Stepping Over Dollars to Pick Up Dimes? Why Volume Based Discounts Can Be Counter-Productive

If you’re considering shipping with a single carrier to receive volume based discounts you may be stepping over dollars to pick up dimes. 

Carriers frequently offer volume based discounts to their customers.  These discounts can sound so good that your account exec might convince you to ditch other carriers to hit volume requirements for discounts.

I’ve personally worked with multiple shippers who’ve been in this predicament.  After they test out shipping with just one carrier to gain a volume based discount, they have always gone back to using multiple carriers.

Before you drop your other carriers to consolidate onto one, here are the three reasons shippers I’ve worked with have always gone back to a multi-carrier strategy after trying to work with only one.

Bargaining power

The first is the counterintuitive one. Working with multiple carriers gives you more bargaining power, not less. If you’re all in with one carrier, you lose a big chip because they know they’ve already won all of your business.

The only way for them to get more volume from you is for your business to grow.  Whereas if you’re shipping with multiple carriers and splitting volume, they’re incentivized to come up with creative ways to earn more of your business. 

I’ve seen this manifest in interesting ways like changing your dimensional weight divisor, removing specific surcharges, or reducing your volume requirements to get discounts. 

Service coverage

If you only ship with one carrier, you give up service options for delivery configurations that would have saved you money. For example, if you only ship with FedEx and you have shipments under 1lb, you’re giving up the ability to ship with USPS Ground Advantage.  This service is specifically designed to help shippers save when shipping parcels under 1lb. 

Similarly, if you only ship with USPS, you might be giving up opportunities to save money on deliveries to businesses address where you can leverage FedEx Ground.  I’ve seen shippers save a great deal per shipment to places like Hawaii and Alaska when they can leverage services like FedEx 2Day instead of USPS Ground Advantage. 

Across the combinations of address, parcel type and surcharge you actually ship, more carriers in the mix means more chances that one of them is cheap for the parcel in front of you. 

Load balancing

The third reason is the one that costs the most when it goes wrong. Using a single carrier removes your ability to load balance, which is moving volume between carriers as conditions change.  

You can load balance to do things like decrease risks caused by carrier bottlenecks.  For example, if a local sorting center is experiencing delays, you can reroute your parcel volume to another carrier to reduce delays.  

Or when demand surcharges kick in during peak season, you can split volume between carriers to limit the change in parcel volume over baseline. This will help you reduce or eliminate demand surcharges as your volume skyrockets during the holiday buying season.

What it comes down to

Shipping with a single carrier gives up more than the discount returns. Whether that is flexibility, cheaper service options, or reducing your leverage for future negotiations, shipping with a single carrier isn’t what your account exec chops it up to be.

Multiple carriers only pay if something compares them

One caveat on all of this. Carriers in your account are not savings. They are candidates. The spread between them only turns into money if something prices the actual parcel against all of them and takes the winner, on every order.

If a person is choosing the carrier, or a static rule is, you get the average answer rather than the right one, and most of the advantage of being multi-carrier stays on the table. Rate Shopper is the native way to close that gap: connect everything you have, put it all in the service collection, and let live rates decide per shipment.