June 18 2010 02:55 PM

The “R” word inflicted — and in many cases, continues to cause — damage, but don’t tell that to major small-parcel carriers FedEx and UPS. They’ve done an excellent job weathering the recession, adapting well to reduced volumes and maintaining service levels. This victory for the big two positions them well for the next couple of years. 

However, any celebrating might have to be put on hold, as a new problem is staring at FedEx, UPS, DHL and every other shipper in the United States. Capacity is not meeting the current demand, the preamble to a tightening of the LTL market. 
So, how does this affect parcel shippers?

First, although many shippers have saved money by turning to LTL services for heavier shipments, small LTL shippers will lack the leverage with LTL carriers moving forward and, therefore, struggle to gain capacity. 

A few options to address this are:
• Develop a more aggressive “Hundred Weight” program with your small-parcel representative. This will ensure the necessary capacity to send heavier shipments during this “supply challenged” time. With LTL carriers raising rates, the gap between “Hundred Weight” and “LTL” pricing will shrink.
• Take advantage of rising fuel costs by increasing your business with small-parcel carriers. With the attendant cost increases of higher fuel costs, these carriers will be eager to do business, and this could have a positive impact on your revenue bands, discount tiers and rebates. 
• Consider using regional carriers such as Eastern Connection, Spee-Dee Delivery, OnTrac, Velocity Express and LoneStar. 

Also, hundreds of local courier companies provide similar services. They typically operate within a 100-mile radius, but are flexible.

The market is changing now, so it’s essential to discuss these options with your sales representatives. It’s also a perfect opportunity to test the partnership that you’ve developed with your carrier representatives. 

Naturally, switching to another service provider from an LTL provider will probably mean an increase in cost. However, the extent of the increase depends on how well you manage this conversion and use time to your advantage. 

Keep in mind, it’s not always about saving money. It’s all about serving your internal and external customers!

Michael J. Ryan is Senior Vice President-Sales/Marketing for GENCO Supply Chain Solutions-Transportation Logistics. He has more than 25 years of experience in the small-parcel industry. GENCO has negotiated over $2.5 billion in small-parcel contracts. GENCO offers a full portfolio of services that are designed to create best-in-class contracts and pricing. Michael can be reached at 708-224-1498 or ryanmj@genco.com