Using regional parcel delivery carriers to supplement the service FedEx and UPS can help keep your shipping costs down. As we discussed in the article, The Benefits of Regional Parcel Carriers, there are considerable advantages to regionals.
But there are hundreds of regional parcel carriers, couriers and messenger companies, and not all regionals are qualitatively equal. There certainly are downside risks to carefully consider.
First, consider the challenges of multisourcing. Relatively few shippers have 100% of their customers within a single regional carrier’s delivery footprint.
So the majority of shippers will need to continue to use national and potentially other regional carriers. That means multiple vendors to manage, different tracking systems, additional integration points, and so on.
Moreover, some of the smaller regional players may not have the support of parcel software vendors. Be sure to confirm that your manifesting system fully supports a regional before investing too much effort exploring it for your distribution.
Carefully review each regional carrier’s technology, tracking tools, web-based shipping systems, manifesting equipment, service coverage and transit guarantees. Few regionals have deep pockets to invest in infrastructure, technology, continuous improvement programs, etc., and find it hard to compete with the Big Two.
You’ll also need to confirm the financial stability of the company. While many of the larger regional carriers have been in business for decades, there are numerous examples of regionals (and national carriers) going out of business.
FedEx and UPS have spent hundreds of millions of dollars developing brand and market awareness. Many regionals lack name brand recognition, a concern for some shippers that connect customer experience and “image.”
Many regional carrier drivers are independent contractors. Drivers at the smaller players, in particular, are not always uniformed, and vehicles may not be decaled. Again, a potential concern for shippers concerned about losing credibility over image.
Regional delivery providers might have an advantage in the event of inclement weather. Of course, the opposite is potentially true as well. If weather or other “acts of God” impair a regional’s ability to deliver packages, theoretically, shippers stand the risk of 100% of shipments missing service commitments.
Finally, many FedEx agreements and nearly all UPS contracts penalize shippers for diverting shipments to another carrier. If too much volume is bled to regional carriers, shippers stand the risk of losing discounts with the national carriers.
Of course, that’s exactly why FedEx and UPS build volume commitments into incentive programs. Shippers get locked in to a single carrier and are discouraged from looking at alternatives. Did you ever notice that additional incentives to hit higher revenue tiers are generally insignificant, while retracting to lower revenue tiers results in a significant loss of incentives?
Shippers need to understand that revenue thresholds, like incentives, accessorial concessions, etc., are negotiable. Refuse to be a rat stuck in the wheel of higher revenue thresholds. Give nationals and carriers the shipments that best meet your overall business needs, and negotiate achievable revenue thresholds.
Now is the time to evaluate regional carriers. Regionals can help shippers reduce costs, increase productivity and improve delivery times; and they can provide a competitive advantage.
If you are unsure if regionals are for you, a number of industry resources, including third-party logistics providers and consultants, can evaluate your distribution and make recommendations as to whether regional carriers offer some benefit. Good luck!
Rob Martinez (email@example.com) is president/CEO of shipping consultancy Shipware Systems Corp.