In the 1980s, purchasing and procurement departments mandated vendor reduction and referred to it as single sourcing. Major companies emphasized the benefits of having sole vendors large enough to provide all of the products or services required. Oh, how times have changed.

Fast-forward to 2006. Major shippers are realizing that it is beneficial to their businesses to utilize a variety of carriers and are now focusing on:

Quality: When carriers offer the best value and excellent quality for the areas they serve and shippers can shop around for the service that most closely meets their needs, the shipper can truly think global and act local.

Technology: Customers are interested in improved shipping, tracking, reporting and invoicing, all of which help speed processes and reduce costs, as well as tighten internal controls for shippers.

Options: Shippers are electing to move all of their eggs from one carrier to several, in order to mitigate their risks and find the best options available for each market. In fact, Morgan Stanelys surveys demonstrated that during the last six months, shippers switched 14% to 17% of their ground and air volume primarily for price and various service reasons.

And it is not only the major shippers who are doing so. Technology has improved so rapidly that smaller companies can acquire and emulate many aspects of technology that larger competitors deploy without massive investments in IT.

Personal interviews with regional carriers, the president of the Express Carriers Association and one of the worlds largest parcel shippers add detail to the shift that is occurring in the shipping industry and why:

Richard Ziemba, President of ParcelTek, a regional carrier in Colorado that delivers 3,000 packages a day on an overnight basis for major brand shippers, emphasizes that these customers like the late pickups, delivery to specific desktops and same-day deliveries that major parcel vendors dont offer. Ziemba adds, Our technology is as good as global carriers, with the proof of delivery being sent within 30 minutes of delivery via EDI to the shipper.

John Grainger, President of Skyline Messenger Service based in Atlanta, Georgia, with six depots throughout the state, says, 75% of our business is with major brand shippers, which makes up most of the major office supply stores and many others. According to Grainger, a key buying point for major shippers includes simplified pricing, while still maintaining high-quality delivery, personalized attention and services not available from the major carriers. He advocates investing in the longer sales cycles required to gain major shippers, who naturally offer bigger volumes as well as commitments.

Paul Steffes, of Jet Messenger Service in New Jersey, reveals, Our company handles large volumes [of packages] for health care and pharmaceutical suppliers, with 25% of our volume coming from Fortune 100 shippers. Specialized handling includes pallet pickup, break bulk and delivery of individual packages. Steffes explains that after 48 years in business, customers still appreciate that Jet Messenger Service does not charge more for residential delivery or signatures, and its technology now includes full exchange of shipment information necessary to meet the shippers highest expectations.

Brad Westrom, President of the Express Carriers Association (ECA), explains, Over the last five years, our annual Shipper-Carrier Marketplace meeting has grown substantially; the number of major shippers in attendance increased from 30 to a projected 50 planned for the 2006 conference in April. Major shippers enjoy the direct contact with owners and executives of the local and regional carriers who are members of ECA.

At Dell Computer, Arun Kumar, Director, American Logistics and Worldwide Trade Compliance, explains his criteria for selecting regional carriers. The primary methodology is to identify the top three to five carriers per region and then move forward with an RFQ. As for selection criteria, we look at their financial health, technology capabilities, service quality, network design and reach, number of terminals within the region, types of customers, percentage of business with their largest customer, claims process and level of security at terminals and rates. We measure them on On-Time Performance (OTP), adherence to their published transit times and service quality measured in terms of missing, wrong and damaged [items].

Undoubtedly, variety and options are key selling points for shipping managers, and they are finding that it no longer makes sense to go with one carrier for all of their shipping needs. Different carriers provide different benefits, so it is understandable that customers want controls in place that will allow everyone involved in the shipping process to understand and compare the approved carriers services and prices, thereby allowing a company to significantly reduce its shipping costs.

Mike Everson, CEO of Data Trak Technologies, and his team have complied and have installed hundreds of multi-carrier solutions for major shippers. Everson explains, The shipper frequently asks for a single solution to replace all of the machines provided by the major carriers, and we comply. Regional carriers can be added to the choice of carriers; for instance, we frequently recommend adding Spee-Dee Delivery for shippers in Minnesota, [and this saves them] money. Everson continues, Many shippers also appreciate that USPS, LTL and carriers specializing as work share partners for the USPS can be added to the multi-carrier solution, making it applicable for all shipments.

Clearly, the days of single sourcing are now over. Customers have taken control over their shipping expenditures and utilize available technology to control their vendors and shop for better rates and services. How the shipping industry has changed in only 20 short years; it will be exciting to see what the future holds.

Rob Shirley, President ExpresShip, Inc. provides two consulting services: Business Development Strategy for Carriers and Parcel Rate Benchmarking for Shippers. Contact Rob at Rob@XpShip.com or 512-217-9976.