Business shutdowns and economic turmoil triggered by the pandemic have created tight trucking capacity throughout North America, but shippers still have options that can allow them to continue getting parcels delivered at reasonable rates and speeds in this “carriers’ market,” according to a panel held today at the Council of Supply Chain Management Professionals’ (CSCMP) EDGE 2020 conference.
“It has become a carriers’ market,” said Wayne MacGregor, director of logistics at Indigo Books and Music Inc., a Toronto, Ontario-based retailer that operates 88 superstores and 94 small format stores, shipping over 4 million e-commerce parcels per year.
“Because of the limitations of Covid and social distancing, for many carriers there are more parcels than their network can manage, so they’re being prescriptive with some of their large shippers in terms of the number of parcels they’re willing to accept, and limiting some of those numbers.”
That has created situations where if a carrier has the capacity to carry 1 million parcels per week and they have 1.3 million coming in, they’ll emphasize the million parcels that make the most money for them, as opposed to honoring previous contracts.
Another impact of the tight market has been to trigger rate hikes and additional surcharges imposed by the “big three” carriers—the U.S. Postal Service, UPS Inc., and FedEx Corp.—said Carson Krieg, co-founder and director of strategic partnerships at Convey, a Texas-based firm that makes a cloud-based platform for improving shippers’ visibility by connecting disparate data and processes.
“The carriers have adopted a ‘take it or leave it’ attitude,” MacGregor said. “We had tried to get rates that were as competitive as possible—based on what the market and our purchasing power would allow—but if you’re at the bottom of the totem pole in terms of profitability for the carriers, that can introduce risk in terms of their willingness to carry your load.”
Those conditions are putting pressure on shippers’ efforts to balance cost, speed, and customer service, so some retailers are turning to new strategies to address the tight market.
First, Indigo adjusted some of its operational patterns to help boost carriers’ efficiency at picking up and dropping off their loads, in order to take the conversation off the question of rates alone, he said. For example, the company began allowing its customers to ship to centralized “hold for pickup” locations, where multiple parcels are held in urban lockers so delivery trucks can make a single stop instead of visiting 20 different consumers’ houses for home delivery.
Second, the company accelerated a plan it had begun two years earlier to diversify the number of carriers it uses to contract deliveries. That approach comes with risk, however, because most carriers grant lower rates for shippers who commit to sending larger volumes. Another drawback to diversification is that it makes it harder to ensure good visibility and freight tracking, since various carriers have different web portals and data standards, especially with smaller fleets.
To address those problems, Indigo began working with Convey, which says its “delivery experience management” solution helps to optimize all steps of a buyer’s journey — from presenting competitive delivery dates pre-purchase through outcome-based shipment execution to shopper communication, exception management, and transportation analysis.
And in a third step, Indigo offered to commit some of its business to business (B2B) volume to carriers, instead of looking to book fleets solely for business to consumer (B2C) shipments. That made its bids more attractive to carriers because it allows them to build greater route density, leading to greater profitability, MacGregor said.
