The Importance of Small Parcel Carrier Diversification & Keys to Success


Final MileSupply Chain Consulting

I. Introduction 

Today, parcel diversification is critical. Previously, companies used a single carrier for all their nationwide shipments. Over the past 5 years with capacity constraints, labor challenges and increasing costs, most shippers today leverage two or more shippers to be able to deliver on their customer promise, but also for contingency planning.  

II. Advantages of Parcel Carrier Diversification  

Using multiple parcel carriers can have several benefits, including improved delivery times, cost savings, expanded coverage and reduced dependency on a single carrier. 

  • Improved delivery times: Diversifying carriers allows for better coverage of more remote areas and reduces the risk of bottlenecks and capacity constraints. 
  • Cost savings: Different carriers offer different pricing structures with volume discounts, accessorials and more.  
  • Expanded coverage: Leveraging regional and local carriers expands the delivery footprint, which is especially useful when delivering to remote locations. 
  • Reducing dependency: Using a single carrier can create a bottleneck risk, and when they fail, it can be costly to manage. 

III. Challenges of Parcel Carrier Diversification  

While there are a number of benefits, parcel carrier diversification requires some adapting. Shippers now may be faced with managing multiple contracts and relationships. There is also the fact that most carriers use different terminology for service levels and accessorials — analysis and synthesis of shipment invoicing data then is a new hurdle. 

  • Different terminologies: Different carriers use different terminology for service levels and accessorials, making it more challenging to analyze supply chain data. 
  • Managing multiple contracts: Managing several contracts and relationships with different carriers can be time-consuming, while also monitoring performance. 
  • Analyzing shipment invoicing data: Analyzing shipment invoicing data becomes increasingly more difficult when there are multiple carriers sending different data formats. 
  • Ensuring consistent quality and service standards: Ensuring that all carriers that are part of the network maintain a consistent high level of service quality is critical. 

IV. Strategies for Successful Parcel Carrier Diversification  

The following strategies are useful when implementing parcel carrier diversification: 

  • Develop a network strategy: Whether a single fulfillment center or multiple distribution centers, it is important to review shipment data to ensure shipments are being fulfilled from the right area and using the right carrier. 
  • Conduct thorough evaluations: Performing thorough carrier evaluations and audits to select the right carriers for specific SKUs, delivery areas and types of deliveries. 
  • Establish clear communication channels: Clear communication channels that create a dialogue with carriers to work better together are of great benefit. 
  • Implement technology solutions: Introducing technology solutions that integrate easily with multiple-carrier invoicing, analysis and reporting. 

V. Best Practices for Effective Parcel Carrier Diversification  

To ensure that a diversified carrier network is effective, you need to consider the following best practices: 

  • Regular performance monitoring: Monitoring carrier performance and reviewing contracts regularly minimizes risks. 
  • Maintaining strong partnerships: Building stronger relationships with carriers by providing feedback and resolving issues promptly will continuously improve their services. 
  • Continuous improvement: Reviewing your fulfillment and parcel carrier model so that you can determine areas of opportunity, especially looking at specific SKU performance. 

VI. Conclusion  

Diversifying carrier networks can help companies achieve greater efficiencies, cost savings and improve delivery coverage. For most shippers, the benefits of a diversified parcel network outweigh the costs associated with it. By selecting the right carriers, establishing clear communication channels, and consistent performance monitoring, a successful parcel carrier network can be implemented and function. Maintaining a focus on continuous improvement allows fine-tuning of strategies and adapting to changes that come with evolving supply chain challenges


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