As a distributor, your profits are being squeezed. Despite enjoying a significant growth in revenue from ecommerce, you have likely seen an increase in the number of small parcel consignments you send. This, together with customer expectations of ever quicker delivery, will have required a change in your delivery strategy. Like many others, you will no doubt be relying more and more on multiple carriers. And in turn, you’ll have seen your transport costs rocket.
So, how can you integrate multi-carrier management into your warehouse systems with ease? And optimise transportation so that you can cut your costs?
This is the first of two blog posts in which we aim to answer those questions. In this first post, we take a closer look at multi-carrier management, the market and the key issues facing distributors and carriers.
What is multi-carrier management?
Multi-carrier management systems help businesses to choose the right carrier for their consignments. That selection can be based on a number of criteria, which are set up in advance. An initial choice of carrier will often come down to the weight or size of the parcels, or the delivery destination. But beyond that, speed of delivery and costs are usually deciding factors.
Aside from choosing the best carrier, systems will also help with other delivery aspects too. Labelling and packaging may need to be tailored to each carrier’s requirements. And systems can also create shipping documents and delivery updates for customers.
Multi-carrier management can be a standalone system. But it’s always best when system integrate with each other. So, they can also integrate with Warehouse Management Systems (WMS) and Transport Management Systems (TMS).
Multi-carrier management allows distributors to be proactive about their parcel shipping. Instead of having a reactive approach to parcel management, optimising and consolidating delivery options can make operations far more productive.
The multi-carrier market
According to Apex Insight, the UK parcels market is currently worth £10bn. And in August 2017, the Pitney Bowes Parcel Shipping Index estimated that “parcel growth will continue to rise at a rate of 17-28 percent each year between 2017 and 2021”.
Driven by increased demand for home shopping, the consumer sector has seen the most growth. However, with many large retailers that are willing to switch supplier to get a better deal, operators mainly compete on price. This makes market share positions more volatile, as suppliers vie for business.
The business-to-business market is steadier, but is more fragmented.
Same-day delivery has come to the fore recently – with offerings such as Amazon’s two-hour Prime Now service. But it seems that the general response to this is still low. Whether driven by retailers being unwilling to adopt it, or consumers unhappy with paying extra for delivery, less than 0.1% of home delivery orders are same day.
Five carriers account for around 80% of the parcel shipping in the UK. They are: Royal Mail, Hermes, Amazon Logistics, DHL and UPS.
Key multi-carrier issues
Providing efficient last-mile deliveries is key for both distributors and carriers. But doing so profitability is a challenge. To achieve this, many carriers have developed networks of collection points and parcel shops.
Depending on the carrier, customers can now choose to have their deliveries sent to local shops, and can drop off their returns in the same way.
DPD claims to have the best network in the UK, with more than 2,500 locations. Ninety-three percent of the UK population has one within a ten-minute drive – or an average five-minute walk for customers in London.
This convenience is a real differentiator for consumers, who can’t always be in when a delivery is expected. And not everyone wants to rely on a friendly neighbour to take in their parcel.
The carriers have another challenge in retaining custom. Retailers with their vast delivery spends are driving market rates down, and creating more instability in an already price-driven market. This has meant slim profit margins for the carriers and increasingly competitive market conditions. However, productivity improvements and the introduction of some automation have buoyed margins a little.
Post-Brexit, there is some uncertainty around labour levels. Availability may be affected, and in turn labour costs may rise.
Apex Insight expects that the market will continue to grow. It sees the proclivity for home shopping developing more, and the future for B2B delivery being supported by a recovering economy. It believes market growth will be driven by volume, with price increases remaining modest.
How does the market situation affect distributors?
Of course, modest price rises are good news for distributors. But keen carrier costs are not the only way distributors can maximise profits.
Integrating a carrier management system with warehouse and transport systems can ease information flow and increase productivity.
Springboard Ship is a multi-carrier management system that can help reduce costs and improve shipping reliability. All shipments are tracked and key performance metrics can be met.
It has a carrier integrations suite that connects directly to third-party logistics providers. There’s connection to 16 carriers, including the big players like Royal Mail, DPD, DHL, Yodel and TNT. You can receive consignments, labels and tracking detail. And it can integrate directly with ERP systems such as SAP Business One, NetSuite, Microsoft Dynamics and Sage, or with your warehouse system.
In our follow-up post on multi-carrier management, we take a closer look at the options available and the recommendations on how to optimise your multi-carrier operations. Read it here: Multi-Carrier Management Part 2: Analysis and Recommendations.
And if you’d like to take a closer look at Springboard Ship in the meantime, call us on 020 8819 9071 or get in touch for a free demonstration.