ECommerce owners and managers like you are staring at their growing list of orders for peak season 2021, hoping that they’ll be able to ship it all on time. But, if you’re limited to just a single carrier or service option, that’s going to be a significant challenge. Carrier diversification is your safest bet to avoid that single point of failure. However, this move comes with concerns around price, availability, and reliability.
You might worry: Is a new carrier option right for you, or would that set you up for failure? Let’s dig through that question and see what’s true, which options are still available, and how they can impact your operations.
What is carrier diversification?
Carrier diversification is just a way to spread your order fulfillment across multiple national and regional carriers. You create accounts with more carriers — or use partners like Red Stag Fulfillment — to access shipping products. Adding them to your account and rate card will let order management tools compare fulfillment costs and pick the best service based on speed and cost considerations.
Essentially, carrier diversification is about not putting all your eggs in one basket.
It protects you against disruptions that may happen in transit. And you get the flexibility to adapt to problems or capacity constraints as soon as they happen. If past peak seasons taught us anything, it’s that you need a plan to enable flexibility.
Can you rely on regionals and new carriers?
New partners can promise the moon, but that rarely addresses the big concern companies have. You want to know if you can rely on a partner. Can you trust a new or regional carrier to deliver? Or, is carrier diversification going to come back and bite you in the end?
That concern may be the best reason for an eCommerce company to pursue carrier diversification through a 3PL like Red Stag. We’ve worked with our carrier partners to understand their advantages and foster relationships. Through us, you’d get access to vetted partners with a history of performing well. You just might find that a new carrier can offer you more reliability than past partners.
Will it help me avoid peak season shipping delays?
Carrier diversification is among the best tools you have to meet the shipping deadlines you promise customers. Adding more carriers to your pool will help you avoid exceeding capacity limits from any single carrier. In general, we’re already hearing that some carriers feel overwhelmed with current capacity demands on their networks.
According to a recent report, 2021 capacity issues could mean 7 million daily packages more than major carriers can handle. That’s up from the predicted 5 million per day, shared by UPS CEO Carol Tomé during the company’s Q2 earnings call.
Using multiple carriers also helps protect you against outside changes. Labor shortages and strikes, illness, natural disasters, and regional congestion can all harm fulfillment. Having multiple carriers helps you respond to these shifts. That’s even more important during times of increased order volume and constrained carrier capacity. Add in benefits like some regional partners having higher on-time delivery percentages, and you’ve got a solid shield against many fulfillment issues.
So, the more options you have, the better you can meet customer promises and shipping guarantees. You’re also better able to set proper customer expectations for what’s possible this peak season.
Does carrier diversification harm price shopping?
Generally, carrier diversification is about keeping your options open and looking for better pricing. You’re adding more chances to find a lower cost without losing speed. Regional carriers, for example, tend to offer better rates for lightweight packages in their coverage area.
However, that’s not the case for peak season rates. Making this change now is about protecting your business first and foremost. Let’s talk about why that’s the case.
Peak season has already begun, so carriers have set their rates and peak surcharges. Those are based on previous shipping volume — sometimes what you did last year, or others what you shipped in October. If you weren’t using a carrier before now, then you’ll hit the threshold where surcharges begin much quicker. Surcharges mean you won’t necessarily save significantly now, but they can help ensure you’re able to fulfill orders at all.
“What if the difference means that your package doesn’t go out at all?” asked Tony Runyan, Red Stag Fulfillment’s VP of Client Relations. “That makes it easy to determine if going with a new carrier makes sense. Carrier diversification also helps you avoid having orders sit there because a carrier didn’t pick up today or you’ve reached your cap. You want alternatives already in place.”
Is it too late to diversify?
“Thankfully, it’s not too late to potentially add new carriers,” said Runyan. “You’re more likely to pay peak surcharges because you didn’t make the shift earlier, but you’re paying for that security.”
Carriers will only accept specific volumes from any shipper during peak, whether that’s your company individually or working with a 3PL like us. Adding more carrier options helps you get access to more capacity and avoid hitting those limits. Even if you’re more comfortable with just using a single carrier, it can be worth expanding just to protect your business.
“Earlier is always better,” said Runyan. “Diversifying sooner creates more opportunities and more options for flexibility. However, we’re at the moment where there is still additional capacity available, and that can help you meet promises and customer demands right now.”
Hear more from Tony and Red Stag leadership about how to protect yourself during the peak season by checking out our Fulfillment Lessons We Learned From Q4 2020. Or learn how simple the process of adding more carriers can be with this guide on How to Enable Multiple Carriers with Red Stag Fulfillment.
