Carrier Diversification in Last-Mile Delivery: Timur Eligulashvili on Perform.AI

Timur Eligulashvili usually does the interviewing on his own show, Logistics Remix. This time the roles flipped: he appeared on Perform.AI’s Unpacking E-Commerce Logistics series to talk carrier diversification in last-mile delivery.

One note on timing. This conversation was published in April 2023. The references to Amazon pushing 2-day delivery toward 1-day and to the USPS workshare program are context from that moment. What has changed since is the direction of travel: regional and alternative carriers have only gained more share of the market since this was recorded.

Read the full article on Perform.AI

What “diverse” actually means

Timur’s definition of diversified is simple: no single carrier is taking more than 50 percent of a company’s volume. That may mean five carriers in the mix, or three, or eight. Every retailer’s goals are different, so there is no one-size-fits-all answer.

The 50 percent rule comes from a real story: a shipper was capped at 50 percent of the volume they intended to ship during the holiday season, and that is the scenario diversification is meant to prevent.

The three reasons to diversify: capacity, cost, capability

Timur frames the case as three C’s: capacity, cost, and capability.

Capacity is self-explanatory. As he put it, no one wants to be stuck in a situation where one carrier cuts them off and they have no alternative options.

Cost is the easy one to get behind. Regional and alternative carriers run more efficient operating models. They are not spending dollars on marketing or running TV ads. They operate lean, so their cost structure allows for more aggressive pricing, and they can pass the savings on to the retailer.

Capability is the one he finds most interesting. Can the carrier provide faster delivery? Are they better on time, with stronger on-time delivery performance? And are they easier to work with? Those are the things that really matter to a retailer or 3PL.

How to start: one market, then the next

Carrier diversification is not a one-time operation where a store picks a partner, onboards them, and sets it and forgets it. It is an ongoing process: find new partners, run due diligence, onboard them, and keep looking for ways to improve.

His advice is to start with one market. Pick a market where the distribution center sits, or a market where the current carrier is underperforming. Then use the network of other retailers. Peer introductions and shared due diligence go a long way when evaluating a new carrier.

To see which carriers cover a given market, search the carriers covering that market by state in our finder.

Why companies stall

Even shippers who want to diversify run into the same blockers.

The first is technology. Many merchants lack the tech, either because their carriers are not integrated or because they are using the wrong system. The fix is to work with internal teams on the business goals so the company can develop and integrate directly with carriers via API.

The second is incentive math. Below a certain volume level, a shipper will pay a little more to ship with a national carrier rather than walk away from incentive discounts.

The third is the middle mile. A shipper may want to use a regional carrier in another part of the country, but with low volume entering that carrier’s market, the packages have to be brought to the carrier and the middle mile cannot be organized efficiently. That one takes real organizational buy-in behind the goal and the plan.

Going further

For the full picture of where regional and alternative carriers fit in a small parcel strategy, see the regional and alternative carriers section of our small parcel shipping guide. And if a new carrier mix means new contracts, our carrier contract negotiation service can help make sure the rates match the strategy.

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This post is based on Timur Eligulashvili’s appearance on Perform.AI.