With the continuing rise in eCommerce sales, parcel shipping cost and capacity constraints have become big headaches for online sellers. Skyrocketing rates and volume caps may have you seeking alternatives to FedEx, UPS, and USPS – sometimes referred to as the “Big Three” in fulfillment circles. While regional parcel carriers may not offer an ideal solution for every parcel shipping situation, they have provided some brands with welcome relief.
What Is a Regional Parcel Carrier?
Unlike large national or multinational parcel carriers, regional parcel carriers run smaller operations focused on specific geographic areas. Some regional carriers operate in a single metropolitan market, while others may provide coverage across several connected states within a region.
Regional delivery services, which specialize in short-haul deliveries, comprise just 6% to 8% of the overall U.S. parcel market but cover more than 85% of the US population. Most regional carriers began as B2B couriers, which remains a primary revenue stream for many such businesses. For example, a manufacturer or distributor might hire a regional carrier to deliver piping components to a plumbing business, spools of cable to a general contractor at a construction site, or a table to an office building.
Though many such carriers had already ventured into B2C, the pandemic and associated eCommerce boom provided an opportunity to expand to home delivery services. In particular, some of these regional carriers have successfully partnered with Amazon, Walmart, Target, Best Buy, and other eCommerce merchants to support last-mile delivery and guaranteed overnight ground service within specific geographic areas.
The Upside to Using Regional Parcel Carriers
Though FedEx, UPS, and USPS can quickly reach most U.S. homes and businesses, regional carriers have revealed and filled some critical holes in the home delivery market. Moreover, in the right situation, regional carriers can offer some advantages over national carriers, including:
- Added capacity. After multiple years of supply chain disruptions, driver shortages, and a global pandemic, national parcel carriers have struggled to keep pace with the massive increase in online sales and subsequent eCommerce shipping requirements. As a result, these parcel giants have taken extreme measures to address capacity shortfalls during peak periods, such as limiting package volume for existing customers and suspending the addition of new customers. Though once taken for granted, freight capacity at the big parcel carriers may not always be able to scale with you – especially during peak when you need them most – since they reserve much of their capacity for their highest-volume customers. Conversely, regional parcel carriers may be happy to add your freight to their networks.
- Lower freight rates for some deliveries. Regional parcel carriers can provide cost savings for next-day and two-day delivery within their delivery area, compared to a large parcel carrier’s express rate. For instance, a regional carrier focused on Texas can often get packages to Texas customers cheaper and faster from a Dallas warehouse than the Big Three. With this in mind, some fulfillment operations leverage regional carriers to handle local package deliveries within a set range of the fulfillment center.
- Better DIM weight pricing. Parcel carriers use DIM weight pricing formulas to ensure they don’t lose money hauling large, lightweight packages. Each carrier has its preferred formula for calculating these charges, but regionals tend to have higher thresholds and DIM weight factors than national carriers, which means you pay less.
- Fewer surcharges. Contracts with regional carriers involve much less red tape. For example, these carriers typically charge less for peak season, rural and residential, and weekend deliveries. Generally speaking, you’ll also find them less concerned with accessorial charges, such as liftgate, over-the-threshold service, unplanned pick-up locations, additional handling, and other fees regularly added by larger carriers.
- White glove service. A smaller carrier may have the time and capacity to provide a higher level of service in specific scenarios, such as white glove delivery. In a white glove agreement, the delivery driver gives special attention to a heavy or fragile item and places it in a preferred location within the customer’s home or business. A white glove driver may also assemble the product on-site for some products, such as furniture or gym equipment.
- Faster delivery. As the popularity for same-day and next-day delivery has risen, regional parcel carriers gained more traction based on their ability to meet demand. These carriers often excel at next-day and same-day delivery within their focused geographic areas, with on-time delivery rates averaging 99%.
- Flexibility/customer-centricity. Because it doesn’t have to route parcels through a hub, a regional carrier may offer varying pick-up times and windows without sacrificing delivery speed. This versatility can help inspire brand loyalty and improve the customer experience.
The Downside to Using Regional Parcel Carriers
While regional parcel carriers may provide the above advantages in the right scenarios, shifting toward a regional model has risks. Therefore, brands considering the use of regional delivery providers as part of their fulfillment strategy should consider the following:
- May prevent hitting the minimum volume requirements of major parcel carriers. The Big Three often provide certain shippers with discounts based on the minimum shipment volume they can guarantee. Shifting some of that volume to regional carriers may drop you below your national carriers’ volume thresholds and put your existing volume-related discounts at risk.
- Poor scalability. Though you may seek regional carriers to increase delivery capacity during high-demand periods, the size limitations of the carrier may keep it from effectively scaling up with your operation. Considering that even the national parcel carriers have hit their capacity during recent peak periods, it’s easy to understand how a regional carrier with a solid customer base can also quickly reach its limits when demand spikes.
- Lack of national coverage between regions. Unlike FedEx, UPS, or USPS, regional parcel carriers have little or no capacity beyond one geographic area. Some companies overcome this disadvantage by forming partnerships, sharing networks, and sharing tracking information with other regional carriers. Shippers can review past order data to see where most shipments have historically gone to ensure they select the regional shipping partner that can provide the most value.
- Lagging technology capabilities. While the technology at regional carriers may seek to emulate national carriers, overall functionality may fall short. When a regional provider’s visibility and tracking capabilities don’t integrate well with the standard tech stack used by your fulfillment center, it may threaten your ability to provide a positive eCommerce customer experience. Online shoppers want to see the progress of their package from the point of purchase until it lands on the porch. Achieving this level of visibility with a regional parcel carrier might require additional technology investments by both the carrier and fulfillment center.
- Managing multiple carriers. Customer visibility isn’t the only technology hurdle created by regional parcel carriers. Unfortunately, not all software solutions for eCommerce fulfillment can easily add regional carriers into the mix, especially if those carriers lack sufficient technology or rely on outdated legacy systems. Consider any limitations on your warehouse management system (WMS) and transportation management system (TMS). Getting regional carriers into your rotation may require modifications to your tech stack to generate labels and route orders to regional carriers.
Are Regionals a Good Fit for Your Business?
With all this in mind, does it make sense to include regional carriers among your parcel delivery options? Unfortunately, the answer isn’t black and white.
If you’re shipping exclusively with big carriers, there may be opportunities to leverage regional carriers to reduce costs. Additionally, national companies are experiencing capacity pressure, leading to delivery delays and unhappy customers. So it may make sense to have a “plan B.”
Ultimately, your use of regional carriers may make sense if:
- You have high concentrations of customers in a geographic area or areas.
- You have a high concentration of customers near your fulfillment center/s.
- You could potentially ship enough through regional carriers where the savings on shipments would offset the loss of national carrier discounts.
- You require white-glove service capabilities to deliver, place, and install items within customer homes and businesses.
- You consistently struggle to get enough capacity from national carriers for your needs.
- You need to meet same-day or next-day demands from your customers.
- You’ve suffered from volume caps by the Big Three.
How Do I Find The Right Regional Partner?
Regional parcel carriers vary widely in size, location, and capability. As such, it’s crucial to vet a local parcel carrier carefully before entrusting that company with your customers’ orders. When interviewing regional carriers, ask the following questions:
- How long have you been in business?
- How many parcels have you delivered?
- How does your pricing compare to national carriers? Other regional options?
- Can you provide actual package data to show how many shipments you’ve made?
- What is your on-time delivery rate?
- How do you handle guaranteed delivery times?
- What value-added services do you provide?
- What is your average time in transit?
- What are your reporting functions and capabilities?
- What type of data can you provide to us about shipments and deliveries?
- Do you have any surcharges, and if so, what are they?
- How do you accommodate for rising fuel costs?
As with any partnership, sourcing a high-quality regional carrier takes time, experience, and industry knowledge. Therefore, the easiest way to leverage the advantages of both national and regional carriers is to work with a third-party logistics (3PL) partner that can handle both your pick/pack/ship requirements and parcel management. The right 3PL will have attractive volume-based discounts with national parcel carriers and will know when it’s appropriate to bring regional carriers into the mix.
More importantly, a B2C-focused 3PL can combine warehousing and parcel management into one integrated fulfillment solution. A fulfillment partner with a national fulfillment warehouse network and advanced technology can optimize your shipments and deliver them in the fastest, most cost-effective manner. It will also provide the data and reporting necessary to keep your customers informed and your business running smoothly.
At Amware Fulfillment, we have extensive experience helping D2C companies ship online orders in the most efficient manner possible. Using our aggregate freight spend across hundreds of customers, we negotiate attractive rates with major parcel carriers and pass those on to customers who ship under our parcel contracts. In addition, we explore the potential of regional parcel carriers to augment freight capacity and provide additional options in certain markets.
For more information about Amware Fulfillment and how we can help you optimize your parcel shipping, let’s talk.