The Pros and Cons of Carrier Diversification

A simple google search for “carrier diversification” and you will find a never-ending list of brokers and carriers that have weighed in on the subject over the past few years. Besides “freight tech”, it wouldn’t be a stretch to say “carrier diversification” is near the top of the list of “solutions” for all of the challenges facing shippers in today’s supply chain climate. 

So let’s break it down, and give you the pros and cons of diversifying your carrier engagements, as simply diversifying carriers may not be a “one size fits all” solution. 

Pros of carrier diversification:

Reduced dependence on a single carrier: One of the main advantages of carrier diversification is that it reduces a shipper's reliance on a single carrier. This is particularly important in situations where a shipper is heavily dependent on a single carrier, which can increase the risk of disruptions due to carrier issues such as capacity constraints, labor strikes, or equipment failures. By spreading their shipments across multiple carriers, shippers can reduce their risk exposure and ensure that their shipments are more likely to arrive on time and without incident.

Increased negotiating power: Another advantage of carrier diversification is that it can give shippers greater negotiating power with carriers. By having multiple carriers competing for their business, shippers may be able to negotiate better rates and service terms. This is particularly true for shippers who have a large volume of shipments, as they may be able to leverage their volume to negotiate more favorable terms.

Greater flexibility: Carrier diversification can provide shippers with more options for different types of shipments or delivery requirements. For example, if a shipper needs to transport hazardous materials or oversized freight, they may need to use a carrier that specializes in these types of shipments. By diversifying their carrier portfolio, shippers can access a wider range of carrier options, which can help them to meet their unique transportation needs.

Some of the cons of carrier diversification include:

Complexity: One of the main disadvantages of carrier diversification is that it can add complexity to a shipper's logistics operations. Managing relationships with multiple carriers can be time-consuming and require additional administrative resources, such as tracking multiple carrier invoices, dealing with different booking processes, or handling multiple claims processes. This complexity can increase the risk of errors or delays, which can negatively impact a shipper's overall logistics performance.

Higher administrative costs: Another disadvantage of carrier diversification is that it can lead to higher administrative costs. As mentioned above, managing relationships with multiple carriers can be more time-consuming and require additional administrative resources. This can include everything from negotiating rates and terms with each carrier, to tracking multiple shipments and handling claims. These additional administrative costs can eat into a shipper's profit margin, particularly if they are already operating on thin margins.

Reduced consistency: A third disadvantage of carrier diversification is that it can lead to inconsistencies in service quality or delivery times. Different carriers may have different levels of service quality, or may have different delivery times for the same shipment. This can make it more difficult for shippers to meet their own customers' expectations, particularly if their customers expect consistent delivery times or service quality across all shipments.

So how does WARP fit into this equation? It’s actually quite simple. 

At WARP, we don’t believe in a pre-set carrier base to move your freight. In fact, we don’t even think about “who” can move your freight until we have solved for the “how”. We are not lying when we say “we optimize every shipment, every time”, so whenever we receive shipment data, we immediately get to work to determine the best way to move that freight. Does it need to hit a cross-dock? Do we need to break down pallets and redistribute individual parcels? Are there consolidation opportunities with other shippers? What are the transit time requirements? The list of questions goes on and on. 

Here is where we focus on the “who” can move the freight. We do the carrier diversification on your behalf, finding the right partner at the right price. Is there an opportunity to use a cargo van or box truck? Are there regional carriers that offer a cost savings? Can we skip last-mile parcel shipping zones to improve overall efficiency? Simply put: what is the best way we can optimize this freight shipment?

Ultimately, the decision to diversify carriers depends on a number of factors, including the size and complexity of a shipper's logistics operations, the specific requirements of their shipments, and the available carrier options in their geographic area. Rather than the time and effort to see minimal impact, let WARP optimize each shipment, find the most reliable and cost-effective carrier, and bring unmatched transparency to your supply chain.

By
Troy Lester
Co-Founder and CRO

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