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Carrier Capacity Management and Costs Explained

A lot goes into a parcel’s journey from point A to point B. On paper, it may seem like an easy route to follow, but the odyssey from distribution center to doorstep is highly dependent on a carrier’s capacity. In fact, carrier capacity can affect multiple aspects of parcel delivery execution, from cost to arrival time. Without proper carrier capacity management, businesses run a very high risk of incurring unexpected surcharges and fees and disappointing customers with delivery delays.

But what makes these risks so high? And how can you deliver your parcel on time without sacrificing your budget?

Let’s take a deeper look into carrier capacity management and then learn how it can impact your shipment costs.

What is Carrier Capacity Management?

A carrier’s capacity is defined by how much product a carrier can transport at one time. This capacity can vary depending on several factors including seasonality, e-commerce demand surges, truck driver availability, upstream supply chain bottlenecks, and more.

Businesses negotiate with carriers to secure a certain percentage of capacity to ship their products, and they can use input (inventory), output (orders), or both to estimate their shipment volumes. Should a business exceed their negotiated capacity, the carrier(s) will either take the parcel but assess a fee or equally challenging – refuse to take the parcel altogether. It’s also important to note, fees are assessed for businesses that under-utilize their negotiated capacity as well.

Fortunately, good warehouse management software, integrated with multi-carrier shipping software, will measure shipment volumes against carrier capacity thresholds automatically to help businesses manage their carrier capacity and optimize their shipping strategies – essentially maximizing capacity utilization to minimize transportation spend. And by understanding how much product can ship with each contracted carrier at one time, shippers can also communicate accurate lead times and manage shipping expectations with their customers.

Carriers, Shipping Costs, and Peak Season

It’s no secret that during peak season, carriers have high shipping quotas to fill and therefore often tighten capacity limits and increase rates. Why not simply adjust to accommodate the pressure for added volume? Some carriers do, acquiring more planes, trucks, and other delivery transport vehicles ahead of peak season for a smoother shipping process.

However, many carriers do not have this luxury, and therefore they pass the pressure onto their customers in the way of cost increases. For businesses to acquire more carrier capacity during this high-demand period means they pay higher rates, usually in the form of peak season surcharges. And if the businesses are shipping across borders or shipping same-day, the price goes up even more.

Unfortunately, when it comes to peak season, the pain doesn’t end on December 26. To compensate for any expenses the carriers assumed to successfully navigate peak, almost all increase rates in the new year.

The good news is, there are ways around these increases. A multi-carrier parcel shipping strategy automatically decreases transportation spend by enabling businesses to ship parcels with more than one carrier, regardless of whether a business is shipping globally, regionally, or last-mile.

By utilizing a multi-carrier parcel shipping strategy, you can:

  • Mitigate capacity limitations during peak and non-peak seasons
  • Save money with regional carriers
  • Save time with last-mile carriers
  • Ensure on-time delivery when supply chain disruptions such as driver strikes, carrier capacity limitations, and peak seasons occur

However, managing a multi-carrier shipping strategy can be tedious if you don’t have the right technology. No matter whether you’re a retailer, manufacturer, or a logistics provider, multi-carrier shipping technology enables you to ship millions of parcels worldwide at the lowest possible cost by automatically selecting the right carrier for each shipment based on origin-destination, delivery timeframe, cost, and any applicable business rules, such as negotiated capacity.

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Manage Your Carrier Capacity with Logistyx

Featuring state-of-the-art cloud-based multi-carrier shipping solutions, Logistyx can automatically assist you in quickly on-boarding new carriers, scaling your shipping volumes, and monitoring your carrier capacity – without taxing your internal logistics and IT resources. By using our technology to rate, rate shop, and select the optimal carrier for each shipment based on origin-destination, delivery timeframe, cost, and any applicable business rules such as capacity thresholds, you can save precious time and effort and turn toward optimizing your order fulfillment strategies instead.

In a shipping landscape fraught with limited carrier capacity and rising shipping costs, Logistyx’s unique solutions help you take control of your capacity management and reduce your transportation spend. Contact our team to learn more about how we can help your organization manage your carrier capacity.