IS A MULTI-CARRIER SOLUTION RIGHT FOR YOU? SIX FACTORS TO CONSIDER
By Thomas Andersen
n an era of restricted carrier capacity, ongoing changes to carrier pricing practices, and changing consumer behavior, one may wonder, is now the right time to diversify your stable of carriers? Many shippers faced monumental difficulties last year when they were surprised by their sole carrier placing limits on peak season volume, and many large enterprise shippers received unexpected rate increases, often ranging from 20% to 50%. A shift to a multi-carrier solution may help mitigate these issues and create opportunities for cost reductions and an improved customer experience. That said, having multiple carriers is not necessary for all organizations, and there is a myriad of advantages and disadvantages associated with creating a multi-carrier environment.
Savings Opportunities: Pricing can vary substantially between carriers, even between those that offer similar services. In addition, regional carriers, consolidators, and others can be substantially more cost-effective based on service, zone, weight, or applicable accessorial charges. They can offer superior service performance in select areas, often at much lower prices. Most of these “other” carriers carve out a niche for a smaller overall percentage of the shipper’s volume. Even the global carriers can offer superior transit times and solutions for certain types of shipments, perhaps strategically positioning an offer for express volume, international shipments, or other select shipments. Being able to optimize service solutions based on these factors can improve service performance while
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reducing costs. These creative solutions often require out-of-the-box thinking and effective communication between the carrier representatives and the shipper. Cost Implications: When including additional carriers into your portfolio, there are several cost implications that must be considered. Since most agreements are structured based on volume requirements, often with a limited buffer to shift volume away, the costs that are related to making a shift to other carriers can be quite substantial. It should be noted that volume is the primary driver when negotiating most carrier agreements, so any lost savings resulting from lesser volume should be weighed against savings that are gained elsewhere. There are additional direct costs tied to investments in technology to manage the shipment processing, as well as additional resources to manage carrier relationships and processes. Operational Flexibility: In today’s environment, where the carriers have exercised their ability to increase rates or cancel agreements, typically upon 30 days’ notice, having the flexibility to shift volume to other carriers can be essential. With capacity constraints being an ongoing issue, having additional carrier options is not only a nice alternative, but often critical to a long-term successful supply chain model. Regional carriers, USPS consolidators, and other niche carriers can often service a specific segment at a fraction of the cost of the global carriers, so carving out a portion of one’s volume with non-global carriers can be a great solution, should one’s shipment profile and volume support it. Customer Service: With the shift to two-day, next-day, and even same-day delivery, many companies continue to shift towards local and regional carrier options that can service clients quicker, while at a reasonable rate. Adapting the local carrier model will continue to play a key role for companies with a local brick and mortar presence. Others may find other ways to differentiate, focusing on a high level of service. This may include allowing clients to choose the carrier and service. Although the industry continues to shift from a carrier-specific solution to focusing more on optimal delivery dates,