By Caroline White | March 25, 2021
It is no secret that 2020 presented challenges for everyone, especially retailers, but the one I want to spend some time talking about is carrier disruption. eCommerce demand and sales have been climbing in recent years, and the COVID-19 pandemic pushed that even higher with the closure of many walk-in retail locations for multiple months. Continuing this trend, eCommerce demand was higher than ever during Peak 2020.
During the Fall 2020, we started to hear that the large parcel and last mile carriers in the United States were going to impose capacity constraints on customers in anticipation of the high demand for parcel delivery during Peak 2020. This sent many retailers scrambling, desperately trying to understand how they could gain capacity from other carriers to meet expected eCommerce demand.
Unfortunately, the effort was often futile: even when retailers were able to find alternative carriers with available capacity, using them was cost prohibitive or not even feasible geographically because of their DC location.
As a result, sole reliance on the standard parcel carriers left retailers across the country sitting on inventory with sufficient customer demand but no way to get it out the door of the DC.
Why are most retailers so reliant on the Big 3 Last Mile Carriers?
95% of all parcel deliveries in the U.S. are handled by the 3 main last mile carriers: UPS, FedEx, and USPS. These parcel providers have a wide reach and have built the infrastructure to efficiently deliver parcel packages all over the country within just a few days. In fact, by referring to their transit maps, both UPS and FedEx would show that with just 2 distribution centers strategically placed, they can support you in 2-day delivery for the majority of the United States population with the Ground Service Level.
Many retailers are reliant on these 3 standard carriers because they only have 1 or 2 distribution nodes in their network. If your only distribution node for eCommerce is on the east coast and your customer is on the west coast, there are not many options outside of the Big 3 national carriers to get your customer’s order across the country – all of the regional carriers are out of the picture because they’re, well, regional.
As online demand continues to build, retailers must be increasingly aware of the risks associated with their last mile delivery strategy. Based on UPS’s own statements about their success this past fall, it’s safe to say capacity constraints are here to stay. Any retailer relying on just the national parcel carriers is destined for painful disruption.
What should the future look like?
Now is the time for retailers to think differently. Now is the time to ask the question “How can I take advantage of more last mile carriers to better service my customers and be better prepared for carrier disruption?”
I have listed a few approaches to solving this problem below:
- Implement a more omni-channel focused strategy – open-up the inventory across all channels to fulfill demand from all channels
- Begin to understand alternative last mile carrier options that are immediately available to you
- Intentionally place inventory in your stores, micro-fulfillment centers, 3PLs, or pop-up locations with the purpose of fulfilling eCommerce demand, so that you can take advantage of more local and regional last mile carriers like LaserShip, OnTrac, GoFor, Postmates, and more
If you’re interested in learning how you can prepare for Peak 2021 and specifically address any concerns about being disrupted by the major parcel carriers and capacity constraints, please reach out to us here at Bricz – we’d love to talk with you about strategies we are employing with our customers to solve this problem.
Contributor: Tyler Linderman, Director, Services & Alliances at Bricz