The following is a guest blog from Green Mountain Consulting’s Mike Lambert. We are glad to have Mike as a member of the Home Delivery World Advisory Board and Green Mountain Consulting as a Silver Sponsor of our 2015 event.
I am noticing Regional carriers are gaining more interest than ever in the parcel shipping community these days. They have been a presence for years in the industry, but recent parcel industry trends and developments are thrusting them onto an even larger stage. Retailers in particular have been a primary factor in providing greater stardom for the Regionals. As most in the parcel industry are aware, omni-channel retailing strategies are disrupting how retailing is conducted. As a result, the methods for fulfilling and delivering consumer orders are also being disrupted. A primary objective of the omni-channel strategy is optimizing inventory and order fulfillment processes across all retail channels while providing customers with the greatest level of convenience. As a result, transportation managers are tasked with reengineering their parcel networks to accomplish the strategy while managing additional complexity. Part of reengineering their network involves assessing and implementing carrier solutions that help managers accomplish their goals. Through the assessment process, managers are finding Regional carriers are helping fulfill several of their objectives. From my point of view, these objectives include:
- Implementing network flexibility to leverage the best carrier solutions
- Increasing the speed to customer while minimizing cost
- Limiting the potential for order fulfillment bottlenecks, especially during peak season
Fulfilling these objectives has led to growth for the Regional carriers. Shippers are requiring network flexibility to execute the service and cost requirements that consumers now expect. Having access to multiple carriers’ solutions allows shippers the flexibility to leverage the best solutions for their service goals. Retailers are also decentralizing their order fulfillment operations to Regional centers and stores in order to get closer to their customer and leverage inventory across their channels. As a result, Regional carriers are becoming a component in many shippers’ solutions to offer cost effective and speedy deliveries that consumers now expect.
Rapidly growing package volume, especially during peak season, has shippers evaluating all possible options to leverage available capacity to avoid the service issues of Christmas 2013. A flawlessly executed 2014 peak season is the primary focus of the mega-shippers I am currently supporting. Regional carriers can provide shippers the flexibility to minimize delivery bottlenecks, not just on the Ground but also for those critical overnight shipments during peak season. As Regional carriers’ operations and infrastructure have grown and matured, many shippers have confidence that Regionals are a reliable option during the critical peak season. I expect regionals to grow peak season volume in the years to come as shippers gain experience with them.
Implementing Regional carrier strategies is not without its challenges however. There are several items shippers need to research and address as they explore implementing Regionals. For example, the capabilities of Regional carriers are not consistent across the U.S. For instance, some Regionals’ networks are not designed to support residential deliveries, but rather scheduled commercial deliveries. Additionally, Regionals typically do not offer coverage of all zip codes within the geographic region they service. As a result, a multi-carrier strategy that includes National and Regional carriers must be developed to have full coverage. Therefore, considerations in developing a Regional carrier strategy include evaluating National carrier contract terms and commitment levels required within their agreements. Conducting an RFI is a good place for a shipper to start gathering information from Regional carriers to understand their capabilities and uncover any potential challenges to overcome.
Regional carriers will continue to grow and become a larger component in the changing landscape of distribution and parcel delivery. However, implementing Regionals requires a carefully crafted strategy to ensure shipper’s expectations are met and their network will run most optimally. Many operational, technical, and contractual details must be flushed out prior to implementation. Once all these areas are addressed, many shippers will find that the Regional carriers provide valuable alternatives in their network.