Many carriers will offer a discount for a guaranteed level of volume. Because of this, many shippers spread freight volume over as few carriers as possible to ensure maximum negotiating power. This method was widely considered a best practice until the onset of the pandemic when shippers found they couldn’t move cargo after their preferred carriers shut down.
In response, shippers rushed in the other direction and rapidly expanded carrier networks, sacrificing bulk discounts for reliability and resilience. Having more carriers to choose from made it less likely the shipper would get stuck with a load they couldn’t move.
With the pandemic in the rearview mirror and inflation continually driving up costs in other areas, shippers are left wondering if the risk of putting all their freight in one basket again is worth it so they can get those volume discounts back.
4 Reasons Why Carrier Diversity Still Matters
Consider the bigger picture before dropping down to a few trusted carrier partners. The benefits of carrier diversity extend beyond the straight-line cost. A volume-based discount from your parcel, less-than-truckload (LTL), or truckload carrier may seem appealing, but consider these other factors before shrinking your carrier network:
#1. Resilience isn’t just about pandemics.
When the supply chain cracked under the strain of a global pandemic, “supply chain resilience” became a buzzword across both popular and business media. The gist of the messaging was that we needed to build resilience into operations so the supply chain would never get caught unawares again. The advice is still good, but resilience isn’t just about global catastrophes.
A resilient operation also resists the small changes that impact businesses every day — for example, a labor strike or a carrier partner going unexpectedly bankrupt. A resilient business is flexible when the unexpected happens, and a diverse carrier base lets you shift volume elsewhere when something goes wrong.
#2. Your customers want optionality.
Providing a good customer experience these days means providing options. These challenges are becoming even more difficult as the lines blur between retail distribution and direct-to-consumer fulfillment, with many warehouses now sending out everything from parcels to pallets.
Some customers might want an order delivered the same day and dropped off at a specific point on their property. Others may not need their order for a week, but they want it at the loading dock within a specific two-hour delivery window. When you have an array of carriers, you’re much more likely to find one that can meet customer demands or unique shipping requirements.
#3. The best carriers will stand out.
Diversifying your carrier base doesn’t mean you shouldn’t have preferred carriers. But if you limit yourself to only a few carriers from the start, you may never know if the grass was greener on the other side.
By collecting data and performance metrics on the carriers you use, you can build a list of high-performing carriers. Even better, you can keep bringing new carriers into the fold and expanding that list over time.
#4. Never worry about scaling up.
Right now, the U.S. trucking sector is clawing its way out of a freight recession. However, only a few short years ago, major carriers were rejecting volume from small and medium shippers to create more capacity for their largest customers. This practice created downstream issues for those smaller shippers, who had to deal with the fallout when they couldn’t get orders to their customers on time.
A healthy mix of national and regional carriers of varying sizes will ensure that you have someone in your network willing to take your volume, even if the usual carriers reject it. This mix can also help you circumvent the surcharges that major carriers have been adding on during the holiday peak season in recent years.
Cost is important, but it shouldn’t be the only factor you consider when determining how many carriers you need in your network. Sacrificing reliability and flexibility for a short-term volume discount can negatively impact your business’s long-term health.
To learn how a 3PL can help you optimize your carrier network, please don’t hesitate to contact us.
About Phoenix Logistics
Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.