DEEPER DIVES: "We're Doing The Work"

Good Morning,

First, as always, thank you for joining.

The last two newsletters really took off. It’s amazing to see so many new people join each week.

Deeper Dives has a wide audience that touches all parts of our industry. Because of that, the topics and what I share each week change a lot. The newsletter moves from opinion, to detailed business analysis, to data analytics and tools and also technical aspects of service and operations models.

If you ever have topics that you want me to write about or see my thoughts, you can always access the full archieve or simply send me an email (by responding to the newsletter) or you can use my AMA Form.

Here’s what this issue brings:

• We’re starting off this week with something a bit different. I saw a parcel carrier round table presentation recently. Multiple regional carriers presented to potential shippers. I’m going to share some of the highlights as to what was discussed, how they framed their offer as well as some emerging trends I’m seeing in the eCommerce / last mile space
  

• You can’t overlook any opportunity these a days in logistics when it comes to how you do things. Will this new type of label pritining capatiblity give 3PLs more opportunity to get into more value added services?
  

• Everyone is talking about data. Here’s a new tool from a provider that has an excellence database client that just put out a new version … Navicat Premium Lite

The Next National Carrier Won’t Be One Company. Regional Carriers Are Creating Syndicates

Last week I took the opportunity to join a roundtable presentation.

The goal was to give shippers more exposure to different regional carriers and allow each of them to share more about their networks, partnerships, and technology.

I’ll start by making it clear that I am not endorsing any of those who presented or the platform that hosted the even (which is why you don’t see any names mentioned).

Second, I am not looking to tear down any of these carriers either. I am sharing my thoughts and perspective on the market as a recovering shipper and someone who now helps brands and service providers get more from their operations and execution.

The parcel shipping market is undergoing a rapid transformation.

These changes are largely driven by the growth of legacy regional carriers (and the influx of new ones since the pandemic).

Technology has made the ability to integrate with different systems seamless.

Shippers now have access to a range of delivery options beyond traditional national carriers.

These regional players are proving they can compete by offering flexible, efficient, and value driven services.

However, they are also facing challenges managing customer expectations that demand national coverage.

Operational models, pricing strategies, and the complexities of scaling within a fragmented logistics landscape are all starting to show.

The biggest surprise that hit mean during this roundtable was happened right in the first presentation.

It was clear that the legacy regional carriers are making the distinction between their services that invest in assets and branded infrastructure, versus those that rely on gig or crowdsourced labor models.

Asset-based carriers present a cohesive brand experience with contracted workers, standardized vehicles, and uniforms, whereas the gig model tends to favor flexibility and reduced costs.

The position was that gig models won’t provide the same level of quality or consistency of service with people who “are trying to fill a few hours, chucking packages up to a door”.

This divide highlights the fundamental need of a strong logistics operation - balancing service quality and brand consistency against operational efficiency and low overhead.

The resistance to platform aggregators and a desire to own the relationships, since "we do the work anyways" without middlemen is another noticeable trend amongst the asset based carriers.

This is something that I have been talking about for a few years now. A post I made last year blew up when I said that logistics platforms were heading for a supernova. See, these platforms took a position in the market as a result of a lack of proper systems and integrations in the market. Logistics had always been a pretty slow and stable industry.

With the pressures of the pandemic, the industry needed people to help connect the dots.

But a few years later, most of the major carriers have quickly adopted new technologies and brough a lot of those capabilities in house.

One of the carriers in the roundtable was very open about it. Even though they had access to all kinds of cash, they neglected technological investement. They’ve now doubled down and dramatically improved their position in the last 12 months.

One unfortunate thing though, as that all of these carriers are striving to differentiate themselves, yet they don’t speak about their business without drawing comparisons to major national players like UPS and FedEx (framing their value propositions around cost savings and accessibility).

This frequent comparison suggests a lack of confidence in knowing what makes them truly unique, aside from simply being a cheaper alternative. Without a distinct value proposition, they end up appearing as a smaller-scale versions of the established giants rather than genuine alternatives.

(Note: I shared this idea during a recent episode of Wake Up And Deliver - Being the low cost provider is a way to dominate a market. But, the thing is that any market typically can only support 1 or 2 real low cost providers. Everyone else just ends up being some competitor selling on discount who ends up making less money).

Another curious trend that emerged was a form of “territorial behavior” developing among asset-based regional carriers.

Instead of attempting to expand across the entire country independently (which one of them clearly said they “weren’t interested”), they focus on building robust infrastructure within their core service areas.

To provide shippers with a broader, national experience, they form alliances (or partnerships) with other regional carriers in complementary territories.

This interconnected network creates a facade of a unified national service while allowing each carrier to concentrate resources in their specific region, optimizing efficiency and service quality.

This strategy makes sense for the carriers. Long term it will also start to shift the dynamics of the market. You will end up having FedEx, Amazon, UPS, USPS followed by “consortiums” (their word not mine) of carriers who have banded together.

This will inherently have to create some type of exclusivity if these alliances want to truly take a bigger piece of the parcel market - where regional carriers are only holiding a 3% position.

Technology plays a crucial role in the growth of these carriers.

Integrations that connect directly to shipper systems allow even the smallest operations to send parcels efficiently.

For instance, some regional carriers serve shippers moving as few as 20-25 packages per day (volumes that national carriers like UPS and FedEx typically deem unworthy of dedicated attention).

This focus on small shippers might seem advantageous for growth, but it also presents challenges.

The recent UPS lawsuit underscores the risks of overreliance on lower-value activity, which can weigh down overall profitability. By focusing on smaller customers, regional carriers may face similar pressures if they cannot diversify their revenue streams effectively.

(I’ve shared with readers of the newsletter exactly how the cost structure of a last mile delivery network works. The mistake that most organizations make is that they over value the “economies of scale” thinkning without understanding where that shifts to a diseconomy of scale)

The biggest advantage touted by regional carriers is their lower cost structure.

Unlike national competitors, these carriers often avoid operating in low-volume, less profitable areas, thereby reducing overhead.

Many also rely on gig workers or independent contractors, minimizing labor costs. These strategies help to keep their pricing competitive, but they also introduce risk.

National players like FedEx, UPS, Amazon, and Walmart are not likely to allow this erosion of market share indefinitely.

They have the assets, capital, and scale to push back, and history (as evidenced by the struggles of USPS) shows the difficulty of sustaining operations when saddled with only the most challenging and least profitable volumes or geographies.

The biggest question that I left the roundtable with was this: how entrenched are these regional carriers with their shippers?

If much of their business is coming from rate-shopping systems, it raises doubts about their long-term customer loyalty.

When the primary selling feature is low cost, price wars are inevitable, and customers can easily switch to the next cheapest option.

The problem with logistics is that the core cost structure is largely fixed.

The activities of picking up, moving, sorting, and delivering packages incur nearly identical expenses regardless of weight or value differences (until you get into bigger package profiles).

With over 90% of eCommerce volume being 5 pounds or less however, you cost structure per package doesn’t really charge for over the road activity.

Without a deeper connection to shippers, these regional players will find it difficult to maintain their position as a sustainable alternative to the nationals who can hit every zip code or postal code.

Another thing that I thought was over-presented was many of these carriers are leveraging technology to encourage self-service from shippers, providing portals for managing data and tracking shipments.

This may offer transparency, but it also shifts more responsibility to the customer.

While visibility tools are beneficial, significant shippers typically prefer a service model where they aren’t managing the details themselves.

For regional carriers, reducing customer support touchpoints in favor of app-based interactions may save costs in the short term, but it risks alienating customers who value a more hands-on service.

The other reality is that apps and portals are easy to replicate. They do not create any type of differentiated service.

The future for regional carriers is full of potential.

The flexibility, low costs, and partnerships give them the possibility to create alternative networks.

However, to thrive, they must move beyond merely being the cheaper option—they need to deliver on a differentiated value that keeps shippers engaged beyond the next rate adjustment.

Will High Speed Inkjet Printing Open More Doors For 3PLs

I’m always watching for emerging trends.

As someone who has made their carrier living in the details, I appreciate the impact that small changes can have.

Here’s another new “innovation” that the parcel industry is taking from mail.

High speed direct-to-package printing.

The concept for these systems has been around for a while.

But up until recently, the ability to get them producing at a speed that was comparable to labels wasn’t there.

That’s now changing.

These systems use high-speed inkjet technology to print directly to corrugated boxes and polybags. They eliminate the need for seperate labels and all of the associated printing processes that go with them.

They open the door for real time printing with a lot more variable data, images and promotional messages.

On top of being an opportunity to do more things with the box, the technology is also being touted as better for the environment. It improves package recyclability, cuts costs on label priniting (and the on-hand inventory storage requirements), and improves the speed of the packing proces.

For a 3PL working in the eComerce space, this technology gives you a ton of potential marketing opportunities with your customers.

Since you don’t require different labels, tapes, boxes, etc - you can program in the customized messages or offers your customers want to make and offer them the ability to get WAY more value from the box.

If I were running a warehoue today, this would be something I would be immediately looking to implement.

Get More From Your Data With Another Amazing Free Tool

Navicate Premium is an all-in-one database management tool that easily allows you to connect to multiple relational databases (basically the type that stores all of your stuff) at the same time.

It allows you to see what the data in your systems looks like, the tables and the structures of each.

You can query, write, design, move data, backup, create documentation … the list goes one.

Up until now, the only option for Navicat was a paid version.

But since the end of June, you can now get a lot of the core functionality with a new version - Navicat Premium Lite.

The best part is that it works on Windows, Mac and Linux (this is always someting I watch for LOL).

The Lite version is designed to cater to small businesses, startups and individual developers.

Even for bigger businesses though, I would suggest taking a look at the tool to see how it could improve your current data approach and understanding (and test it before you take the plung into any paid version if you like what you see).

That’s it for this week. Thanks for being here.