Competition. It is the ultimate in business. It serves to keep a balance between reasonable prices and profit margins. It keeps companies from hiking their prices on consumers, and it encourages businesses to produce better products and meet customers’ expectations. While competition is good, it is often forgotten when thinking about shipping. Most businesses think their only options are FedEx, DHL or UPS, but in reality, there are dozens of carriers waiting to be tapped. However, these carriers are relatively smaller than the Big Three, and their services may be off limits if you can’t reach them in your area. But, that does not mean you shouldn’t explore them. We’ve discussed the importance of using parcel shippers, multi-carrier shipping programs and joint-ventures with Magento Freight Shipping in the past, but the importance of carrier selection is taking center-stage once more. E-commerce is increasing in size and reach, and you need to understand the vital role carrier selection plays in keeping e-commerce profitable and productive.
What Is Carrier Selection?
Carrier selection is an idea made up of two simple words. You need to have multiple carrier options available for selection to keep the price point and shipping cost of your products down. Your transportation costs are roughly equivalent to 5 percent of your total sales, so unless you want to willingly pay 5 percent, you need more options. Fortunately, a broad carrier selection gives you these options.
Why Do You Need a Variety of Carriers to Choose From?
There are multiple benefits to working with a variety of carriers. More importantly, you do not have to worry about not getting hold of one carrier for all your needs. Instead, multiple options naturally lead to better service levels and cost savings throughout your business, but some of the additional reasons for expanding your carrier selection include the following:
- Consumers Demand More Choices and Options. Consumers are not satisfied with standard shipping anymore. They want it today, and they want shipping costs to be ZERO. If you can’t meet those demands or be very close to them, they will find what they need from Amazon, Wal-Mart or E-Bay.
- E-Commerce Order Sizes and Delivery Requirements May Vary. E-commerce varies heavily in size. Although many packages are small parcels, some may be huge. Think of the difference between shipping a 65-inch TV and a bushel of apples. Both may be bulky, but the dimensions can vary dramatically. As a result, you need to have access to multiple types of shipping.
- Different Carriers May Offer Different Service Levels. Next-day air service is great, but what if a product takes longer by air than by truck? Different service levels must be available to ensure the fastest mode of transit possible.
- Carriers May Not Provide Open-Ended Services. Open-ended services are provided by carriers who work exclusively with other businesses and logistics service providers. In other words, some carriers may not even be available to you without a third-party logistics provider.
- More Carriers Equals More Competitive Rates. Carriers have a vested interest in getting your business, so having more carriers will give you access to more rates to choose from.
- Interlining Is Essential to Globalization of E-Commerce. Carriers are not necessarily capable of working globally, and some shipments may need to be transferred to another carrier for final or international delivery, otherwise known as interlining. This is critical to making sure you can reach your e-commerce customers from around the globe. Plus, this transfer increases rates, and as mentioned previously, more rates are better.
Other Benefits of Carrier Selection Through 3PLs.
An expanded carrier selection is designed to save you money. While it may not seem like it initially, small cost savings add up to big profit margins over time. For example, imagine the options at your disposal when you transition from having three carriers to review to 60. But, managing this many carriers yourself is a huge time investment, so you need to take advantage of a 3PL to ensure you are seeing the best rates available for your needs. In other words, you don’t need to know the most expensive if the cheapest is first on the list. However, some additional benefits of using carrier selection through 3PLs include the following:
- Auditing and Order Tracking Tools. 3PLs offer an array of auditing services, which can help you isolate errors in your system and processes, which reduce overhead. In addition, you and your customers can take advantage of more order tracking tools to help improve customer service as well.
- Assistance in Preventing Overbilling and Crediting Overpayments. Overbilling or double-billing is part of business, and even the most proactive systems will let a few instances slip through the cracks, but a 3PL can work to locate and credit incorrect billing issues.
- Web-Based Applications to Ensure Optimized Routes. Optimized routes lead to shorter delivery schedules and better reception by customers, promoting your brand from within.
- Better Alignment of Business Strategy With Goals of E-Commerce. Your business must adapt to e-commerce, and 3PLs can provide assistance with aligning your business strategy to the needs of e-commerce.
- Dashboarding Improves Communication in Your Operation. Dashboarding is also critical to your success, and your 3PL should offer metrics and dashboards to keep you in the loop and updated on your progress quickly.
- More Shipping Lanes and Availability. Having a broad carrier selection through a 3PL also opens up more shipping lanes and helps to prevent delays from unavailable carriers.
As a shipper or retailer, you have more power in deciding which carrier ships your products than you realize, and some lesser-known carriers could easily be cheaper solutions for local business. However, smaller carrier size means you may not even know those carriers exist, and in some cases, these carriers may have negotiated lower unpublished rates with 3PLs that bring them business. Ultimately, having more carrier options is the next step in the evolution of the supply chain to meet the demands of a world driven by e-commerce.