Transportation Planning: Navigating Peaks And Valleys Through Last-Mile Carrier Diversification Or Consolidation

Transportation planning is critical to supply chain management, ensuring the efficient and effective movement of goods from origin to destination. One of the key challenges faced in this dynamic field is managing transportation during peak seasons when demand surges. Peak seasons, characterized by heightened consumer demand or specific industry trends, pose unique challenges for transportation planners. Whether it’s the holiday shopping rush, the need for efficient and reliable transportation becomes paramount to delight our customers’ experience.

Logistics professionals must carefully balance capacity, cost, and service levels to meet customer expectations during these peak periods.

In addition to this peak and valley complex demand, supply chain experts have been hotly debating regarding two contrasting strategies—carrier diversification or carrier consolidation— to determine the most advantageous approach for companies, retailers, and shippers.

Regardless of the strategy selected, it is imperative to be mindful of the advantages and disadvantages associated with each option.

“Successful transportation planning hinges on strategic decision-making that aligns with organizational goals and the ever-evolving market demands”

Capacity: Distributing shipments across multiple carriers improves redundancy and reduces the risk of disruptions caused by individual carrier issues, such as equipment failures, labor strikes, service failures or capacity constraints which allows more flexibility to adapt to changing market conditions, such as  peak spikes, fluctuating fuel prices or regulatory changes. However, relying on a limited number of carriers increases density, negotiation capacity and volume concentration specially when our volumes are low.

Carrier Management: Managing relationships with multiple carriers can be administratively complex, requiring typically larger headcount, more robust systems, and defined processes to coordinate efficiently schedules and communication across diverse carrier networks potentially impacting service levels.

Dealing with fewer carriers simplifies the management process, reducing administrative complexities and improving overall coordination. Working closely with a consolidated set of carriers can lead to improved visibility and communication, fostering better collaboration and problem-solving.

Cost: Consolidating transportation with a single or few carriers can lead to volume-based discounts and streamlined operational efficiencies, resulting in cost savings. Diversifying carriers might limit the ability to negotiate higher volume discounts that are achievable through consolidated agreements. On the other hand, engaging with multiple carriers encourages competition, leading to more aggressive competitive pricing, which can result in cost savings for the shipper.

Customer Experience: The utilization of multiple carriers provides increased flexibility in accommodating customer delivery preferences, including specific delivery windows or specialized services like pick-up points and lockers. This enhances the overall customer experience by catering to diverse needs. However, it’s worth noting that carrier diversification may occasionally pose challenges, as customers may find it confusing not knowing which carrier is responsible for delivering their packages. Some customers appreciate establishing a personal connection with their parcel delivery courier, and diversification might hinder the development of such a relationship.

Choosing between carrier diversification and consolidation involves a careful evaluation of the trade-offs. Finding the right balance requires a nuanced understanding of specific supply chain needs, risk tolerance, and the dynamic nature of peak season demands. Ultimately, successful transportation planning hinges on strategic decision-making that aligns with organizational goals and the ever-evolving market demands.