How SMEs Can Overcome the Volume Disadvantage in Logistics

According to this article by Supply Chain Brain contributor Vitalii Savryha, when it comes to arranging logistics, small and medium-sized enterprises are at a huge disadvantage: They pay substantially more for identical shipping services compared to Fortune 500 companies, purely due to volume-based pricing structures. While large corporations negotiate directly with carriers using guaranteed monthly volumes, smaller businesses operate in a spot market designed to extract maximum margins from fragmented demand.

The challenge is substantial. U.S. business logistics costs reached a record $2.58 trillion in 2024, or 9% of GDP. Logistics costs are usually at the level of around 10% to 25% of a company's total sales. Small businesses remain particularly vulnerable, due to limited negotiating power and lack of volume in carrier relationships.

As he points out, the solution isn't waiting for revolutionary technologies — it's leveraging volume-aggregation models.

Carriers structure rates around volume guarantees and operational efficiency, optimizing vessel space and reducing costs when large retailers commit to massive, predictable volumes. SMEs, as providers of "filler cargo," face spot market pricing with full fees and no capacity guarantees for small shippers (under 10 containers monthly), while mid-volume (10-50 containers) and enterprise (50+ containers) shippers secure reduced or base rates through contracts.

Large corporations like Walmart leverage massive volumes for competitive rates, leaving smaller businesses reliant on intermediaries. Hidden costs from customs processing, documentation, and last-mile delivery often exceed base charges, widening the gap. Volume aggregation counters this by uniting SMEs to present consolidated demand, accessing enterprise-level pricing through intermediaries.

He points to the following three aggregation models:

1) Third-party logistics providers consolidation. Traditional 3PLs combine several customer shipments into larger volumes for negotiations with carriers. Leading 3PLs maintain relationships with three to five carriers of different modes of transport on a tender basis.

2) Freight forwarder cooperatives. Specialized forwarders create buying cooperatives for specific trade lanes, particularly effective for international shipping and seasonal businesses. Shippers' associations exemplify this model — the American Institute for Shippers' Associations describes them as "non-profit transportation membership cooperatives" that arrange cargo shipment for members at favorable volume rates.

3) Regional industry consortiums. Industry associations in manufacturing hubs create logistics partnerships among local companies. Michigan's automotive suppliers demonstrate this approach, where Tier 1 and Tier 2 suppliers coordinate through associations like MichAuto to negotiate joint contracts for just-in-time delivery between the Detroit region and assembly plants.

Nucleus will point out, however, that partnering with a 4PL Supply Chain as a Service provider is without question the simplest and most cost-effective way for companies of any size to leverage volume aggregation. A multi-customer, multi-carrier, multi-industry platform that is continuously optimized. Internally, inside each customer, and externally across customers. Nucleus has built an extensive database and institutional knowledge about which carriers suit which types of freight and customer/industry. Nucleus also offers the added benefit of leveraged volume aggregation, but with a single point of contact which significantly reduces the cost of managing multiple carrier relationships.

He goes on to say that timeline expectations involve 15% to 25% cost reductions through improved rates in months one through three, an additional 5% to 10% savings through operational efficiency in months four through six, and reinvestment capabilities in inventory, marketing, and expansion after year one. With most implementations, aim for 20% to 35% total cost reduction alongside 40% to 60% service reliability improvement for a strong ROI.

Volume-based pricing creates systematic SME disadvantages, but aggregation models offer immediate solutions. Strategic logistics partnerships deliver measurable results within three to six months through proven frameworks, unlike complex transformations requiring years. Success demands calculating comprehensive costs, evaluating models, and implementing pilots, enabling market responsiveness, seasonal scalability, and global expansion. SMEs mastering aggregation achieve lower costs, reliable delivery, and optimized cash flow, compounding into sustainable advantages. The choice is which model best supports growth, starting with understanding costs and selecting aligned partners.

Nucleus couldn't agree more.

Source: Supply Chain Brain