LaserShip Buys OnTrac: What Parcel Shippers Should Know

Standards and opportunities in logistics appear to be changing as LaserShip has now purchased OnTrac, notes Jennifer Smith of The Wall Street Journal, to expand operations with plans on creating a national parcel carrier that will help the two companies grow and stay competitive. In shipping management, there are massive opportunities for efficiency gains. Billing issues can be corrected through auditing and automated chargebacks. Fuel surcharges will fluctuate in tandem with market dynamics, and the value of data will become more evident as companies look for ways to avoid bottlenecks. For these reasons, many shippers have sought a truly national competitor to the major parcel carriers, UPS and FedEx, but few companies have successfully created a competitive entity. In this article, the Intelligent Audit team digs deeper into this new acquisition and its impact and will explore why shippers need to understand what this move means for the industry and how it reiterates the need for data-driven management of parcels as well.

What's Happening With the Acquisition of OnTrac?

LaserShip has announced intentions to buy OnTrac Logistics, which predominantly services the western half of the U.S., for roughly $1.3 billion. The sale is expected to close near the end of the month with a tentative date of October 25, 2021. The goal of acquisition is to expand regional last-mile delivery to reach more customers. In fact, the effects of such an acquisition will put LaserShip in a position to reach approximately 74% of the U.S. population, LaserShip Chief Commercial Officer Josh Dinneen said.

The acquisition also brings 100 sorting and delivery hubs into the LaserShip portfolio across 30 states and the District of Columbia. While it isn't going to impact peak season operations much in the short term, experts are already speaking out about how the acquisition will help shippers find capacity in tight markets and have an eventual option for parcel delivery that is comparable to FedEx and UPS. Such advances and acquisitions are mission-critical for regional carriers to expand operations and achieve growth in a market subject to massive constraints and the astonishing growth of e-commerce.

What's the Value of Regional Parcel Carriers?

Remember, regional parcel carriers tend to have higher service tiers and charge lower fees than national carriers. This comes from their local footprint. It's no secret that regionals are an opportunity to get rates more competitive than the national carriers when strung end-to-end to create long-haul moves with a last-mile capability. Such opportunities through long-haul moves were echoed by Hannah Testani, CEO of Intelligent Audit, as well. "This isn't surprising when considering the overall state of consolidation in the industry, but it is big news for shippers. Once there are enough regional carriers that can move national shipments, shippers can leverage those networks to have a more balanced relationship with their carriers and keep costs in check." Her words express an absolute need for more efficiency in parcel delivery, especially as parcel volume has soared with the advancement of e-commerce. According to DC Velocity, all parcel carriers reported record-setting throughput in Q1 of 2021, and even more concerning, the ability of the supply chain to stretch appears to be headed toward a breaking point. There are only so many drivers and opportunities to make a company grow organically, and the future of growth will be marked by companies that are able to consolidate their existing operations with other entities to create new networks that offer national coverage. But that begs the question around the impact of the merger.

What Should Shippers Do About the Merger Today and in the Future?

The first takeaway from the merger is simple: It will not impact operations through the holiday shopping season. Both companies have announced intentions to hold off on integration of services until well into 2022. That means the impact in the industry will be minimal and more metaphysical. In other words, it is an effect that will likely stimulate more interest in network consolidation through the holiday shopping season, but it will not truly impact current rates.

With that in mind, the gradual implementation will mean invoices will be subject to new processes and reporting protocols. As a result, there maybe a higher opportunity for errors as LaserShip folds the processes of OnTrac into its enterprise. That's where the first true impact to shippers will become evident. Shippers will need an auditing solution that seamlessly accounts for these changes and aggregates data from more systems as both companies become one network. Second, shippers will need to vigorously analyze data to derive actionable insights, normalizing it in tandem, while also modeling and quantifying total costs versus savings, to ensure their chosen carrier for national moves is the best choice. Further, the auditing solution offers the ability to model and accurately quantify options between the carriers to select the best cost and service available in your carrier mix. This will become more complicated as LaserShip grows to rival the major carriers in nearly three-quarters of the market population. Meanwhile, alternative fulfillment models, such as hub injection and zone skipping, will still be valuable, and with the acquisition's introduction of 100 new delivery hubs into larger networks, knowing when to pull the trigger on those opportunities will come down to having data-driven insights at every step of the process.

Stay Informed of Your Parcel Financial Goals With the Right Auditing Solution

Regional parcel provider consolidation will continue as more local companies seek to build larger networks that can compete on a national scale. The purchase of OnTrac is only the latest in these efforts, and it heralds an opportunity for shippers to start leveraging smaller companies to avoid the massive costs associated with disruption among national carriers. Fortunately, the implication and use case of an advanced auditing and business intelligence solution like Intelligent Audit is the same; shippers need to stay mindful of their invoices as corporate structures change and know when it makes sense to use each carrier on a market-by-market basis. Connect with Intelligent Audit to get started today.