Underestimate regional small package providers at your own risk

When it comes to the regional, small package service providers, it is clear that they are making inroads and growing market share although they still represent less than 5 percent of the total market. But even with that said shippers have made it clear in various industry surveys that they are open to alternatives to FedEx and UPS to reduce costs.

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With a prescient focus on e-commerce and last-mile activity in supply chain circles these days, coming with it are myriad related aspects like inventory management, transportation and delivery options.

One area that certainly does not get overlooked when it comes to the e-commerce supply chain is ground delivery, specifically on the small package side. When most of us think of the small package delivery market, the duopoly of FedEx and UPS undoubtedly come to mind and for good reason, too, as they represent roughly 95 percent of the small package market.

If that does not convince you of their massive reach and market share, then consider this: if all the small package providers in the U.S. increased their volumes by 50 percent that would only increase cumulative market share by a mere 1 percent.

Over the years, Logistics Management has done a Parcel Roundtable in which we reach out to leading industry experts to get their sense of market trends, developments, and long-term market views, among other things.

And while the small package market is only a piece of the puzzle, it is certainly an important one at the same time. I recently gave a presentation on the small package market to a group of parcel providers, which was largely based on feedback from the LM parcel roundtables, as well as some data on the small package market put together by our Peerless Research Group, which had some insightful analysis.

On the roundtable side, it was noted how small package is a market segment that is really exciting in terms of current market dynamics, which to a fairly large degree are being driven by the never ending engine of e-commerce—-with e-commerce basically redefining the parcel marketplace. That was made clear when looking at things like increasing demand in the small package market and ongoing emergence of B2C deliveries, which has led to “inventive hybrid solutions” to get packages delivered in the most efficient manner.

In the 2015 roundtable, a common theme echoed by our panel was to “analyze/optimize/and diversify through a combination of least-cost routing, and modal and carrier optimization including UPS, FDX, USPS, and regional parcel carriers.

As for the regionals, it is clear that they are making inroads and growing market share although they still represent less than 5 percent of the total market. But even with that said shippers have made it clear in various industry surveys that they are open to alternatives to FedEx and UPS to reduce costs.

What’s more, our expert panelists explained regionals are able to provide various benefits over the nationals, including cost savings, a larger next-day delivery footprint, later pickups, earlier deliveries, easier contracts with fewer accessorial charges, same-day delivery options and customized solutions. And they are well positioned to leverage the ongoing trend of retailers looking to ‘regionalize’ inventory by geographically staging fulfillment operations near customer clusters to decrease shipping times, reduce costs, and better serve customers.

So what did the research tell us? As it turns out, plenty. But I need to preface it with the caveat that it was heavily data rich, so I need to “cherry pick” some of the major takeaways, which are grouped in sections below. This data was based on feedback from nearly 180 shippers using regional, small package service providers.

1-Greatest challenges or pain points shippers are looking to address over the next two years as it relates to small parcel shipping:
-cutting costs associated with shipping methods, 71 percent;
-dimensional issues, 42 percent;
-meeting delivery timelines, 37 percent;
-eliminating/reducing shipping errors, 36 percent; and
-streamlining shipping procedures, 33 percent

2-The most important things shippers evaluate in making small package shipping decisions:
-on-time delivery service, 91 percent;
-easy track and trace capabilities and visibility, 85 percent; and
-price, 83 percent

3-What shipping needs are not currently being met by your small package carriers?:
-cost and control; automation/technology integration; limitations on dimensions-weight and size requirements; minimizing damages/damaged packages; flexibility-being flexible with pick-up times; on-time deliveries; timely pickups; and value

4-Advantages of using a regional small package provider:
-personalized customer service, 52 percent;
-lower cost, 51 percent;
-in transit times can be enhanced (compared to national carriers), 45 percent;
-can meet shippers’ additional requests at point of delivery, 40 percent;
-later pick up times, 37 percent; and
-fewer claims, 23 percent

5-Ways in which increased e-commerce activity has changed small package delivery operations:
-customer demands, 56 percent;
-increased volume, 51 percent;
-contingency plans during Peak Season/need better performance and service, 31 percent;
-need to rely on multiple carriers, 22 percent;
-reverse logistics has increased, 17 percent; and
-need to add labor, 14 percent (and “other” at 8 percent)

That is basically a data summary of the findings. One thing made clear is that while the regional, small package providers will never have the size, scale, depth or reach of the FedEx/UPS duopoly, as well as the USPS, it still merits widespread respect and consideration in terms of the services they provide for shippers and the related benefits, too, of which there are many, as the data points out.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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