6 Ways to Optimize Your Multi-Carrier Parcel Strategy
Multi-carrier parcel shipping is a staple of the 21st-century e-commerce landscape. As businesses grow and aim to serve more customers scattered throughout various geographies, the adoption of multi-carrier parcel shipping has become synonymous with market share growth.
The greatest need for multi-carrier parcel shipping historically came in the November to January holiday seasons. However, that changed in 2020 when the COVID-19 pandemic swept the globe and boomed e-commerce and ad-hoc shipments year-round. Companies became more aggressive in optimizing their carrier strategy by bringing in regional-based and postal carriers to cover volume gaps and meet sudden demand hikes. This led to a rapid evolution of supply chain management—what would’ve taken years under normal circumstances only took months.
The global market won’t ever fully revert to pre-pandemic habits. We’re in an era of ‘new normal’ as customers continue to expect higher service levels, such as shorter delivery times at lower prices. Let’s look at how that affects multi-carrier parcel shipping, the most significant challenges it faces, and how to optimize the process.
Multi-Carrier Parcel Management and Challenges
Multi-carrier parcel management is when a company uses several carriers and/or couriers to deliver smaller shipments to a large customer base. This practice is most prevalent in retail, consumer electronics, and consumer packaged goods (CPG), but it also occurs in other industries. Multi-carrier parcel management is complex due to the sheer number of variables and its sensitive nature—it can affect client satisfaction, profit margins, resource allocation, and a company’s brand.
Some of the most pressing challenges within multi-carrier parcel management include:
- Shipping time—Customers expect fast shipping at low or free prices, and the evolution of logistical practices during the pandemic has significantly raised customer expectations. Ensuring proper alignment of service and transit time to meet your customer SLAs is important.
- Price—Companies need best-in-class shipping rates in order to optimize their transportation spend and remain profitable. Companies that accomplish this maintain and grow profit margins and customer base.
- Carrier selection—A strong portfolio of national, regional, global, and hybrid postal carriers that can serve distribution centers (DCs), fulfillment centers (FCs), and stores can make the difference between loss and prosperity.
- Monitoring performance—As the number and diversity of carriers increase, it’s more challenging to monitor performance on a micro-level to find gaps to remedy or create new opportunities.
- Controlling spend—With demand fluctuation, year-round peak season, and carrier capacity issues, managing transportation spend is more complex and blurry.
While these challenges may seem staggering, they’re surmountable by implementing a resilient multi-carrier parcel management strategy.
1. Identify your Needs
It’s imperative that you understand your current transportation strategy and your needs. Your needs include identifying the scope of your shipping requirements, appropriate carrier mix, desired delivery times, adequate contractual volumes, and financial commitments.
Mapping out your needs gives insight into how to optimize your multi-carrier parcel management. The localities and demands of your customers shed light on what type of carrier portfolio you should deploy. Choosing the right regional carriers is important as they have specific coverage areas and tend to have several service options within that coverage area. National carriers, while much broader in coverage, may actually have longer transit times in certain areas and given tight capacity in the parcel market, one may want to lower the risk of simply using a single national carrier or carriers and spreading their package volume across a combination of national and regional carriers. Trax offers carrier management services that give access to real-time data to make quick, informed business decisions. Companies that plan ahead don't lose out on new opportunities or stumble when rapid changes occur in the market like during the pandemic.
2. Develop an RFP Framework
A vital yet commonly overlooked strategy is developing a proper RFP framework. Getting it right is a critical, foundational factor that can save you a substantial amount of money and time. Historical carrier data gives insights to match shipping characteristics with the right mode of transportation carriers. It also ensures that carriers align with your needs and mitigates overlap so you can eliminate carriers that can’t serve your target market or objectives sufficiently. At Trax, we’ve seen how creating a customized RFP template leads to selecting the right carriers, and our clients saving as much as 12% in transportation spend.
Customizing RFPs includes all the information and terms that are important to your company when searching for a suitable vendor. Our RFx Manager is one of many tools you can use to accomplish this objective. Instead of your procurement teams working with a template not designed for supply chains, you can create RFPs that hone in on your needs. This helps eliminate unsuitable carriers and find the right ones that meet your financial, performance, outreach, and other criteria.
3. Select the Right Carriers
Once you’ve obtained carrier bids for your RFPs, you need to identify the right carriers, which is best done through optimizing contract management and standardizing contractual cost drivers. This offers enhanced visibility into your transportation spend.
Factoring all payables into the total cost of service for each carrier divulges the financial feasibility of each option. Remember to factor in weight/zone pricing, dimensional weight, fuel surcharges, residential/extended area surcharges, oversize or overweight accessorials, and other relevant payables.
Forming a strategy around consolidation to terminal or location pick-up, which also impacts cost and transit time, helps detail your transportation spend. For example, how aligned is a carrier's network with your package density requirements and network topology? Can you consolidate shipments using FTLs to drive cost reductions? Factor in the average pro-rated cost per package of the truckload into the delivery costs by carrier when modeling and performing cost comparatives.
However, don’t focus solely on the financials, as slightly higher cost for better carrier performance can mean substantial cost savings in the long run. Furthermore, carrier performance can drastically boost—or harm—your business and brand. We at Trax have found carrier scorecards to be an excellent way to measure carrier performance. Carrier scorecards are a simple tool with relevant KPIs highlighting how each carrier performs for the most important criteria to your business, offering you an easy way to crosscheck cost-effectiveness and performance so you can get the best service for the best value.
4. Build your Network
Building a resilient and efficient logistical network is crucial, especially for businesses that have an omnichannel strategy. Gaining complete visibility into shipping origins, destinations, delivery times, and costs can help you make meaningful and informed decisions that improve your bottom line.
A strong network also helps you to plan for the future and be ready for the unexpected. For example, in an omnichannel strategy, changes to shipping volumes should be reflected in your choice of carriers and their respective volume commitments. A powerful, strategic logistical network delivers greater control and the ability to shift and adapt as you need to a changing market, such as what we saw in 2020.
Omnichannel strategies can prove quite complex if a network isn’t well-defined, as understanding direct shipments from various distribution points like suppliers, FCs, and stores is critical for smooth sailing. Factor in reverse logistics into stores or FCs as well, as neglecting them may create a massive headache moving forward.
Leveraging real-time and historical data while constantly evaluating and addressing gaps is vital to plan ahead and reflect future network changes. Trax has helped companies get the right data in hand to make informed decisions, quickly adapt to new circumstances, and take advantage of new opportunities.
5. Leverage Technology
The right technology takes multi-carrier parcel management to the next level. Solutions like Trax that can gather, normalize, and centralize data from distributed order management systems (DOM), warehouse management systems (WMS), and your other systems, can greatly enhance efficiency and data management. Leveraging technology in all locations enables you to implement a multi-carrier strategy so you can route shipments to certain locations under specific conditions through the most suitable carrier.
Technology not only increases efficiency through mitigating human error, streamlining the process, and reducing admin work, but it also creates a data hub. This data hub collects and refines data to deliver detailed information, which you can leverage to make quick and impactful decisions. Integrating various systems into one platform and standardizing the data provides increased visibility into your operations and cost centers. Comprehensive visibility has long been a challenge in multi-carrier shipping, and leading companies have taken active steps to remedy it—Gartner reports that 50% of product-centric enterprises will have invested in real-time transportation visibility platforms by 2023.
Choosing the right solutions that align with your strategy and setup is crucial to optimizing your multi-carrier parcel management. Having the right, normalized, high-quality, and consistent influx of data makes the difference between flying blind and being a leader in the market.
6. Perform Post-RFP Compliance Review
If the pandemic taught us anything, it’s that we must always be prepared, and constant monitoring and evaluation are key to being proactive. Continuously perfecting your multi-carrier parcel management gives your supply chain greater agility and resilience in case things go awry, which 89% of supply chain leaders aim to do going forward. It also helps you to shift gears and take advantage of windows of opportunity. We’ve had great success with helping clients in their post-RFP compliance reviews
Post-RFP compliance reviews evaluate if the actual performance matches your initial goals. Constantly reviewing carrier performance allows for quick course corrections and helps you to improve your network. Monitoring financial compliance maintains and grows your profit margin, ensuring that your transportation spend execution aligns with your business objectives.
Tailoring the RFP helps your company to optimize and mature through the Trax Transportation Spend Management Maturity Model, a framework that provides a roadmap for large, global enterprises to shift from a lack of visibility and control to a fully optimized and accurate data-based transportation supply chain for all modes and geographies. Our model improves efficiencies, accountability, transparency, and more in your Transportation Spend Management.
Resolute Multi-Carrier Parcel Management is Vital
The COVID-19 pandemic necessitated rapid evolution of multi-carrier parcel management that transformed the landscape of multi-carrier shipping to be more efficient and cost-effective.
The year 2020 was a wakeup call that highlighted the need for businesses to adopt a resolute multi-carrier parcel management strategy in order to survive. Companies that went all in benefited the most, not only surviving one of the worst economic pitfalls in recent history but thriving within it. The companies that stuck to the old ways saw their customer base become disgruntled and looked for other suppliers that could meet their heightened expectations. Companies that rose to the challenge ushered in the ‘new normal’ and dramatically boosted their brand.
At Trax, we model carrier mixes considering vital criteria, such as cost-effectiveness, transit times, performance, zone-skips, and other constrained outcomes, to determine the best execution strategy. To learn more about how we can help you optimize your multi-carrier parcel management strategy, contact Trax today.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.