Weekly Logistics Report - Mapping and Charting the Growth of Regional Parcel Carriers
Regional carriers are becoming increasingly popular for shippers as national carriers are over capacity. According to a recent Salesforce article, around 700 million packages are expected to be shipped in the US during the holiday season. This number is 5% over what the US logistics ecosystem is able to handle. Shipping frustrations led co-CEO of Journelle, Guido Campello, to state “UPS is at least a day late on everything… and it’s just going to get worse.”
As a result, many companies are considering alternative strategies to address these challenges with regional carriers increasing in popularity. Regional carriers are smaller carriers that service only certain geographical areas of the United States. OnTrac covers the western region, Lone Star Overnight - the southern region, Spee-Dee Delivery - the midwestern region… you get the point.
Many shippers have begun diverting portions of their shipments to regional carriers to circumvent national carriers' overcapacity issues and surcharges. For companies considering this strategy but unsure of where to begin, start to consider the following:
Shipment volume by origin (distribution center(s))
The geographical location of customers
Shipping volume committed to a specific carrier for discounts
Companies with distribution center(s) and customers in a concentrated geographical area are prime candidates for regional carriers. For example, if a shipment from an Oregon warehouse needs to be delivered to California, the shipper may want to consider a western regional carrier such as OnTrac instead of a national carrier, such as FedEx, to deliver the shipments. By doing so, companies can reduce delivery costs and deliver their shipments sooner than a national carrier can.
Once a company has realized that the geographical location of their warehouses and customers allows them to leverage regional carriers, they must look at the amount of volume they’ve committed to their primary carrier. Many companies are wary of diverting volume to other carriers because they’re afraid they may lose their pre-negotiated discounts with their primary carriers. This is why companies must be strategic with how much volume to divert to prevent losing their pre-negotiated discounts. Once the uncommitted volume is identified, then they can be routed to alternative carriers.
If the strategy is executed properly, savings can be monumental and companies can still maintain their discounted rates with their primary carriers. However, partnering with regional carriers is only half of the solution. Due to the increased complexity of the diversified carrier mix model, companies can no longer operate manually and must automate carrier decisions. Premier shipping softwares can provide customizable business rules to route the appropriate volume of shipments to lower-cost carriers while meeting the volume threshold to keep discounts with primary carriers.