What is Groupage in Shipping?
Typically, cargo transport involves sending goods either as a Full Container Load (FCL) or as Less-than Container Load (LCL). It is not necessary that when you have an LCL shipment for sending to your customer that you hire or lease a full container to send it to them. This is where the term Groupage comes in.
As the name suggests, it is a group of LCL cargo from different shippers or consignors that are consolidated and sent to various customers or consignees as a full container load in a single freight container. This method of transporting multiple LCL shipments also goes by the name of Cargo Consolidation or Groupage Operation.
In other words, in groupage shipping, each freight container will carry several different LCL cargo shipments originating from one port to be delivered to another common port or separate ports.
Depending on the volume of cargo to be transported, the groupage operator will book a container with the shipping line. This can be a 20’ or a 40’ container.
Once the loading of cargo is completed, the operator will issue a House Bills of Lading (HBL) to all the customers shipping goods by the container. The groupage operator will then collect the Master Bill of Lading from the shipping line.
Each LCL shipment will have a separate Bill of Lading (BL) that shows its consignor and the consignee. Upon arrival at the destination port, these LCL cargoes are unloaded from the vessel and each of them is cleared and taken custody of by the respective consignees.
Who is a Groupage Operator?
An agent who arranges pick-up less-than-container loads cargo from the seller and delivers it to the buyer by transporting it in a groupage or consolidation container is called a groupage operator or a cargo consolidator.
He may collect cargo from several shippers for delivery to their different customers or he may collect LCL cargo from several organizations for consolidation and delivery to a single customer.
Non-Vessel Operating Common Carrier (NVOCC)
NVOCC are prime examples of groupage operators. Though most of them deal directly with freight forwarders, some of them offer cargo space to individual customers for transporting their goods by a cargo vessel.
NVOCCs normally do not own cargo vessels or warehouses. The cargo space or container is leased from a shipping line and mostly, the loading is done from the customer’s warehouse. When required, warehouse space is leased from warehouse operators.
For more information on NVOCCs read here.
Example for Groupage Operation – Single Customer
Let us take the liquor industry as an example for the above. While alcoholic spirits and beers are generally ordered as full container loads by the customer, wines are mostly ordered in small quantities. This is because it is a niche market and the availability of wines, especially those of good vintages, is limited.
Vineyards are spread across countries such as France, Italy, Spain, Germany, Portugal, the United States, Australia, etc.
Customers usually order several different wines, in small volumes, from different vineyards spread across a region. For example, a customer may order French wines that come from Bordeaux, Burgundy, the Loire Valley, Languedoc, and Alsace in France.
Some of the important wine areas of Germany are the Rhine area, Mosel, Ahr, Saxony, etc. In Spain the important areas are the Riojas, Priorat, Rias Baixas, Toro, etc.
In this example, let us take a customer (a wine shop) located in Dubai that requires wines from France, Italy, and Spain. The customer would place individual orders to his wine suppliers in these countries and take the service of a consolidator such as JF Hillebrand for bringing these wines as a full container load following the storage and transport requirements for these wines. Wines have specific packing and temperature requirements to be followed during storage and transport.
In the above case, JF Hillebrand would arrange for pick-up of the individual orders from the different vineyards once they are ready, their storage, packing, and shipping to Port Jebel Ali, Dubai under a consolidated bill of lading.
Depending on the volumes that are to be shipped, JF Hillebrand may consolidate the French, Italian, and Spanish wines in separate containers sailing from the respective seaports in these countries.
If the volumes are not enough to justify full container loads, the groupage operator may consolidate them in a single container for shipment from either the port of Antwerp in Belgium or Rotterdam in The Netherlands.
JF Hillebrand is a leading logistics company based in Mainz, Germany with operations in most of the major wine-growing regions of the world. They specialize in the consolidation and transport of wines, alcoholic spirits, and beer. It is one of the leaders in the consolidation of wines especially from Europe, the United States, and Australia.
Groupage of Cargo of Different Customers
Another type of consolidation is when the groupage operator undertakes to transport your LCL cargo to the customer. In such a situation, the consolidator would have orders to transport several such LCL shipments from different customers. They would then segregate the LCL cargoes by their destination ports and ship them as full container loads to each of these ports.
There will be several shipments with a common destination that will go by a common container. Each shipment that is included in a groupage container would be under a separate bill of lading. Optimization of the container payload according to allowable limits is critical here.
Kuehne + Nagel with headquarters in Switzerland is one of the world’s top cargo consolidators that caters to the consolidation of a variety of cargo such as electronic items, pharmaceutical drugs, perishables, industrial items, etc.
Advantages of Using Groupage Service
The biggest advantage of using groupage service is the cost. The cost of a full container can be avoided as you pay only by the CBM (cubic meters) or the weight of the cargo.
Groupage shipment saves you money as you pay only for the space taken up in the container. All the consignors who ship their goods in such a groupage container will pay likewise and therefore the cost of shipping the container is distributed amongst them based on the CBM used by each consignor.
The empty container for loading does not have to be picked up nor does the labour for packing and stacking have to be arranged. It saves the consignor the hassle of sending the loaded full container to the port.
Being able to send or receive in small quantities is beneficial to both the seller and the customer as they do not have to maintain a large inventory. Inventory can be kept to the optimum. Groupage is one way of optimizing the container space.
Since a full container load of groupage cargo is usually packed to capacity, there are fewer chances of the cargo moving around the container during handling and transport.
When there is empty space inside a container and cargo is not stacked properly, there are chances of it moving around and damaging itself as well as the other goods inside the container.
A reliable consolidator with a good network of operators ensures that LCL cargo is handled properly and reaches its destination safely.
What are the Disadvantages of Groupage Service?
While groupage services may be advantageous in certain conditions, it has several disadvantages too. Let us take a look at some of the disadvantages of using groupage services.
If groupage cargo is not organized correctly, it can result in increased costs to the customer. The cost per CBM might be higher when compared with sending as an FCL.
Planning the pickup of goods and their loading order into the container is important. It is usually planned, taking into consideration the cargo dimensions, the weight of the cargo, port of discharge, etc.
In certain cases, there is multiple handling of the cargo. There is more chance of the cargo getting damaged during this multiple handling.
Groupage containers can get delayed when the consolidator waits for shipments to fill the container. Shipping cargo by groupage means that the container may be shipped out only when it is full.
This will increase the lead time of the cargo. Lead time is the total time taken for the cargo to reach its delivery point from the time of placement of the order.
In the event of a container getting detained by the port customs for some reason, all the different cargo in the container will also get delayed.
If a groupage container is not packed correctly or is not full, there is a chance for the goods to get damaged when it moves around the cargo during handling and transport.
Since groupage is a collection of several different LCL shipments, it may result in damage or deterioration while stuffing or unstuffing the container.
During groupage, not all goods can be loaded inside a container. Some goods cannot be loaded with certain other goods in the same container as it may result in the deterioration of quality of either of the goods or both.
An example of this is detergents, some cosmetics, and food items. The strong smell of some detergents and cosmetic products gets easily transferred to the food items making them inedible.
Similarly, hazardous cargo and chemicals are not generally sent by groupage with other items.
Cargo consolidators are usually cautious when grouping the different types of cargo. As a general practice, for food items and such other perishables, a full container is used even if the volume is not enough to fill the container.
In such cases, the packing and stacking inside the container are critical and it has to be done properly so that the loose load does not move around the container causing damage.
Documents Required for Shipping by Groupage
The main documents that are required while shipping cargo by groupage container are the following:
Bill of Lading
The contract of carriage between the ocean freight company or consolidator and the shipper of goods is called the bill of lading. When it is issued by the consolidator it is known as the House Bill of Lading or HBL. When it is issued by the ocean freight company, it is called the Master Bill of Lading or MBL.
The packing list contains all information regarding the goods that are shipped under a specific bill of lading such as its description, weight, volume, packaging, etc. It also shows the name and address of the seller and the buyer. A packing list helps the customs to verify the goods physically besides helping the person receiving the cargo at its destination to confirm the contents correctly.
This is the bill or invoice from the seller to the buyer. The commercial invoice is very similar to the packing list. It details all information regarding the products that are shipped. The main difference between the packing list and the commercial invoice is that the invoice includes the individual and aggregate prices of the products mentioned in it. The commercial invoice is used for the calculation of customs duties and other taxes.
Certificate of Origin
The Certificate of Origin shows the country where the goods are produced. This is normally issued by that country’s Chamber of Commerce or in some cases the Consulate or Embassy.
Dangerous Goods or HAZMAT Certificate
The International Maritime Dangerous Goods or IMDG code and the MARPOL (The International Convention for the Prevention of Pollution from Ships) have classified certain goods as dangerous or hazardous. These include certain chemicals, gases, materials that may be corrosive or poisonous, certain types of oils, etc.
If the shipper is sending any such cargo, he has to submit a Dangerous Goods or HAZMAT Declaration to the carrier with all the relevant information on the goods being sent.
Letter of Credit
The terms of trade between the buyer and seller could be by Letter of Credit. This is a type of bank guarantee for payment from the buyer to the seller upon shipment of goods by the seller.
Intermodal groupage helps organizations to send or receive their small-volume consignments on time. When there is a steady flow of cargo traffic the system of groupage is the best for transporting LCL shipments from one point to another.
You might also like to read:
- A Guide to Shipping Container Dimensions
- How Are Shipping Containers Made?
- What Are Insulated Shipping Containers?
- What is Consolidated Freight in Shipping?
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Hari Menon is a Freelance writer with close to 20 years of professional experience in Logistics, Warehousing, Supply chain, and Contracts administration. An avid fitness freak, and bibliophile, he loves travelling too.