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 is expected to grow 30 percent in the next three years. Cottage industries are growing at around 18 percent to 25 percent per year, generating even more parcel and package traffic.

What’s driving this?

The answer is millenials, who are 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 to be the new norms. However, this model doesn’t seem to be working. The thought was that the change in pricing would change behaviors, but it didn’t. 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 are now pushing 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 is less than 1 ft. x 1 ft. x 1ft., USPS doesn’t price it by dim-weight. Market needs are driving 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 be reviewed. I suspect that radio frequency identification (RFID) tags will become the norm, and operations like Walmart have been doing it for a long time.

Barriers to Growth

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

Even the USPS is cooperating 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 are truly in a global economy now. This means there will be more business going internationally between countries and being 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 to be resolved.

Optimizing Technology

We use QR codes today with letters and flats, so why not use them with packages and parcels as well? QR codes are just a part of the omnichannel marketing strategy. We use QR codes as hyperlinks to websites, so why not as hyperlinks to apps? Geocoding has been around for a long time and is currently used in many applications for dynamic routing of trucks and people. Also, geocoding is the basis or foundation for geofencing.

What if we now use geofencing to alert drivers that a pickup is needed because a person just entered his or her order online? What if the package the driver was delivering would chirp or glow when nearing its destination. This is all possible when tying various technologies together. So if we tie geocodes and QR codes together with GPS, we get augmented reality, which already exists on smartphones 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 are less sensitive to soiling and damage; they can store significantly greater data; they have 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. The 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. Brokers may be needed at the intersections of the networks to keep certain data private and secure. Competitive data will be protected and not shared. Linking all of this is a ton of software. For scheduling purposes, software is already being used to track where drivers are, when pickups are made, and how much mail is coming in. There is already software available to deal with combined delivery services and sharing of delivery revenue/expenses. The opportunity is there: $327 billion to be spent on e-commerce in 2016.

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