Single-Carrier Parcel Shipping Strategies are Dead. Here’s Why.
By ProShip Shipping Experts
There are a variety of reasons why continuing to rely on a single major carrier is risky business
In year’s past, companies regularly negotiated exclusive shipping contracts with just the major carriers because they handled all their parcel shipping (and some freight as well). These kinds of arrangements had several advantages. Companies benefited from predictable costs and delivery guarantees, and carriers could more easily forecast volume and revenue.
Even today, you may still be relying on a similar model.
Because of the capacity chaos that the pandemic induced, most, if not all of these brands are probably aware that it’s no longer sufficient. While there was initially a steep rise in parcel shipping volume in 2020 due to the pandemic, capacity has started to slow down. This doesn’t mean that it won’t get busier again during peak season. With all these ups and downs, what can shippers really expect? And will their shipping strategy be agile enough to keep up?
How relying on a single carrier may leave you stranded
The past couple years have been challenging for both online sellers and carriers. So challenging, that shippers who are currently utilizing single-carrier strategies or national carriers only are struggling with a variety of pain points and risk failing their customers. These pain points include late deliveries, a lack of shipping options, and expensive shipping costs.
- Lack of choice: With only a few carriers to choose from, you minimize your ability to choose a faster shipping option at a lower cost. You also limit the number of shipping options available at check out, such as same-day and next-day delivery.
- Shipping costs: A single-carrier strategy is far from cost-effective. This strategy has fewer rates to rate shop, a key functionality for ensuring economical shipping costs. Rate Shopping is a seamless and streamlined solution for brands who want to determine the lowest cost carrier and service option that will still meet the customer’s delivery expectation. With national carrier surcharges increasing each season, any way to manage costs to stay within the lines will leave more on your bottom line.
- Contract termination due to capacity limits: Because of the historic parcel volume carriers are experiencing, major carriers have put capacity limits into place, exceeding these could result in additional peak surcharges. Unfortunately, these will lead to extremely high total shipping fees and can even lead to a carrier cancelling their relationship with a customer who continually exceeds parcel volume capacity limits. It’s happened, we’ve seen it.
- Decrease in flexibility: Can you ship from all of your origin points? As capacity and surcharges grow in importance, so does having a variety fulfillment sources, such as 3PLs, manufacturing vendors, distribution centers and stores. With additional fulfillment channels, brands can decrease the shipping time to customer and the cost of shipping, while increasing capacities due to the shortened amount of time in a carrier’s network. Regional carriers are excellent partners for omnichannel fulfillment. In fact, it might surprise you to learn that regional carriers cover more than 85% of the US population.
4 reasons why you should diversify your carrier mix
There are several reasons why diversifying your carrier mix is imperative.
1. The surge in e-commerce and direct-to-consumer (DTC) shipping. Before the pandemic, consumers made 32% of their purchases online. Now post-pandemic, that sits just under 50%. After fluctuating up and down during the pandemic, that number is now expected to stay. If your business doesn’t have the flexibility to scale up and down as the shipping landscape changes, you will likely struggle to get product out the door in a timely fashion, meet your delivery promises and keep customers returning.
Additional peak season volume will only exacerbate an already tough situation. The more carriers you can leverage, without having to take valuable seconds (or even minutes) to manually log into different carrier systems, the better you’ll be able to manage the increased volumes.
2. Continuing supply chain disruptions. Throughout the past several years, on-time delivery rates have fallen, and carriers have removed their service guarantees. While carriers have been increasing capacity, overwhelmed and under-staffed shipping hubs can cause delays. That risk can increase during peak season, as demand increases and orders pour in for retailers.
The good news is that regional carriers have been less prone to disruptions. They can often circumvent tangles at the major hubs – a key to lowering shipping costs and making good on your delivery promises.
NOTE: Adding more regionals to your carrier mix is a smart idea, but focusing on timing and the right fit will be crucial. Do your research to see who matches with your shipping needs and don’t procrastinate! There will be a mad rush in new carrier onboarding directly as peak season approaches. We recommend that you don’t wait until the last minute.
3. Shipping costs are on the rise. We are familiar with the new peak season surcharges and volume caps of the past but what will this year bring? As volatility runs rampant through the shipping technology space, you could be looking at even higher costs. So what can shippers expect?
This is one of the most persuasive arguments for adopting a multi-carrier strategy. In today’s environment, shippers benefit greatly from flexibility that allows them to quickly find the best rates and options, while maximizing their negotiated discounts and avoiding surcharges and capacity limits every time they print a label.
4. Evolving customer expectations. Customers are relying on shipping more than ever before, and the customer experience is now synonymous with the product experience. While most customers do understand and forgive delays due to supply chain disruptions, 76% are unlikely to purchase again after just one poor shipping experience.
Important stats you need to know about shipping today
The Gen Z population group has $360 billion in disposable income, more than double an estimate from 4 years ago. As “graduates of the pandemic”, brands are constantly trying to figure out how to appeal to this group – knowing that they are a prime target.
But don’t just think it’s only the younger generation shopping online. The older generation is learning to trust online retailers more, and Boomers, the second largest population group in the US, control a large portion of all disposable income. Given their spending power, boomers should be an important demographic for brands.
But customers of all ages want transparency in all phases of the buying process. They want to know what’s in stock, where, and they want to choose the most convenient delivery options. Free returns are a primary motivator as well.
Shipping and logistics are now an essential way to set your brand apart and build loyalty. And if you’re worried about the cost, don’t. The right multi-carrier parcel shipping solution typically saves companies 30% on their shipping costs. It also gives you more chances to position your company as a leader now, and in the years to come.
This is why you need a strong carrier mix, now.
Without the ability to rate shop and seamlessly choose between options in the event of a disruption or overload, your profitability and brand reputation will remain at the mercy of unexpected events and the whims of the major carriers. But it doesn’t have to be this way.
Multi-carrier shipping software does the heavy lifting for you by automating shipping decisions in your supply chain. In milliseconds, it will choose the most cost-effective shipping options to keep your customers happy and boost your bottom line.
About the Author
ProShip Inc. is owned by FOG Software Group, a division of Constellation Software Inc. (TSX: CSU). The FOG Software Group acquires, manages, and builds software companies in a variety of vertical markets, enabling them to be clear leaders in their industries.
FOG Software is highly experienced in the software industry and shares our belief in the importance of technological advancement and exceptional customer support.
The Logistics & Supply Chain Management Society supports the Supply Chain Brief MVP Awards and features the Top Winning Articles in issues of CargoNOW magazine.
This article by ProShip Shipping Experts was a winner of the Supply Chain Brief MVP Awards 2021