Post-COVID Pros and Cons of Regional Parcel Carriers
by Staci Americas on Sep 21, 2023 10:00:00 AM
During the pandemic when parcel capacity was tight and shippers experienced the sting of carrier volume caps or discontinuation of services, regional parcel carriers stepped in to fill the void.
Along with providing extra capacity the big three parcel carriers couldn’t provide, regionals opened shippers’ eyes to other benefits like lower rates in certain markets and better and faster service.
But now that things have stabilized, how have things changed? Without the panic for capacity, are regional parcel carriers still as attractive?
We sat down withStaci Americas' Director of Transportation, Dan Galassi for an update that should matter very much to shippers.
How much should it matter? The Wall Street Journal reports that shipping represents 10% to 15% of an eCommerce brand’s sales.
That makes the job of optimizing shipping costs a priority. Every option needs to be evaluated regularly – including regional parcel carriers.
Here are 10 considerations for eRetailers looking into regional carrier strategies in our post-COVID world.
1 - Cost Savings
PRO: Savings of 10% - 20% are possible using a regional carrier in its chosen market. Other industry sources say that can go up to 40%.
CON: Those savings need to be considered in light of the potential impact on volume discounts you receive from major carriers. Simply put, if you have a contract with a major carrier and you shift some of that volume over to a regional, you must make sure you still have the volume to retain your contract rate. If you don’t, Dan says, the major carriers are on it and will adjust their rates upward. Shippers need to make sure lower freight rates from regionals are not offset by increases to their nationwide contracted rates.
2 - Delivery Speed
PRO: Regional carriers offer ground service in a localized area and leverage their local expertise in route planning to provide one- or same-day delivery at a savings compared to national carriers who would have to charge for expedited service.
CON: Regional carriers don’t offer the range of delivery options major carriers do. “With the major carriers you can get services ranging from one-day and next-morning all the way up to three-day and eight-day delivery – all with different price points,” Dan says. “With regionals, you've only got one or two services and that's it.”
3 - Surcharges and Accessorials
PRO: Typically, regional carriers have fewer fees just because they're a smaller niche. In general, less bureaucracy and more entrepreneurial gumption make regionals more lenient when it comes to accessorial charges, such as liftgate, over-the-threshold service, unplanned pick-up locations, and additional handling.
CON: The regional carriers have grown up in the time since the pandemic. Many are now asking for the same surcharges and accessorials that the big three are charging. “Some charge residential fees and fuel surcharge as well as peak fees – though not as many,” Dan says.
4 - Risk Reduction
PRO: Regionals remain a hedge for adding capacity during a supply chain disruption such as a labor strike or another outbreak of COVID. Dan says that there is value in having relationships with local carriers who can add capacity when needed.
CON: Regional carriers are smaller so bankruptcy and disruptive mergers are risks that must be considered when you move your eggs to a local carrier’s basket.
5 - Technology
PRO: There’s no sacrifice in tracking and executing shipments with local carriers today, Dan says. Regionals use leading edge transportation management systems (TMS) that integrate with shippers’ enterprise resource planning (ERP) systems. “Regional carriers are automated, so you get tracking information, event scanning and visibility to your package.”
CON: Integrating systems is the same as it is with a major carrier. Shippers that expect easier integration with a smaller carrier will be disappointed. Local carriers aren’t a resource you can immediately turn on when needed to handle unexpected volume. Dan says it is a 6-month process oftentimes to complete negotiations, integrate a TMS, and get running.
6 - Scalability
PRO: Increasing capacity 10% to 20% is no problem for most regional carriers. If business grows at a healthy pace, the regional option can grow right along with you.
CON: If your product becomes a Tik-Tok sensation and business quadruples, a regional carrier may struggle with this capacity uptick, whereas a major carrier would not.
7 – Ease of Administration
PRO: Regionals tend to have more personalized customer service, so you can get an answer to a question pretty quickly. National carriers tend to have automated help centers with all their accompanying frustrations.
CON: If you work with a national carrier and supplement with regional carriers in certain markets, it takes time and effort to manage these multiple carriers.
8 - Quality
PRO: Regional parcel carriers provide a good customer experience. They know the territory and can take the time to ensure successful on-time delivery to buyers.
CON: Smaller operations and smaller asset pools mean local carriers sometimes rely on contracted labor that can tarnish the customer experience and shipper’s brand image. Unidentifiable delivery vans and drivers without uniforms can impart a fly-by-night impression brands don’t want.
9 - Customizable Services
PRO: Agile and entrepreneurial local carriers can customize program elements for you, like pick-up times. They don’t have to worry about offering the same service on a national scale.
CON: When customizing means increasing capacity, local carriers might not have the resources to accommodate you. What if you need multiple pick-up times during a volume surge? Big three carriers have bigger workforces and asset pools to shift your way than regional carriers do.
10 – Initiating the service
PRO: Regionals will meet with you to understand your product shipping needs, delivery time frames, and budget and then design a program for you.
CON: Adding regional carriers adds complexity. Dan stresses that you have to do the math. First of all, shippers have to have a local distribution center within the radius of a region that makes shipping with a regional carrier viable. Secondly, shippers need to make very sure that the volume they shift from a major carrier to a regional carrier doesn’t sabotage the contracted rates they have negotiated with major carriers.
Consider the advantage of a 3PL to handle parcel strategy and shipping
Regional parcel carriers have grown in size and sophistication and are certainly a more viable option today than they once were. But the relevance of regionals to your business will depend on your warehouse locations and ship-to points.
For help figuring it out, it could make sense to work with a 3PL like Staci Americas for integrated warehouse fulfillment and parcel delivery. As part of the Staci global fulfillment network, Staci Americas has 18 U.S. fulfillment centers and manages a very large volume of parcel freight. As a result, we enjoy excellent rates and relationships with key national parcel carriers.
If you’re looking to optimize your pick/pack/ship process, talk to the experts at Staci Americas about a combined warehousing and parcel distribution solution.
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