Editor’s Note: Register here to watch an on-demand replay of Supply Chain Dive’s Sept. 21 virtual event “Insights into the Holiday 2023 season.”
While carrier diversification became a necessity in 2020 due to elevated volumes — crowding the market — carriers are now seeing less density in their network, prompting per parcel costs to spike, according to Vijay Ramachandran, VP of go-to-market enablement and experience at Pitney Bowes.
In this environment, shippers should work with carriers on pricing to help reduce their exposure to peak season surcharges, Ramachandran said at Supply Chain Dive’s Sept. 21 event “Insights into the Holiday 2023 season.”
“It’s more just an expectation moving that forward that the big nationals will include these peak season surcharges not necessarily required from the peak demand standpoint,” Carson Krieg, director of global alliances at project44, said during the panel. “But it’s not a requirement to leave 100% of your volume with the big nationals and just kind of accept the challenges at face value.”
Instead of taking surcharge announcements from carriers as an indicator, shippers should have conversations with their providers regarding reasonable cost basis for transportation over the peak period and into the next year, according to the panelists.
“There are always opportunities to save, if not on the rate [then] in other ways like timing, frequency of pickups, when the pickups happen, when do you expect your transit time … there are so many variables that go into the cost of transportation that it’s important for every shipper to consider how they adapt to this environment when there are fewer parcels going through more carriers than there have been in the past,” Ramachandran said.
Shippers should also review their carrier allocation, he added. When a shipper procures a carrier, a contract is signed with an assumed amount of volume. However, if a shipper is using a rate shopping platform, for instance, the configuration of the rate shopping engine is different from what carriers use to evaluate what to pick and procure.
“What ends up happening is that your shipping platform is making different decisions than what your procurement team made, and as a result, you may not hit the same discount thresholds that you thought you were going to hit when you originally priced the deal with the carrier,” Ramachandran explained.
If the shipping platform doesn’t account for that changing algorithm on how discounts are applied, “you’re going to end up having different costs than what you originally priced when you procured your carriers in the first place, earlier this year,” Ramachandran said.
In turn, it is vital to make sure shippers secure meetings between each of their carriers, procurement teams, and the team configuring the shipping applications. That is so the “logic is consistent across all of those because those discounts you thought you signed up for may not be the discounts you end up with during peak,” he added.