Dive Brief:

• LaserShip and OnTrac have launched a transcontinental service delivering packages between their respective coverage areas on the East Coast and West Coast, an operational milestone in the ongoing merger of the two regional carriers.
• The service launched Wednesday night, with pickups taking place for packages moving their way across the country on 53-foot trailers, said Josh Dinneen, chief commercial officer at LaserShip and OnTrac, in an interview Thursday morning.
• LaserShip and OnTrac sorting centers in Los Angeles and New Jersey are the first to be involved in the service, with additional centers to be added each week, Dinneen added.

Dive Insight:

LaserShip and OnTrac's agreement to merge last year opened the door for an alternative to FedEx and UPS's cross-country parcel delivery capabilities.

"They dominate 100% of packages moving over 800 miles," Dinneen said of FedEx and UPS.

The transcontinental offering allows the LaserShip-OnTrac combination to reach 74% of the U.S. populations across 30 states and Washington, D.C., according to a news release announcing the launch. The service’s transit times range from three to five days, per LaserShip’s website.

The transcontinental service launch is the first of many growth initiatives as LaserShip and OnTrac's networks integrate to form a "pure-play, coast-to-coast carrier of choice for last-mile ecommerce deliveries," according to the release. LaserShip and OnTrac will also expand to the Texas markets of Austin, Dallas-Fort Worth, Houston and San Antonio beginning in Q1 of 2023, reaching an additional 19 million customers.

Carriers outside of FedEx, UPS, the Postal Service and Amazon Logistics are a small portion of the total U.S. parcel delivery market. However, these smaller carriers nearly doubled their volume and revenue in 2021, according to Pitney Bowes, as shippers pursue lower costs and more flexible delivery capacity.

But a surge in demand also invites growing pains. Higher volumes can clog an unprepared carrier's network and hurt service levels, particularly during the busy peak holiday shipping season. LaserShip had a "disappointing 2021 peak season when its network struggled to handle excess package volume," leading customers to divert their volume to other carriers, according to a July 22 note from Moody's.

LaserShip has since seen its volume and margins recover, which Moody's said was encouraging ahead of this year's peak season.

"New executive management has significantly expanded network capacity and implemented new planning processes to meet expected volumes," Moody's said. "However, it still remains to be seen whether the company can service all of its customers at the required service levels and sustain network efficiencies over the long-term as the company continues to scale."

LaserShip and OnTrac's number one priority is to ensure high service levels during the upcoming peak season, Dinneen said. They are investing heavily to expand capacity and opening new sorting centers in states including New Jersey, Ohio, Tennessee and North Carolina.