PROS AND CONS TO DIVERSIFYING YOUR CARRIER PORTFOLIO
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n the current environment of restricted carrier capacity, ongoing changes to carrier pricing practices, and evolving consumer expectations, it may be time to reconsider your single-carrier approach to delivering product to your customers. That said, dual or multi-sourcing is not the right solution for everyone. In fact, there are a myriad of advantages and disadvantages that should be considered. A multi-carrier model can offer significant advantages and disadvantages over a more traditional single-carrier solution. These effects can permeate the organization and impact multiple aspects of the business, including operations, marketing, and finance. Many aspects of this model have both advantages that can be leveraged, and challenges that must be mitigated.
savings with each carrier, optimizing what they do best and lowering your costs by always choosing the best option. These cost savings need to be balanced with consideration that there can be several cost implications. First, most carrier agreements have a “self-regulating” element to them, which bases discount levels on spend with the carrier — therefore, diverting spend to other carriers may trigger cost increases with the incumbent carriers. Second, some carrier agreements even contain “minimum commitment language” or “primary carrier language,” which may risk invalidating the contract if a diversion is made. Third, considering that volume is the primary driver when negotiating most carrier agreements, splitting volumes between carriers will dilute your purchasing power. Next, there may be additional costs tied to investments in technology to manage shipment processing. Finally, multiple carriers will require multiple shipping processes, which may add to labor hours in both training and processing times.
Savings vs. Cost There are several cost-saving opportunities that can often be experienced. First, regional carriers, consolidators, and others can be substantially more cost-effective than national carriers based on service, zone, weight, or applicable accessorial charges. Second, having a stable of carriers inherently creates a competitive environment for your business, motivating carriers to offer aggressive pricing. Third, a robust rate-shopping solution will allow you to take advantage of areas of
Operational Implications Having operational flexibility is becoming more important than ever. With capacity constraints during peak being the new normal, having additional carrier options is not only a nice alternative, but often critical to a long-term successful supply chain model. This “capacity overlap” can also aid when: One carrier is delayed by weather Needed equipment is scarce Operating hours/pick-up time conflicts arise
BY THOMAS ANDERSEN AND KENNETH MOYER
36 PARCELindustry.com MAY-JUNE 2022