Two years. That’s how long has passed since the world as we knew it changed. Parents got notifications that school was cancelled, employees got notice to stay home, the world started buying most of their goods online, and the global supply chain did a collective * gulp. *
We’ve had many ups and downs since March of 2020, but one up that has continued its upward trend, is e-commerce purchase volume. Over the past two years, e-commerce brands have learned a lot. Better sourcing processes, how to implement omnichannel fulfillment, and creative solutions for labor shortages. But one thing that still needs to take hold with the e-commerce market is this –
E-Commerce brands are no longer just product companies. They’re shipping companies.
The e-commerce shipping landscape looks quite a bit different from what it did just two years ago. Consumers are demanding and they know exactly what they want – fast, reliable, and cheap shipping options. And they’ll make buying decisions based on their shipping experience.
The shipping experience now defines the shopping experience.
So, if you don’t have clear visibility into your entire shipping program, your delivery experience will suffer, which directly impacts customer loyalty and growth.
Shipping operations have become enormously more complex and difficult to manage as carriers continue to have tight capacity due to high demand and an ongoing labor shortage. Your carrier strategy is the area that needs focus in 2022. A multi-carrier parcel shipping strategy is what will separate those who still think they’re just product companies from those who know they’re shipping companies.
Multi-Carrier Parcel Shipping Strategy: Where to Start?
There’s a lot of buzz around the carrier capacity crunch, and the solution verdict is in – a multi-carrier parcel shipping strategy is the secret sauce.
If you haven’t yet jumped into the multi-carrier shipping pool, you may be asking yourself a few questions:
- Why is a multi-carrier strategy better?
- What carriers should I evaluate?
- How do I know if I’m getting a good deal with these carriers?
- When should I start negotiating?
- How do I ensure that our discounts with our primary carrier stay intact?
Great questions, we would love to help you answer them.
Why is a multi-carrier parcel shipping strategy better?
One of the most pressing issues facing e-commerce shippers is the capacity limit put in place by carriers. Shippers who standardized with a single carrier to secure higher volume-based rates, found themselves with their hands tied as e-commerce exploded. Carrier networks became overloaded, a shortage of drivers created inefficiencies, and volume caps were handed out. Meaning that when your carrier capped your shipping volume, you were at risk of getting the products your customers ordered to them within the timeframe you promised. Or worse yet, getting their order to them at all.
To ensure you can deliver on your promises to your customers as well as gain competitive advantage, diversifying your carrier mix is the long-term strategy. Expanding your carrier portfolio has a wide range of benefits, including:
- Reduced costs. Through automated carrier rate shopping, you can select the best carrier based on lowest rate, fastest transit, accessorial charges, and any combination of variables to ensure the lowest cost to your business.
- Increased sales. Today, consumers want to choose when and by what method orders are delivered. Presenting options at checkout enhances the customer delivery experience, which is directly tied to sales.
- Agility. When market conditions rapidly shift like they did two years ago, a multi-carrier parcel shipping strategy ensures that you can pivot quickly where needed.
According to a Bloomberg article highlighting a September 2021 conference call with analysts, Chief Marketing Officer for FedEx, Brie Carere, shared that the parcel market is expected to grow 10% annually through 2026. Continued parcel shipping growth coupled with ongoing parcel shipping volume caps by major carriers means that e-commerce shippers must become more flexible with their carrier mix.
What carriers should I evaluate?
Not only is e-commerce exploding, but the growth in new carriers to support shippers is also growing very quickly, particularly in the middle and final mile spaces. The starting point to evaluate your list of potential new carriers is to take a deep dive into your shipping program data and identify where are you hurting the most. Find the pain point(s).
From a high level, you want to better understand what you are doing well and what you aren’t doing well. And analyze that data by carrier. For example, if your major carrier is high performing 90% of the time, what does the 10% they’re not doing well represent?
Here are a few data segments that can often lead to a light-bulb moment:
- Low performing regions or markets
- Average time in transit for a particular service
- High cost due to package size or weight
- Carriers with higher accessorial charges
The key is to isolate data segments of high cost and low performance, then evaluate carriers with a solution that can be deployed to solve your challenge. There may just be a regional carrier that can pick up this volume for a cheaper cost than your primary carrier.
As major carriers have less pricing flexibility and more surcharges, regional carriers like LaserShip / OnTrac and Lone Star Overnight (LSO) are positioning themselves nicely to help shippers compete in this complex parcel shipping landscape.
How do I know if I’m getting a good deal with these carriers?
Once you have a good understanding of your current parcel shipping performance and the carriers that you want to evaluate, then you model scenarios to future outcomes through comparing carrier proposals.
Modeling future shipping scenarios helps you see the long-term impact of your decisions before you make them. Even small, seemingly insignificant changes to your parcel shipping program can have considerable implications down the road.
A carrier proposal model looks at every relevant variable of your current shipping program and compares it to each carrier’s proposal to help you identify both risks and opportunities in your multi-carrier parcel shipping strategy. For example:
- Can a carrier reduce time in transit for my deliveries without increasing costs?
- How will my discounts shift across services as my volume grows?
- Which carrier is the most cost-effective for my big & bulky shipments?
Let the data tell the story, and more importantly, determine the appropriate course of action to optimize your parcel shipping program.
When should I start negotiating?
Yesterday. With the volatility of the e-commerce shipping market, carriers have been marking earlier new-customer cutoff dates each year. Starting early is the name of the game. The sooner you can create a diversified mix of carriers, the better you will execute in balancing capacity among them, leading to optimized and agile shipping operations that are primed for volume spikes and peak season.
Understanding both what you offer to the carrier as well as how the carrier is performing for you are crucial to understand before sitting down at the negotiating table. For instance, carrier’s have different strengths and competencies. If you are a shipper with a high volume of heavy goods, you are likely more attractive to a shipper that excels in ground deliveries. If you understand how you make the carrier money as well as their areas of low performance, you are more likely to strike an agreement that is mutually beneficial, rather than simply being a cash cow for the carrier.
Prior to heading into carrier evaluation & negotiations, make sure multi-carrier parcel shipping software is a line item in your budget. Too often, companies find themselves struggling to compete on shipping in Q4 when they’re standardized on a single carrier and don’t have the relationships or technology in place to support a diversified carrier strategy. Taking a forward-looking approach here will help ensure that you don’t find yourself in a situation where you’re unable to pivot because software wasn’t a line item on the budget so you must wait another full fiscal year to diversify your carrier mix and optimize your shipping program.
Start early. Budget for multi-carrier shipping software. You’ll thank us later.
How do I ensure that our discounts with our primary carrier stay intact?
Automation. Prior to implementing a multi-carrier parcel shipping strategy, ensure you have flexible technology in place that enables automated shipping rule sets.
Implementing a transportation management system (TMS) that integrates seamlessly with your warehouse management system (WMS), e-commerce shopping carts, carrier systems, and other business systems comes first.
Next, make sure your TMS allows you to create dynamic rule sets specific to the needs of your business. Automated rule sets that select the carrier at the time the order is placed is how you ensure your primary carrier discounts will remain intact.
Allocating the right percentage of volume to your primary carrier is the first step in staying compliant with your contract. You can also create rules based on your revenue band commitment to ensure you don’t fall below it and risk falling into a lower discount tier.
Additional automated rule sets can be created to divert excess volume to your non-primary carriers once your primary carrier commitments have been hit, and there are several ways to optimize the selection process through business rules. Here are a few examples of business logic to select the right carrier – “Ship everything through my primary carrier until I hit my revenue band, then…
- Rate shop to select the carrier with the lowest rate
- Review time in transit for each carrier, and select the carrier with the shortest time
- For larger package sizes, review DIM fees and other accessorial charges and select the lowest overall cost
The business rules that you define in your TMS need to be easily configurable. If tomorrow your primary carrier tells you your capacity will be limited again unless you sign a new contract with higher rates, you need to be sure your system will allow for a quick pivot that puts your business in the best position possible.
The key to a successful multi-carrier parcel shipping strategy is flexibility. Shippers that have technology in place that enables them to be agile and quickly pivot when unexpected market shifts occur will have the upper hand long-term.
Enveyo’s multi-carrier parcel shipping software enables full visibility across your supply chain, the agility to pivot quickly when needed, and the power to turn your shipping costs into a competitive advantage. Learn more about Enveyo’s solutions.