Why Multi-Carrier Strategies Aren't for Everyone
Many articles about the benefits of a multi-carrier strategy claim that a single-carrier strategy is a relic of the past. Those articles are published by multi-carrier software companies and usually don’t clarify that they target shippers who ship direct-to-consumer with Express carriers. They also don’t clearly distinguish between the benefits of a multi-carrier strategy and multi-carrier software and ignore that multi-carrier strategies are not typical for Road transportation.
When I joined Viya, I didn’t have prior knowledge about logistics. Because of this, I couldn’t put existing articles about multi-carrier strategies into context. They gave me the impression that a multi-carrier strategy is something to pursue for all shippers. Now that I’ve spoken to some of our customers and have insight into different shipping scenarios, I know a multi-carrier strategy isn’t for everyone.
Carrier Choice
One advantage to a multi-carrier strategy is that you can give customers a choice between carriers. That’s always a positive thing for customer satisfaction. Another advantage is that you make your supply chain more resilient to disruptions because you can switch to another carrier more quickly if your regular carrier has problems.
But to pursue a multi-carrier strategy, you must have sufficient volume or use discounted rates from shipping platforms that also sell shipping labels - which creates other limitations. It’s not as clear-cut as it is usually presented.
Volume versus Value
A multi-carrier strategy is commonly adopted for Express shipping because the volume is high in Express transport, so the price differences based on weight, dimensions, and destination add up. With a monthly volume of 5,000 packages, a price difference of €0.50 per package can significantly affect the bottom line. But if you have a volume of 1000 shipments per month and save an average of €0.50 per package with a multi-carrier strategy, you save only €500 per month on shipping costs. That amount is lost in personnel costs if your staff has to compare rates from carriers to choose the cheapest one manually.
With multi-carrier software, you enter the details of a shipment, and the software calculates who the cheapest carriers are. This saves you time and money and reduces the risk of errors, but the software cost should be proportional to the expected savings in shipping costs and customer satisfaction benefits. When calculating the expected ROI, aspects like the time and energy required to choose, implement and maintain a new software system should be taken into account.
So, before a multi-carrier strategy is profitable, you must first ship enough packages to work with multiple carriers. That’s the case if you agree on rates with carriers, but it applies equally if you work with discounted rates from shipping platforms because there’s a volume requirement for pickups. Second, using multi-carrier software must create sufficient value. This value subsists from savings on shipping costs but also lies in making your supply chain more resistant and increasing customer satisfaction by offering customers a choice between carriers.
Conclusion
In conclusion, you need to look at the type of transport you need, your shipping volume (do you have enough volume for multi-carrier appointments or multi-carrier pick-ups?), your expected savings on shipping costs, the anticipated effects on customer satisfaction and sustainability of your supply chain, and the costs of multi-carrier software you will need to make your multi-carrier strategy manageable.
