The parcel and freight market has seen big changes in the dynamic between shippers and carriers over the past 12 months. Jason Smith, assistant vice president with U.S. Bank, explains.

The threat earlier this year of a strike against UPS, and a tightening of capacity among parcel carriers even before that, have had a major impact on the freight market in the last year, Smith says. It has resulted in trucks being removed from service, planes being parked and rates rising. 

“Parcel carriers want to be better, not bigger,” Smith says. “More selective on what they choose to haul.” And that desire is putting new pricing pressures on shippers.

At the same time, he says, regional carriers are continuing to make inroads into the national freight network, offering competitive pricing against the large integrators.

All of this affects the critical functions of freight auditing and payment. A good program today, Smith says, requires close collaboration between shippers and carriers, “to solve invoice issues quickly and productively.” The two sides must be willing to share key data and promote best practices in the relationship between customers and their freight audit and payment providers. “Shippers need their provider to be a true collaborator with both parties,” he says.

In a time of rising rates, shippers are on the lookout for ways to cut down on freight costs. One possibility is shifting parcel volumes over to less-than-truckload (LTL) providers. To do that effectively, they need to study their historical shipping trends, especially with regard to package weight, then communicate those findings to internal stakeholders. A 300-pound parcel shipment, for example, is often a candidate for cheaper LTL service, even if its service standards are somewhat lower than those of the parcel carriers. The move might require an extra day in delivery time, “but you can save 65% to 70% over parcel if it’s a commodity,” Smith says.