Shipping processes and best practices are continually evolving and adapting to help small and medium businesses gain a competitive advantage in an increasingly complex global economy. Driven by the growth of e-commerce, more shippers are involved in the global economy than ever before. Only 5 percent of shippers expand their horizons and shipments beyond the big two parcel carrier options in the U.S. In other words, only 5 percent of us-based shippers are taking advantage of the perks of working with the regional center, explains Paul Steiner of Supply & Demand Chain Executive.
As a shipper, you need to understand the drawbacks to using the big two parcel carrier options, the benefits of exploring other options, and what caution you need to consider before devoting all of your resources to either regional or the big two carriers.
There are numerous drawbacks to simply focusing on the duopoly of the big two carriers. The U.S. has a long-standing tradition of preventing businesses from creating a monopoly in the economy, but the big two parcel carrier options have managed to evade this inevitability by keeping pricing low and ensuring their partner businesses and customers are kept typing. However, shippers are faced with additional challenges with solely using the big two carriers, which include the following:
To gain competitive discount from the big two carriers, shippers must usually engage in a high volume of business with the respective carriers. If enough volume is not processed and shipped, the carrier they assess additional costs to the shipper at the end of a reporting period.
The big three carriers also have a hard time ensuring last mile delivery for businesses that do not generate a high volume of shipments within the carrier. In many cases, shipments two are transferred to smaller carriers for last mile delivery. For example, FedEx and UPS may move shipments to the United States Postal Service for final delivery.
Like communicating with many large corporations, maintaining contact with FedEx and UPS for variances and shipping needs can be difficult at best. There may not be a person with the authority to explain current rate for contract details, and as a result, small-to-medium shippers can end up paying more for their shipments. In other words, the bargaining chip for working with small to medium businesses as a major carrier is insurmountable, and small to medium businesses are left to deal simply with the rates.
There are significant benefits to working with regional carriers, which include the following:
By definition, regional carriers are more apt at ensuring last mile delivery from within the given carrier. As a result, shippers know exactly who handles the package from the beginning to the end of its journey. Furthermore, this can be a vital part of visibility and tracking of packages.
Regional carriers may also be able to communicate better and provide access to order tracking tools and assistance to shoppers when they need it.
With the rise of cloud computing technology, more regional carriers are also growing in their automation capabilities. They may be able to offer services similar to third-party logistics providers (3PLs), such as value-added services and contract negotiation, to ensure rate selection and billing is completed accurately and appropriately
Understanding how there are disadvantages to solely using the big two parcel carrier options can be misleading. Rather than diverting all resources and shipments to regional carriers, shippers need to take specific cautions when selecting regional carriers.
Regional carriers often have limitations on their capabilities. While they may offer additional hours of service for pickup or drop-off, they may not have the new technologies of the big two. Also, regional carriers are working with a more limited staff, and delivery guarantees may not be as promising. For example, tracking shipments with smaller carriers may be more complicated than using the big two, explains Jeremy Marsan of FitSmallBusiness.
Automation in regional carriers is another issue. Regional carriers may not have the financial or technological resources to improve efficiency beyond the capabilities of the big carriers. As a result, shippers need to consider their options carefully when negotiating contracts with regional carriers and not alienate other carrier relationships.
Regional carriers may also process shipments differently from the big two parcel carrier options. For example, a regional carrier that picks up shipments after-hours may not process the shipment until the next day, if not later. As a result, it may be more cost effective to select a slightly higher cost shipping via a bigger carrier for processing. In addition, regional carriers are often limited in where their services are offered, and transporting packages for shipments across geographic boundaries can take significantly longer and involved higher rates.
The only solution to the conundrum of using the big two or regional carriers is to find a combination that results in maximum optimization and efficiency of shipping processes. As a result, more shippers are turning to 3PLs to negotiate contracts and ensure the most cost-effective party processes the shipments.
Unfortunately, the overwhelming majority of shippers do not use regional carriers at all, but 64 percent of them want to expand their options beyond the big two. Ultimately, having more than the two options for shipping is gaining traction throughout the industry. In fact, the following infographic, created by Endicia, details some of the most specific differences in pricing and shipping options among the big two and USPS.
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