge.
'To be honest, we don't see that as an issue,' he said. 'We have global, regional and country personnel in each market to operate the system. It's a very structured product.'
Among the more active markets for the LCL growth are all parts of Latin America, Singapore and Brazil to Los Angeles.
'There are a wide variety of commodities moving by LCL ' nothing very specific,' Thorell said. 'LCL is being used more as part of a standard supply chain. There are a lot of commodities that move as LCL that we were used to seeing as FCL. Shippers now see this as a reliable option.'
Aside from merely expanding its network, DHL has also been opening centers in the Asia-Pacific region designed to drive LCL volume, including six Fashion and Apparel Centers for Excellence in the region (with another planned in Shanghai by the end of 2010). In late May, DHL launched a GPS tracking system as well as a garments-on-hangers service for its LCL shipments out of Colombo, the latest of the fashion and apparel centers to open.
While maintaining a dominant position in the global market, DHL's parcel business had a rough go of it in the United States, leaving in early 2009 after entering the market in 2003 through the acquisition of Airborne Express. Company officials said, however, that the development of DHL's other businesses (including LCL) has little to do with the U.S. exit.
DHL uses in-house non-vessel-operating common carrier Danmar Lines to arrange ocean service for its LCL services. 'That structure ties in with the core of the product offering,' Thorell said.
