Carrier Capacity Management Levels the Playing Field in a Carriers’ Market
The unprecedented cargo logjams off the southern California coast wreaking havoc on supply chains show no signs of waning. Just two days before Thanksgiving, FreightWaves reported an “all-time-high 93 ships” were waiting there. Workforce shortages and other challenges abound throughout all transportation sectors, and while this may revitalize investments in localized manufacturing, expanded warehousing to hold more inventory, and other efforts, these changes do not solve today’s issues.
Despite the epic supply chain problems, some companies have taken big steps to profitably meet consumer demand leading up to and during the busy holiday season. Even if much of their sought-after inventory remains stuck at sea, merchants still need to move products that are available, and this brings its own set of relentless challenges.
Carrier capacity tops the list of parcel shippers’ challenges
Most shippers currently face a long list of challenges thanks to some well-known trends. E-commerce order volume keeps climbing, straining carrier capacity with shippers sending more parcels outbound and receiving more returns inbound. Requirements to manage carrier invoices and other transactions grow in stride. Consumer expectations for cheap and fast shipping continue to climb, and consumers increasingly want to order across borders, only compounding the problems.
The net effect creates a difficult reality for shippers. They face higher costs. They must navigate carrier parcel volume caps. In some cases, those same caps bring even higher costs. They have less negotiation power with carriers and partners.
Carrier capacity management strategies ease the crunch
Proactive shippers have used multi-carrier parcel shipping technologies and strategies to navigate rising carrier costs for years. Recently, as carriers increasingly presented shippers with volume-based pricing and outright caps on the number of parcels they will accept, many shippers added business rules to their multi-carrier shipping strategies to specifically address how to handle decisions related to capacity limitations, volume-related costs, and volume-related rate increases.
Multi-carrier shipping strategies also need rules in place related to delivery time requirements, special conditions (hazmat, refrigeration, etc.), and distribution points across a network. Each parcel delivery should consider not only the destination but also the origin of the shipment since many shippers have multiple warehouses or stores from which they can fulfill orders. Carrier-imposed capacity constraints that vary from location to location add another important consideration for shippers faced with making these decisions fast and at scale on an ongoing basis.
Rate shopping groups help address these capacity constraints as part of shippers’ ongoing decision-making about the best way to ship each parcel out the door. Rate shopping groups have their own business rules which point to one group or another based on the context of an individual shipment and where the shipper stands at any given moment related to the volume-based limitations and pricing of its carrier network. Based on this context, a shipper will send a parcel to Group A, Group B, etc., adjusting the carrier service used, facility that sends the parcel, and other factors to navigate capacity limitations most effectively.
Widening our view of carrier capacity management
Increasingly, some retailers, e-commerce merchants, and other shippers have broadened their definition of carrier capacity management to include new and effective ways to lessen the carrier capacity crunch. Most of these fresh considerations involve reducing demand for traditional carrier services.
A growing number of shippers now embrace the gig economy to get orders to customers, for example. Target, Walgreens, and other retailers now offer same-day and two-hour delivery options. Essentially taxis and bike messengers, this new army of couriers helps shippers lighten their demand for more traditional carrier services by reducing, often significantly, the number of parcels in those carriers’ queues. Their ranks are growing, with more of the gig economy racing to implement the right technology to accommodate heightened requirements for security, proof of delivery, signature capture, and more.
Omnichannel retailers have also begun reexamining their retail footprint from new perspectives. No longer considering only ship-from-store to offset carrier capacity constraints, many retailers found other ways to leverage stores to reduce demand for traditional carrier services. First and foremost, retailers have begun to not just offer services like buy online, pickup instore (BOPIS) and curbside pickup, but to incentivize consumers to choose these fulfillment options. Belk, Petco, Target, and Walmart were among the first to offer customers discounts for picking up orders, but carrier capacity constraints have helped the concept catch on with others.
Manufacturers also adjusted. Out of necessity to move product faster, some added parcel shipping operations at manufacturing facilities. This strategy gives manufacturers another distribution point and allows them to navigate capacity limits and volume-based pricing more strategically.
Giving customers more environmentally friendly delivery options or even incentivizing them to choose these options can also help shippers reduce their fulfillment burdens and give them new flexibility on how they choose and use carrier services to reduce the impact of capacity constraints. Amazon has done this for years, giving Prime members the choice to reduce deliveries by scheduling orders to arrive on their weekly delivery day. Other shippers have caught on, understanding that being environmentally friendly can align with meeting consumer demand. They can cater to their environmentally minded customers and improve operations by encouraging and incentivizing less-than-next-day shipping.
Others turned to additive manufacturing/3D printing to create goods closer to customers. Until recently, this was used most by service teams for regional production of parts, but the idea has reached a wider audience thanks in part to the rising costs and challenges of parcel shipping. Others, including some American behemoths, teamed up to ease the burden. Walmart, for example, offers logistics services to competitors. This creates new revenue streams for Walmart, new flexibility in how it deploys its fleet, and additional capacity among carriers.
Look for shippers to continue deploying these and other creative strategies in the new year to reduce their demand for more mainstream carrier services and minimize the impact of capacity constraints.
Business intelligence sorts it all out
Some of these strategies work better than others for different types of shippers, but business intelligence (BI) technologies help shippers audit and track performance and adjust processes accordingly. Many are more carefully planning and evaluating their BI dashboards to better identify opportunities in the new year, ensuring they can track the pulse of the metrics that matter most to them and adjust efforts going forward. Whether shippers want to track the performance of stores, opportunities to collaborate with partners, or their ability to avoid capacity-related rate hikes, shippers who get creative to minimize the damage of carrier capacity constraints can leverage BI to find answers to their questions in their own fulfillment data.
Ken Fleming is president of Logistyx Technologies, the leader in Transportation Management for parcel shipping. Since the mid-1990s, Ken has led successful launches of many new technologies and services, including supply chain management, e-commerce, SaaS, and enterprise software and systems integration solutions. Ken can be reached at email@example.com.
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