Regional Carriers: A Way to Lower Small Parcel Spend?

 In Industry News

Many shippers are combatting rising small parcel shipping costs by using a combination of carriers to build a national delivery network and create the lowest total cost of shipping for their specific business.

Smart shippers are not only mixing and matching UPS, FedEx, and USPS for the best rates by lanes. A lot of shippers are now also leveraging regional small parcel carriers to build their most optimized delivery network — and for many it is paying off.

Size matters

Unfortunately, size still matters when it comes to finding the best discounts and service. As a general rule, a business that spends over $10 million in net transportation has the ability to leverage multiple carriers to have a real impact on rates.

This minimum spend level gives a shipper the ability to take advantage of a regional carrier’s savings and still maintain enough penetration into their target revenue tier with the national carriers. In other words, the savings with a regional carrier needs to be considered against the potential loss of discounts with FedEx and UPS.

Each shipper and its rate agreements is unique, so it never hurts to explore the possibility of adding regional operators into your carrier mix. The hard truth, though, is that shippers who spend less than that benchmark usually don’t have the negotiating leverage with both national and regional carriers.

Benefits of regional carriers

Major regional carriers cover approximately 85% of the U.S. and, with the growth of ecommerce, have been steadily expanding from the B2B market into the B2C market. As the name implies, these carriers service very specific geographic areas. The best results can therefore be gained when a shipper’s lane and volume needs closely match a particular carrier’s footprint.

Fast & on time: Regional providers average around 99% on-time delivery, which is ideal for businesses that have a large group of customers in the same area and want to stay competitive by providing same-day or next-day delivery.

Service: Regional carriers can usually offer more personalized customer service than national carriers. With the customer experience being so important to retailers today, getting customer service issues resolved quickly and correctly can be a great advantage of using a regional carrier.

Flexibility: National carriers tend to be more rigid with their rules than regional providers. Regional carriers are more likely to be able and willing to create custom solutions to meet your business’s unique needs, such as extending pickup windows.

Lower costs: Regional carriers have lower operating costs and are able to pass those savings along to their customers. Their base rates are sometimes as much as 10%–40% lower than those of national carriers like UPS and FedEx. They also tend to have fewer accessorial charges and lower minimums than their national counterparts.

Other considerations

There are factors beyond base rates and fees to consider before moving volume to a regional carrier. Make sure you ask yourself and any potential carrier partner the right questions. These can include:

  • Can the carrier meet your service requirements in terms of pickup cut-off time and transit time?
  • Can the carrier accommodate odd- or oversized items you may ship?
  • What is the on-time delivery performance of the carrier?
  • Are rates negotiable or do they require a minimum volume?
  • What are the potential surcharges and fees?

What’s best for your business

You may find that using only the national carriers may still be the best option for your business. If that’s the case, it’s never a bad time to renegotiate your agreement. Tightening up your rates and service agreement with your existing carriers might be all that’s needed to optimize your small parcel shipping operations.

The first step to finding out if a regional carrier would be able to meet all the delivery requirements of your business is to ask them to model rates and service times for your most important lanes. Then, if the carrier is a potentially good fit, you can explore whether leveraging regional small parcel carriers to build your most optimized delivery network will pay off for your business.

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