Strength in Numbers | Why the Days of Single Sourcing and Single DC Models Are Over

The days of single sourcing are over, and just so we’re on the same page, we are referring to using a single carrier, as opposed to a mix of carriers, for small parcel shipping. 

The COVID-19 pandemic, as well as the lack of capacity in the small parcel market, has exposed companies that are single sourcing a shipping provider, and not in a positive way. 

This is a big shift for shippers though, as historically the marketplace encouraged single sourcing. However, companies who put all their eggs in one basket are finding that if the basket is dropped, all their eggs are broken and their options are gone. In this day and age, options are power.

The days of dealing with the punches that carriers throw in the form of capacity constraints, rate increases--and making it very difficult to consider other transportation providers--are over. Your customers won’t put up with slow shipping and high costs, and your bottom line can’t absorb it any longer.  Carriers are doing what is in the best interest of their business, not yours, and it is your job to take action and create a work around that serves you.  

However, getting away from a single source strategy could be compared to getting out of a timeshare: difficult but well worth it, and you are better going at it with some help.

Your goal at the end of the day should be a resilient supply chain that gives you the capacity and contingencies that you need. Bringing in a professional in this process who knows both the goals and needs of your business as well as how to navigate the market, the carriers, and performance agreements is critical.

You wouldn’t have your dentist remove your appendix, so don’t take time away from your internal experts to dissect an issue that frankly, they don’t need to use their precious time on. Working with a qualified and seasoned expert who has worked for the carriers themselves is the Trojan Horse of supply chain--It is best to strategize leveraging the knowledge of someone who has been on the inside.

For your company, this new strategy may take on many forms, one of them being a multi-distribution center model. Just as the days of single sourcing are over, so are the days of having one mega distribution center. Not only is having a multi-DC model a protection against pandemics and geopolitical events, but it also makes supply chains drastically more efficient.

Companies that have several distribution centers are able to utilize service standards that compete with Amazon Prime, have the flexibility to utilize more economical ground services, and are more effective in using regional carriers as part of a multi-sourcing model. All of these result in more dollars staying in the company’s pocket and happier customers making repeat purchases. .

When considering a multi-DC model, there are key points to keep in mind:

• The first being that spot-on demand forecasting and inventory allocation is critical.
• The second being that because there are more distribution centers, there will need to be more inventory to split between them. 

The good news is that even small shippers can benefit from this strategy by engaging with a 3PL. It would obviously be a terrible idea for a small company to go out on its own and rent entire distribution centers, but a 3PL can secure only the space that they need in a network of warehouses. A well-crafted fulfillment plan can put your inventory in two locations and hit about 90% of the continental United States in two ground days. All you have to do is pick what service level and delivery experience are the most competitive for your business, and then let a fulfillment company do what they do best. 

There is not only strength in numbers, but also leverage, options, and savings. In a rapidly evolving industry, having one carrier and one warehouse is a sinking ship, and it is in your best interest to diversify in preparation for whatever comes next.