The September/October 2024 edition of PARCEL featured an article entitled “The Case Against Multi-Carrier Parcel Solutions: Why A Single Carrier Can Be More Efficient.” The principal argument presented in the article was that by using a single carrier’s “advanced technology” and suite of delivery services, shippers can avoid the complexity, costs, and operational overhead associated with managing a multi-carrier solution.
In this article, I will make the counter-argument that with the explosive growth of e-commerce, shippers can’t hide from the complexity that has crept into the parcel industry and is eroding shipper margins. The complexity challenge cannot be solved by simply sourcing with a single carrier, no matter how comprehensive their services are or how efficient their shipping systems are at printing labels. Today, there are many more decision factors and variables that need to be considered to manage costs and service offerings effectively.
Unlike carrier-provided shipping systems operating at the end of a warehouse conveyor, modern parcel transportation management systems (TMS) are designed to automate complex end-to-end decision-making throughout the order-to-delivery process, protecting margins while streamlining operations. Below are five ways parcel TMS platforms tackle the complex challenges that modern logistics managers face — challenges a single-carrier solution simply can't overcome.
1. High-Speed Rating and Delivery Options in Digital Storefronts
The digital storefront is the new battleground for customer experience and brand loyalty. Just as marketing messaging has become more targeted based on customer-specific product preference data, offering delivery methods suited to the customer is also a key differentiator. In fact, recent McKinsey research found that 34% of online shoppers now expect multiple delivery options.
For example, some customers may want same-day delivery, PO box deliveries, specialized services like BOPIS (buy online, pick up in-store), more sustainable choices, or over-the-threshold setup services. Not all carriers can provide all these services, nor can their solutions make data-driven, customer-specific decisions. And their APIs can’t calculate rates fast enough to keep up with digital storefront processes. In comparison, parcel TMS solutions feature in-platform optimization engines designed to process thousands of carrier rates, times in transit, and customer-specific delivery instructions per second.
In B2B environments, the need for customer choice is even greater. Many business customers prefer using their own carrier billing accounts or their own negotiated rates. Parcel TMS platforms are smart enough to apply and account accurately for carrier billing instructions.
2. Improve Margin by Plugging Spend Leakage
Free shipping is a crucial part of the e-commerce experience, with 90% of shoppers abandoning shopping carts if they don’t see it offered at checkout. But of course, free shipping isn’t actually free. Businesses need to accurately calculate or, better still, avoid shipping costs to minimize margin erosion. Unfortunately, the gap between expected and actual carrier costs continues to widen as rate structures grow more complex, with added surcharges, fluctuating discount levels, and seasonal pricing changes. Single carrier solutions don’t focus on shippers’ margins, but parcel TMS platforms do.
Parcel TMS solutions enable shippers to configure instructions to plug the spend leakage problems that regularly show up in invoice audits, thereby avoiding unexpected surcharges and errors. These systems route to alternative carriers offering more forgiving DIM factors, out-of-area surcharges, residential charges, and peak season fees.
And despite what some advocates for a single-carrier solution suggest, shippers needn’t fear “volume dilution” of their primary carrier incentive if they diversify their carrier network. That’s not how data-driven decisions work. Parcel TMS solutions have the ability to monitor primary carrier spending levels and only allow routing to other carriers once primary carrier discount targets have been met. It is a win-win-win for shippers, primary carriers, and alternative carriers.
3. Make and Keep Cost-Effective Delivery Promises
The previous PARCEL article was correct in stating service level inconsistencies among different carriers. According to a recent DC Velocity article, one in three (27%) home delivery packages are delivered late. Unless shippers opt for expensive express services, most parcel carriers can’t provide firm delivery commitments, especially for ground shipments outside of urban areas.
Parcel TMS platforms leverage predictive machine learning models to monitor carrier performance based on shipping history and can provide shippers with more accurate delivery estimates throughout the order-to-delivery process. But why use a two-day express service if history shows a ground service can achieve the same result? Even in a single carrier environment, businesses can utilize parcel TMS solutions to confidently offer accurate delivery windows without resorting to premium shipping options, improving both margin and customer satisfaction.
4. Intelligent Diversified Carrier Management
Another argument single-carrier advocates make against a multicarrier solution is that it leads to increased administrative overhead. Managing multiple carrier accounts, monitoring service levels, and optimizing for cost can indeed be complicated — but with the right technology, it doesn’t have to be.
Unlike legacy shipping platforms that require costly and inflexible custom programming, parcel TMS platforms enable business users to easily configure automated routing, customer preference, cartonization, and other instructions in minutes instead of weeks. Parcel TMS systems dynamically decide when, where, and how to use specific carrier services cost-effectively and efficiently. Rather than avoiding complexity, a well-managed multicarrier approach through a parcel TMS can be a strategic competitive weapon.
5. Intelligent Packing Reduces Carbon Emissions and Waste
Sustainability is increasingly important to consumers, especially younger generations. Most consumers have experienced the frustration of receiving a small product in an oversized box filled with wasteful packaging materials. Parcel TMS solutions solve that problem by determining the most shipping-cost-effective way to pack an order based on SKU-level packing instructions.
By applying cartonization instructions during shopping carts (where rules of thumb often prevail), order allocation, and fulfillment processes, parcel TMS users can better predict shipping costs and avoid unexpected dimensional weight adjustments on their carrier invoices. Carriers can cube out their vehicles, giving consumers a more sustainable delivery experience. Again: win, win, win.
The Future of Parcel Shipping: Why TMS Is the Smarter Choice
There is no doubt that the major carriers offer valuable, quality services. But in an increasingly complex shipping world, parcel TMS solutions provide businesses the flexibility, control, and efficiency to thrive. Whether managing single or multiple carriers, parcel TMS platforms simplify operations, protect margins, and enhance customer satisfaction. For businesses looking to stay competitive, adopting a parcel TMS is not just a smart choice — it’s an essential step toward sustainable growth and long-term success.
Bob Malley is CEO of Sendflex Technology. To learn more about their parcel TMS solutions visit https://www.sendflex.com/ or reach out directly bob.malley@sendflex.com.
This article originally appeared in the November/December, 2024 issue of PARCEL.
