Determining the ROI on Adding Regional Parcel Carriers to Your Carrier Portfolio

Posted on Jan 10, 2019 6:31:43 PM

Article is republished from Parcel Magazine and written by OnTrac Vice President of Business Development Mark Magill.

Recent media outlets have reported a record high economic outlook and consumer sentiment that has led to ever increasing ecommerce parcel volumes. This growth rate has put great pressure on shippers to keep transportation costs in check while simultaneously gaining the necessary carrier capacity to serve their customers. Those massive parcel volumes have triggered higher parcel rates and accessorial charges, and have placed capacity constraints on what the national carriers can handle during Peak shipping season. Those factors have prompted many shippers to seek out alternative delivery methods.

An obvious choice would be the regional parcel carriers who deliver to multiple states and serve millions of consumers in concentrated geographical areas. They appear to be an excellent solution, simply because the very largest parcel shippers use multiple regional parcel carriers on a grand scale. However, just because Amazon uses regionals does that mean it will be a viable alternative for you? In this article, we will examine some of the factors that determine the Return on Investment (ROI) in adding regional carriers to your carrier portfolio.

First and foremost, you need detailed shipping data to accurately complete the analysis. To put it bluntly, “Data Is King!” If you want the most competitive rates from a regional carrier, it is vital to provide them with a two month shipping sample containing line item data with weights, dates and zip codes. If you really want to increase your ROI though, you should also provide them with street level delivery address information. This will enable the carrier to determine the delivery density of your shipment profile. Delivery density (the average number of shipments delivered to an address on a given day) is one of the main determinants of a regional carrier’s costs. If your data can demonstrate that your typical residential delivery order consists of 1.15 shipments being delivered per address, you can command a much better rate than if it was only one shipment per delivery. You may not be aware that this data is readily available on your national carrier invoice that you can download from their websites in Excel format. (When providing this data to a regional carrier, PLEASE remove the national carrier name and rates.) If you employ a freight auditor, they will have this information available for you as well.

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Next, let’s take a quick look at how the national carriers structure their rates. In your national carrier contract you will almost certainly find the words, ”subject to all applicable minimums.” In plain English, this means the lowest price you will pay for a shipment is the Zone 2, one pound Ground rate. The 2019 tariff rate for this absolute minimum charge is now $7.85. This means that if you have a 50% discount on your rates, the net discount is mitigated by that minimum charge and consequently you will never get a straight 50% discount ($3.92.) Rather, the lowest price you will pay on any package is that $7.85 Zone 2, one pound charge, or whatever minimum charge you have negotiated. Check your math carefully. You may be surprised to find that your effective net discount is really only 25% when calculated using that absolute minimum charge. The good news here is that it is much easier to get relief on that minimum charge from a regional carrier than it is from the nationals. If you’re a high volume shipper, make it a goal of yours to get that minimum charge reduced by at least 20% from the regionals you contact. This is an easy way to reduce your basic package charge.

Now what about those accessorial charges that can easily add 50% to your total package charge? In the annual shipper surveys released by Parcel Magazine, the increase in accessorial charges is consistently listed as the shipper’s greatest source of irritation. Those additional fees for residential deliveries, extended delivery areas, dimensional weight, additional handling and large packages all put great pressure on a shipper’s budget and they are always looking for ways to reduce the impact of those fees. Reducing accessorial charges is also a quick way to rack up savings when adding regional carriers. This is very evident by looking at their websites. Some regional carriers don’t even assess a residential or a delivery area surcharge. (Voila! You’ve just achieved a 100% reduction in those charges.) The other regional carriers typically charge less than the national carriers for those additional charges and make it easier to negotiate them at a lower rate.

There is an old Bob Dylan song that says “You give something up for everything you gain” and that is certainly true when adding additional carriers to your portfolio. Let’s take a look at some of those additional costs so you will have an accurate perspective on the true ROI you can expect to gain. A key element is to measure what impact diverting volume will have on your national carrier’s contract. The national carriers (wisely) construct their shipping agreements so there are penalties like loss of discount if the parcel volumes shipped with them diminish. Pay close attention to this to determine your net effective savings in light of your national carrier discount structure.

What about the soft costs of adding alternative delivery methods? They are most certainly part of the equation. Additional carriers will necessitate additional dock doors. Do you have those doors available? How about invoicing? Each regional carrier will be invoicing you separately and there are administrative costs associated with that. There is also the training issue involved with preparing your customer service and shipping departments to effectively utilize your new carrier. Can you quantify how much that may impact your budget?

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Another very important issue to address is integration. Specifically, how will you transmit the shipping data to the new carrier and how will you create a label for the packages shipped with them? If you’re using the shipping system provided by the national carriers, you will need to purchase an additional shipping software solution. Similarly, if you are using your own homegrown legacy system, there will be IT costs for the programming required to add another carrier. Thankfully, the price has come down considerably for shipping software and some solutions can be purchased for mere pennies a tracking number. Though there are certainly additional costs involved in integration, it should be emphasized that there is a built in benefit when you add a multi-carrier solution. The reason for this is shippers who single source with a national carrier and strictly use the shipping system provided by the carrier are in effect sitting ducks. Employing only one option gives your carrier great leverage over you and you should never allow yourself to be placed in that position. EVERY shipper should utilize some kind of multi-carrier transportation system and have at least one other carrier in place even if it just means having an account with the other national carrier and giving them just one percent of your business. This is self-preservation at its most basic level.

In order to fully balance the ROI of adding carriers, the faster delivery speed of regional carriers should be taken into account. The Amazon Effect is in full force and with the incredible amount of distribution centers they have operational, their customers can get two-day, next-day and even same-day delivery at no extra charge. Adding a regional carrier to your carrier mix can mitigate this advantage because the regional carriers provide a much larger next-day Ground footprint, usually offering next-day Ground delivery more than 400 miles from your shipping location. In comparison, the next-day footprint of the national carrier’s Ground service is only 200 miles. It doesn’t have to be Amazon you’re competing with, though. What if you are a plumbing supply company with a DC located in Harrisburg, Pennsylvania that competes with a company whose DC is located in New England? This means your competitor will provide next day Ground delivery to your mutual customers in Boston and you will be at a competitive disadvantage with the national carrier’s two-day Ground transit time. However, if you add one of the several regional carriers that serve the Northeast you can optimize your deliveries with the next-day regional Ground footprint that stretches from your Pennsylvania DC all the way to your customer in Massachusetts. It may be very worthwhile to take a close look at where your largest customers are located, and then determine if you can improve your transit time (and your customer experience) by adding a regional carrier with Zone 4 next-day delivery capability. This may help build customer loyalty and even increase sales.

Please do your due diligence and look at all factors involved in accurately determining the ROI in adding regional carriers. Compile the detailed data that will enable you to command the best discount, take a close look at your national carrier contracts, set pricing objectives with the regional carriers, and take a good look at the not so obvious factors like soft costs and integration. Putting all of these together will give you a clear picture of the best course of action for your company.

Topics: Mark Magill, shipping strategy, On Time for Less, Pacel Magazine

ROI Explained at Parcel Forum by OnTrac Vice President Mark Magill

Posted on Sep 24, 2018 3:19:59 PM

The savings created by a diversified logistics portfolio during the current eCommerce explosion is defined by Industry Experts on Wednesday, September 26th, 2018.

OnTrac is proud to have Vice President Mark Magill present at Parcel Forum for the sixth year. This unique event is held for Supply Chain Professionals who are dedicated to parcel fulfillment. Over a thousand decisions makers responsible for shipping, warehousing, packaging, distribution and delivery of parcels attend the conference to learn how to increase efficiencies, cost-effectiveness, and frequency of distribution of packages.

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Joined with Lasership, Inc. Vice President Seth Pierce, and United Delivery Service Vice President of Sales Dave Meyers, Magill chose this topic to help the greater population of the logistics industry to better understand a complex theory of calculating the return on investment and how a logistics provider of a specific region can improve the bottom line. Magill said, “Working with some of the Fortune 500 companies who have successfully made it through the current retail environment and out the other side as eCommerce giants, I noticed that their sophisticated methodology to determine the ROI for their parcel mix is not common knowledge by all. The goal of this presentation is to decipher those equations, so that each logistics professional can take the tools back to the office and determine if the savings is great enough to include a logistics provider like OnTrac in their overall mix.”

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The presentation is titled, “307: Evaluating the ROI of Adding Regionals to the Parcel Carrier Mix” and is taking place on Wednesday, September 26th, 2018 from 12:40pm to 1:30pm. To register for the Parcel Forum located at Renaissance Schaumburg Hotel & Convention Center, 1551 N. Thoreau Dr., Schaumburg, Illinois 60173, please click here.

To learn more about how the OnTrac logistics network can provide lower rates with faster transit times, please stop by booth number 215 to speak to a Corporate Account Manager.

Topics: Logistics/Distribution, Mark Magill, OnTrac Presentation, Parcel Forum, shipping strategy

OnTrac Vice President Mark Magill Presented at Home Delivery World

Posted on Apr 19, 2018 10:07:27 AM

OnTrac exhibited for the sixth year at the Home Delivery World conference that took place on Wednesday April 18th through Thursday April 19th, 2018. Since the inception of the conference in 2013, Home Delivery World has been connecting retailers, etailers, grocers and solution providers to discuss trends and innovations for the entire delivery cycle.

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OnTrac Vice President of Business Development Mark Magill discussed how to leverage regional carriers and logistics companies for an improved customer experience, speed of delivery, and reduction of transportation costs during a panel at the conference. The panel took place on the first day of the conference at the Atlanta Convention Center at AmericasMart and was moderated by Bodybuilding.com Director of Global Transportation Greg Dahlstrom. Magill is a regular presenter at Home Delivery World who is passionate about sharing the benefits of a multi-company approach to create a cost-savings and faster delivery times for companies who ship within the West Coast.

“There are many advantages to using a multi-carrier approach for your shipping strategy,” says Magill. “The number one benefit that continues to top the lists in research each year is the cost savings that regional carriers and logistics companies provide. The larger next-day delivery footprint, greater same day options and a more personal approach to customer service are a few of the added perks that come with the full package.”

Magill began his career in the logistics and transportation industry over 25 years ago, starting out with SonicAir Courier now a division of UPS. He has been a regular contributor to Parcel Magazine and is a popular speaker at transportation conferences focusing on the regional small parcel industry. Magill was awarded the 2016 TMSA Sales Executive of the Year by the Transportation Marketing and Sales Association.

Topics: Announcements, Mark Magill, Panel Presentation, shipping strategy, Company News, Home Delivery World

OnTrac Vice President Mark Magill to Present at Parcel Forum

Posted on Sep 18, 2017 10:51:13 AM

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OnTrac Vice President of Business Development Mark Magill will be representing the parcel logistics company at Parcel Forum during a conference presentation on Tuesday, September 19, 2017. The presentation will be focusing on the topic of “How Shield HealthCare Improved Delivery by Using Regional Carriers.” Shield HealthCare Director of Purchasing Jeff Lichtenstein will be representing Shield HealthCare and sharing the company’s experience of partnering with OnTrac for over 20 years.


“Many Fortune 500 companies are using a multi-carrier strategy,” says Magill. “The amount of available technology, the positive impact on the bottom line and maintaining a great service experience make it a no brainer.” mark_magill.jpg


For the past 15 years, Parcel Forum has been bringing together a large group of transportation professionals who are responsible for the shipping, distribution and delivery of parcel-sized packages. Attendees will leave the presentation with a clear understanding of what a regional carrier is, their role in supply chain and logistics planning, the benefits of using a regional carrier, and how to incorporate them into plans without disruption. In addition, Lichtenstein will provide real-life shipping examples and strategies. 

Read the Press Release

Topics: Mark Magill, OnTrac News, OnTrac Presentation, Parcel Forum

OnTrac VP Mark Magill Awarded 2016 TMSA Sales Executive of the Year

Posted on Jun 9, 2016 1:31:11 PM

OnTrac attended the Transportation Marketing and Sales Association (TMSA) Recognition and Compass Awards Banquet on Monday, June 6, 2016 at The Ritz-Carlton resort in Fort Lauderdale, Florida. OnTrac Vice President of Business Development Mark Magill was honored at this event as the selected 2016 TMSA Sales Executive of the Year. Mark received this prestigious award from the TMSA Recognition Committee based on his demonstration of ongoing excellence and success in the field of sales, business development, and customer solutions. Each year, TMSA recognizes a senior-level leader within North America for their leadership, professional excellence, and results produced on behalf of their company. The awards banquet is in conjunction with the TMSA Marketing and Sales Leadership Conference and Expo from June 5 to June 7, 2016.

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TMSA is the only professional association of its kind serving the transportation and logistics industry by helping their members and their companies to make sales, marketing and communication strategies more effective, productive, and profitable. Thousands of members rely on TMSA to deliver value through knowledge, connections, recognition, and solutions.

“The TMSA Recognition Committee and others involved in the selection process were thoroughly impressed with how effectively Mark represents the OnTrac brand through association involvement and the many industry events he attends,” said TMSA Chief Executive Officer Brian Everett. “We were particularly struck by a statement made in his nomination, stating that ‘Technology has changed the way transportation services are sold. Newcomers try to leverage tech trends to generate new business, while seasoned professionals focus on building needed relationships. Mark Magill has mastered both.’”

Mark began his career in the logistics and transportation industry over 25 years ago and continues to prove himself as an Industry Expert. He has been a regular contributor to Parcel Magazine for the last five years, focusing on the regional small parcel industry.  He is a popular speaker at many transportation industry conferences including Council of Supply Chain Management Professionals, The Parcel Forum, Oracle Value Chain Summit, Kewill Accelerate, Transportation Warehouse Logistics Summit, the CMS Globalsoft User Group Conference and Manhattan and Associates.

 “The TMSA Sales Executive of the Year award is one of the highest honors that a person could receive in the industry,” says OnTrac Vice President Mark Magill. “Attending the event with my peers in the transportation and logistics industry is very gratifying. I’m very grateful for this honor and am excited for the future of transportation.”

About the Transportation Marketing & Sales Association

The Transportation Marketing & Sales Association helps its members and their companies to make sales, marketing and communications strategies more effective, productive, and profitable. The only professional association of its kind serving the transportation and logistics industry, TMSA delivers value to thousands of members through knowledge, connections, recognition, and solutions. For more information, visit www.TMSAtoday.org.

Topics: Award, TMSA, Mark Magill, Transportation Marketing and Sales Association, 2016 TMSA Sales Executive of the Year