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Multi-carrier Shipping for 3PLs: A Guide

This guide discusses how multi-carrier shipping can benefit 3PLs, and how to craft a rock-solid multi-carrier strategy.

Team Hopstack
February 13, 2024

In this blog

Shipping is an integral service offered by 3PLs to their clients. As the final step, shipping completes the order fulfillment lifecycle and is arguably the most important part of the process. 

Yet, 3PL shipping is fraught with challenges stemming from elevated client expectations, the volatile nature of the shipping industry, and various operational hurdles.

The challenges translate into high shipping costs, client dissatisfaction, and SLA unattainment. 

Multi-carrier shipping is a proven strategy to alleviate many of such challenges — while mitigating operational risks and starkly improving the cost structure. 

How do clients expect 3PLs to ship?

Clients often have high (and sometimes unreasonable) expectations from their 3PL partners.  The expectation for shipping within 24 hours has emerged as the norm, with clients seeking swift dispatch at minimized costs, aiming for peak fulfillment efficiency.

Additionally, tracking and real-time visibility is another aspect that has become a standard demand for the clients. 

Challenges faced by 3PLs in shipping

3PLs face many different challenges in shipping that impact their business outcomes. 

Shipping costs

Shipping rates and tariffs are on the rise. In fact, leading up to 2024, the major shipping companies have hiked their rates by an average of 5.9%.

Although the shipping costs are not borne by the 3PLs and are passed on to the clients, high shipping costs do make a 3PL’s services much more expensive, leading to a competitive disadvantage. 

One-day shipping/Two-day deliveries

E-commerce fulfillment has become all about speed. The likes of Amazon and Walmart have established one/two-day deliveries as the standard — imposing immense pressure on the 3PLs. 

3PLs now have rigid SLAs to ship orders within 24 hours and work with carriers that complete the delivery within 48 hours. 

Such expectations heighten operational challenges, allowing no margin for downtime or inefficiency. Consequently, 3PLs must carefully select carriers that can meet these rigorous standards, further complicating their operations.

Geographic restrictions

Geographic limitations pose a significant hurdle for smaller and independent 3PLs, which typically partner with a limited number of carriers. These carriers often operate within restricted areas, consequently narrowing the geographic reach of 3PL services.

Moreover, even when collaborating with carriers boasting wide coverage, 3PLs may face steep shipping fees for orders requiring long-distance delivery, further complicating the balance between service scope and cost efficiency.

Limited visibility and reporting

Most 3PLs, even in 2024, operate on legacy technologies that do not serve them well enough in the shipping activity. 

3PLs lack the ability to continuously track each shipment, right from dispatch to delivery, and identify improvement opportunities. 

Additionally, most 3PLs are unable to keep track of their shipping metrics. This limits the level of performance visibility 3PLs have and prevents them from making the right business decisions. 

What is multi-carrier shipping for 3PLs? 

Multi-carrier shipping refers to the use of a mix of shipping carriers to ship and deliver customer orders. This approach allows a 3PL to partner with an array of carriers, selecting the most appropriate option for each order based on factors like cost, delivery speed, and geographic reach.

While promising in theory, multi-carrier shipping presents its own complexities. It demands strategic planning, maintaining multiple carrier relationships, negotiating rates, and overseeing both overall and individual performance metrics. This multifaceted approach requires diligent management but can offer significant benefits in flexibility and efficiency.

Single carrier vs Multi-carrier shipping

Single carrier shipping is an outdated methodology that introduces many challenges for 3PLs shipping orders. It often entails limited flexibility, and involves a high degree of risk, given the high dependence on a single shipping carrier. 

Multi-carrier shipping trumps single carrier shipping on these fronts more. It mitigates many risks and challenges observed in the latter. A multi-carrier shipping strategy enables flexibility, drives cost efficiencies, and provide an improved experience to the 3PL clients. 

Benefits of multi-carrier shipping for 3PLs

Shipping cost reduction

This is possibly the most important benefit 3PLs look to drive by implementing a multi-carrier approach. 

By working with a range of carriers, 3PLs can retrieve all the shipping rates for each order and establish rules to choose a carrier optimally. With shipping rate as the key consideration, 3PLs are able to achieve cost reduction in shipping. 

Faster deliveries

3PLs working with multiple carriers are also able to regard the estimated delivery dates and delivery options for each carrier. 

Depending on the order, customer, and product characteristics, 3PLs can intelligently select the best delivery option, optimizing for delivery timelines. 

For example, 3PLs offering Seller-fulfilled-prime as a service will almost certainly look to select the fastest delivery option to help the client adhere to Amazon’s guidelines. 

Geographic expansion

3PLs can service a wider geographical area by leveraging a mix of shipping carriers. Each carrier has its own geographical barriers. However, collectively, they cover all the key regions.

By helping their clients ship to more regions and all the key demand centers, 3PLs not only enhance client satisfaction but also ensure higher client retention. 

Product specialization

Many carriers specialize in certain product categories, such as chemicals, furniture, food and beverages, etc. This concept is much more prevalent in wholesale/B2B fulfillment as opposed to DTC/E-commerce fulfillment. 

By working with different specialized carriers, 3PLs can help fulfill orders having a large variety of products and also enhance the shipping experience. 

Challenges faced by 3PLs in multi-carrier shipping 

Managing carrier relationships

Many large 3PLs have a personalized and hands-on relationship with all their partner carriers. Managing relationships with carriers requires dedicated time and personnel. 

This is generally a major pitfall smaller 3PLs face, preventing them from having a direct relationship with the carriers. 

Rate negotiation

Negotiating carrier rates is the main challenge in working with a wide range of carriers. 

3PLs often look for volume discounts when negotiating with shipping carriers. The negotiation is cumbersome, often favoring the carrier, and requires continuous renewal. 3PLs also need to be able to meet the minimum guaranteed volumes to reap the benefits of the discounts offered. 

When negotiating rates, many carriers also seek exclusivity for certain categories of orders. This defies the core principle of multi-carrier shipping. 

Real-time integrations

3PLs, and their clients are today required to track every step in the delivery process. Right from pickup to last-mile dispatch, and final delivery, the stakeholders should be able to eye each step. 

This requires the 3PL to have robust integration between each carrier and the fulfillment/warehouse management software. The integration process is highly time-consuming, prone to downtimes, and needs dedicated technical personnel. 

Fulfillment software with pre-built carrier integrations can be an optimal solution to avoid having to build custom integration with every carrier. 

Packaging requirements and labeling 

Every carrier has its own set of packing requirements. From specialized product packaging to materials to be used and weight and dimensions requirements, each carrier has defined its own standards. 

Furthermore, the labeling process also differs with each carrier. Label sizes, placement guidelines, etc, are variable. 

This prevents 3PLs from standardizing the packing and labeling process, making training the warehouse workforce challenging and leaving high room for packing and labeling errors. 

Benefits and challenges of multi-carrier shipping
Benefits and challenges of multi-carrier shipping

Multi-carrier shipping software

A multi-carrier shipping software is specialized software that aggregates shipping information from all carriers and presents it in a unified dashboard. The multi-carrier shipping software helps 3PLs/shippers compare rates from each carrier, alongside tracking the estimated delivery date for each shipping option. 

This eliminates the need to operate individual carrier accounts and manually retrieve rates for every order.

Key functions of a multi-carrier shipping software include: 

  1. Retrieving rates and delivery dates for every order
  2. Generating and sourcing the shipping labels
  3. Managing shipping bills and invoices centrally
  4. Tracking shipping performance, on-time pickups, and deliveries

A multi-carrier shipping system is essential for shippers looking to optimize cost, meet delivery SLAs, and ensure smooth and reliable deliveries. 

Hopstack’s shipping module for 3PLs

Hopstack’s powerful and comprehensive shipping module is what 3PLs need to take better control of their shipping process. 

With Hopstack, 3PLs can lower fulfillment costs, track the shipment lifecycle better, monitor performance indicators, and improve SLA attainment. 

Key shipping functionalities of Hopstack include: 

  1. Pre-built carrier integrations: Hopstack comes integrated with all leading shipping carriers and aggregator platforms. This minimizes the implementation time and eliminates the need for allocating technical resources to the setup process. 
  2. Multi-carrier shipping: Retrieve shipping rates and delivery estimates from all your shipping carriers for every order, parcel, or truckload. Set up intelligent rules to automatically select the optimal carrier option.
  3. Label generation and printing: Automatically generate, source, and print shipping/box/pallet labels for every order. Save packing and labeling time and expedite the fulfillment process.
  4. Shipping performance reports: Continuously view and track the key performance metrics of your carriers. Accurately track metrics like pickup performance, on-time delivery rate, transit time, shipping cost per order, and order tracking accuracy.

Speak with Hopstack’s product specialist today to learn more about how Hopstack’s fulfillment and warehouse management software can help transform your 3PL operations. 

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