How to Determine the ROI of Adding Regional Parcel Carriers to Your Carrier Portfolio

by Josh Dunham — Co-Founder

When we talk about package delivery, we often focus on the U.S.’s biggest players — FedEx and UPS, and just behind them, the U.S. Postal Service and DHL. These third-party shipping carriers can move goods through a national network, full of their own trucks, warehouses and employees.

But even with the growth of e-commerce, not every package needs to travel from coast to coast. There are many domestic shipping carriers in the U.S. that have smaller geographic footprints. Since these regional carriers cover less ground and typically have fewer clients to manage, they can be more personal, flexible and responsive than national and international carriers.

Regional carriers typically have sound networks, local expertise, and much more flexibility in pricing than FedEx and UPS do. They don’t offer the same convenience and standardization as the national carriers — but supply chain managers willing to do the research and negotiation required may find regional carriers are a valuable addition to their shipping mix.

How does one ship with regional parcel carriers?

Besides improving your bottom line — which they can often do — regional carriers can also offer greater flexibility, more attention, and greater speed.

As always, start with your data. Review as much information as you have about what you ship, where it goes, and how much you spend. Then, reach out to regional parcel carriers in your target areas. Regional carriers fall roughly into two groups: multi-state carriers and metro-area carriers. Explore both options depending on your needs and industry.

To get competitive rates from regional carriers, you’ll need to provide them with at least two months of data about your shipping needs. This should include parcel weights, shipment dates, and ZIP codes for parcel destinations. An ideal shipping profile also includes street-level delivery addresses, which carriers can use to determine delivery density.

Remember, although many supply chain leaders find regional carriers more flexible than FedEx and UPS, they have the same goal: to make as much profit from moving your parcels as possible. That means, like national carriers, regional ones are seeking to maximize efficiency and grow cost savings. The better your delivery network fits into that of a carrier, the better the ROI for both of you.

Should your transportation strategy include a regional parcel carrier?

Regional carriers serve certain industries better than others. Manufacturers, like those in the automotive industry, and suppliers, including office supplies, medical supplies and pharmaceuticals, can often benefit from regional carriers. Shippers who primarily serve residential customers may see less benefit.

Shippers who move large volumes need to think about which revenue tier they fall into with national carriers. Switching some shipments to a regional carrier may push you down a tier, meaning you end spending more than you intended.

But for smaller shippers, regional carriers can offer fast service at lower rates than their national competitors. However, you may have more room to negotiate reduced same-day or next-day rates with your national carrier than you do with a smaller regional company. In both conversations, make sure to request competitive express or zone-skip rates.

If you ship from a major metro area, you may be positioned to take advantage of regional carriers’ line haul/zone skipping offerings. This is when a carrier collects a bunch of orders from a warehouse and ships them together on a pallet. At the end of the journey, the carrier breaks up the pallet and moves each item to its final destination. Zone skipping can help both you and your carrier save time and money.

Regional carriers can often ship large items at lower rates than national competitors, too. National carriers have been implementing larger and larger surcharges for large and heavy packages, and for every package, there’s a point at which these fees become prohibitive. Regional carriers offer more flexibility on parcels weighing between 70 and 200 pounds.

Another potential advantage of regional carriers: cheaper white-glove delivery service than national carriers. White-glove delivery may include carrying parcels up or down stairs, delivering items to specific rooms, or unpacking them.

As you weigh whether regional carriers make sense for your business, consider not just what each carrier offers, but what your team can handle. One big advantage of national carriers is that they offer one-stop shopping — every service you need from a single company, often with the help of a single account representative. Onboarding a regional carrier will cost your company money in the form of your team’s time.

Many businesses, especially those who spend more than $10 million annually on transportation, choose to incorporate regional carriers without abandoning national carriers. If this strategy makes sense for your business, make sure to ask your regional carrier for a ZIP code list so you know exactly what they can offer you and where you’ll still need your national partner.

Which regional carrier is right for me?

Major regional carriers include:

• Eastern Connection, which serves the northeast and mid-Atlantic regions
• Lone Star Overnight in the Southwest and West
• OnTrac, which was formerly known as California Overnight, in California, Arizona, Nevada, Oregon, Washington, Utah, Colorado and Idaho
• Spee Dee Delivery Service in Illinois and the Upper Midwest
• U.S. Cargo in Ohio, Pennsylvania, Virginia and West Virginia

Why use a regional parcel carrier?

Finding the right mix of shipping carriers can be an enormous competitive advantage. National carriers offer convenience and reliability — but regional carriers offer more flexibility and more personalized service, often at greater speeds and lower prices – the cost savings alone could be incredibly beneficial to many ecommerce companies.

Adding regional carriers to your shipping mix is not a decision that should be made lightly, however. Make sure you compile detailed data that will enable you to understand exactly what regional carriers offer to your business. Set pricing objectives and consider soft costs, like staff time and software integration. Then, use that data to command the best discount you can.

Supply chain leaders willing to do their due diligence on regional carriers may realize they offer a significant return on investment. Or they may find that, after weighing the pros and cons, now isn’t the right time to switch up their shipping strategy. Either way, you’ll finish with a clear picture of how regional carriers can best help your business — and if the time comes to make a change, you’ll be ready to take action.