Industry experts are saying that although space has freed up within the Big 3’s (FedEx, UPS and USPS) networks, shippers continue to diversify their parcel carrier mix. Increased capacity and more robust services from regional carriers are driving this trend.
According to Supply Chain Dive, FedEx and UPS enacted rate increases for 2023, and because alternatives in the parcel delivery sector have grown, there’s plenty of cost-effective capacity for Shippers and 3PLs to utilize.
In Episode 8 of Banyan’s Tire Tracks™ podcast, Bill Schroeder, President of ProShip, the industry-leader in automated multi-carrier parcel shipping software for mid- to enterprise-size shippers, discusses the state of parcel shipping, including how changes in the supply chain have affected regional carriers versus the Big 3.
“The big companies can't add capacity as fast as the smaller companies. Some regional carriers play nationally, but they are looking for very specific parcels. They don't want to move everything. They just want kind of the stuff that the Big 3 don't necessarily want,” he said. “We saw a real big increase in investment and in the creation of new startups in the parcel, regional space.”
Schroeder explained that the Big 3 are now going after that business and those parcels, they didn’t want a few years ago.
“It was our expectation that those regionals would probably hit critical mass, and several of them have… [Some have] good business plans, great execution, they manage their costs, and they know how to do what they're doing,” he said. “Some of the other startups are just learning how to do that, and then then the volume tempered, and UPS and FedEx said, ‘we want those parcels back’ and got after it.”
With supply and demand equalizing, there's some change and shift in the growth of consumer behavior in ecommerce that is starting to cause some stability back into parcel pricing.
“That is squeezing those regional players out if they didn't control their costs and build a good, efficient network. If they were counting on that 3% premium that they could get, that's getting pulled out from under them right now,” said Schroeder. “I think we'll continue to see that trend evolve, and we'll still see, regionals pop up here, there and everywhere. And we'll see a few that are operating and executing well continue to survive. They serve specific metro markets, and they do it better than the Big 3 can do in the metro market.”
With parcel shipping stabilizing and a possible strike at one of the Big 3 carriers, diversifying your risk is key to a cost-effective parcel shipping strategy.
“Single carrier strategies made sense back in the 1990s, when you could bundle all of your shipping together with one carrier and negotiate a better deal than you could with two carriers,” said Schroeder. “It hasn't been that way for at least 15 years. You can negotiate good deals with both of them. You're going to get marginally incremental, better deals if you bundle all your volume, but you're also taking on a whole bunch of risk.”
Another way to protect your bottom line is to partner with the right technology providers for your parcel shipping. Transportation management software has made it easier than ever for you to get the most out of your shipping services. From tracking packages in real-time to seamlessly integrating with existing systems, modern parcel shipping solutions are designed to help streamline operations and minimize errors.
Schroeder explains how partnerships have helped the company focus on exceling in parcel shipping.
“We look to find a good strategic partner where an alliance makes sense, what are their delivering capabilities, and then do they fit integrated into our platform,” said Schroeder. “Banyan has a great [platform] that we can use to leverage the integration to them and take care of an expanded offering of over-the-road capabilities.”
To hear more about how to adjust to significant changes in parcel shipping, visit https://www.banyantechnology.com/resource/the-difference-between-regional-parcel-carriers-and-the-big-3-episode-8.
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