Building the National e-Commerce Infrastructure

At the recent National Postal Forum in Anaheim, California, I presented my thoughts on how technology and cooperation will be the keys to realizing a vision for a national e-commerce infrastructure.

In 2013, use of mobile devices to access the Internet surpassed that of desktop devices. Today, 52 percent of Americans purchase products online. E-commerce should grow 30 percent in the next three years. Cottage industries grow at around 18 percent to 25 percent per year, generating even more parcel and package traffic.

What’s driving this?

The answer: Millenials, willing to spend money on lifestyle products and to get them fast. As more consumers make online purchases, shippers handling bulky but light packages decided to make their systems more efficient and went to dim-weight pricing methods.

Packaging and package density were the new norms. However, this model shows flaws. The thought was that the change in pricing would change behaviors, but it proved false. People want their products and want them now, regardless of higher shipping costs.

Meanwhile, the USPS started to more aggressively market itself as a courier. In today’s world economies, they now push their greatest strength: the last mile. They grew in number of packages delivered by 18 percent over the previous Christmas period.

In addition, if the item takes up less than 1 ft. x 1 ft. x 1ft., USPS stops pricing it by dim-weight. Market needs now drive efficiency in transportation networks all the way back to the distribution center. With same-day delivery as the ultimate goal, we need to look toward greater automation and speed from truck to stock and stock to truck. Current labeling technologies relying on optical scanning need to reviewing. I suspect that radio frequency identification (RFID) tags will turn into the norm, and operations like Walmart planted roots in it for a long time.

Barriers to Growth

In every growth opportunity, barriers exist. Lack of cooperation and capital investment represent two of the greatest barriers to e-commerce. Companies compete against each other for so long that they fear cooperation will lose them market share, despite the fact that market share  will fluctuate anyway. Companies must start cooperating.

Even the USPS cooperates with companies like FedEx to take advantage of their strengths. Commitment to capital investment is simple to comprehend. Companies must invest to stay competitive with new technologies and new concepts. We truly live in a global economy now. This means more international business between countries processed by various customs authorities. Thank goodness for the Universal Postal Union’s efforts to help simplify this with standard addressing and labeling. About 70 percent of the world’s population lives without standardized addressing. That issue clearly needs resolving.

Optimizing Technology

We use QR codes today with letters and flats, so why not use them with packages and parcels as well? QR codes represent just one part of the omnichannel marketing strategy. We use QR codes as hyperlinks to websites, so why not as hyperlinks to apps? Geocoding, used for a long time, now exists in many applications for dynamic routing of trucks and people. Also, geocoding creates the basis for geofencing.

What if we now use geofencing to alert drivers of a pickup needed for a person who just entered their order online? What if the package would chirp or glow when nearing its destination? The possibility exists when tying technologies together. So, if we tie geocodes and QR codes together with GPS, we get augmented reality, which already exists on smartphone apps that can use the phone’s camera, QR codes, and your GPS locator to guide you to the next great deal. Something similar could be done to help drivers deliver parcels.

RFID technology has been around for a while. There are two types: active and passive. Obviously, the active would need to have a power source to allow it to be read. That is possible now with certain inks and technologies. The benefits to RFID technology are that hundreds of items can be registered simultaneously. They prove less sensitive to soiling and damage, and they can also store significantly greater data. RFID carries up to 10X faster read speeds; tags are re-writable; and they provide data integrity/security. The drawbacks are that RFID tags are relatively more expensive; a global standard for delivery use does not exist; bulk reading is impacted by certain metals/liquids; and there are concerns regarding employee tracking.

Improving Delivery

To remain competitive in this industry and to meet customer demand for instant gratification, we need to find new products and services. These can include same-day delivery of online orders, better secure delivery options, dynamic re-routing, and even late-evening and weekend deliveries. The big couriers and the USPS have examined parcel lockers in different locations, and there are benefits to both shippers and recipients. That expensive product ordered can be locked away and picked up when you want, as opposed to having it left at your door or with a neighbor. I believe that a parcel locker network will exist shortly. Amazon and other companies are even exploring delivery by drones. It’s too early to tell if this will catch on, but does warrant monitoring.

Putting it All Together

Technology will play a huge part in the network. RFID tags embedded in labels would report when packages are transferred from distribution center to truck and then to the final destination. Trucks would have GPS and readers on them to report automatically back to the system. The driver would be notified where on the truck the item is located to make it easier and faster to retrieve. Rerouting based on geocodes will be in place. Auto feedback to the courier, customer and OEM will also be in place. The parcel locker has to become an agnostic network for all to use. The software will need to reach out to all presorters, couriers and the USPS to notify them and deal with rates.

To make this all happen, a new level of cooperation must exist. We may need Brokers at the intersections of the networks to keep certain data private and secure. Competitive data needs protection, without sharing. Linking all of this requires a ton of software. For scheduling purposes, software already exists to track driver locations, when pickups happen, and how much mail comes and goes. We already create software to deal with combined delivery services and sharing of delivery revenue/expenses. The opportunity lives: $327 billion to spend on e-commerce in 2016.

Now it’s up to us to build the right e-commerce infrastructure to seize and grow that opportunity.