With New Carrier Innovations, Who Stands to Benefit Most?

by | Sep 2, 2016

4 min read

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You may have heard about some of the cool and innovative methods carriers are using to deliver packages to your customers. (Hint: we covered a few of them here.) These innovations may soon have an impact on how your parcels end up in the hands of your customer, but here’s the secret—these advancements aren’t really about your customers. In fact, enhancing the customer experience is quite likely secondary to the carrier’s primary goal of reducing their own costs.

Before diving into that, it’s important to first familiarize yourself with some of the innovations that are either upcoming or currently being tested in select markets. Here is a quick sampling:

  • Amazon is actively considering self-service Amazon Lockers in Munich and Berlin. This could create competition between Amazon and Deutsche Post DHL, a critical delivery partner for the American eCommerce brand.1
  • UPS® is also rolling out self-service lockers in the US.2
  • Attempting to target a “young, extremely online savvy” group, DHL is testing a new delivery model in its hometown, Stuggart; they plan to extend to seven other cities in the coming months. The service allows owners of Daimler AG’s Smart cars to have parcels delivered directly to the trunks of their parked cars.3
  • Another DHL innovation is in the works; they are attempting to develop a prototype for self-driving delivery carts that can “autonomously accompany staff during last mile delivery.” This would help couriers by reducing the amount of packages they have to carry, and consequently, the amount of time-consuming trips they have to make back and forth from the truck.4
  • Dispatch, a San Francisco-based startup is working to replace couriers with a “3-foot-tall, 150-pound, battery-operated roving robot.” Using artificial intelligence, five cameras, and a laser, the robot would be able to navigate on sidewalks around pedestrians to get packages to the door. Look out, R2-D2.5

Let’s not kid ourselves into thinking these innovations were implemented primarily to benefit your customers. Parcel carriers are most likely developing these to improve their bottom lines and benefit their shareholders.

The cost-savings are going to be derived from two specific areas: residential deliveries and missed deliveries.

  1. Residential deliveries are more time-consuming and costly for carriers because their packages-per-stop ratio drops tremendously. With a commercial delivery, or a delivery to a commercial property, a courier can drop off several packages with a single stop because they are often delivering packages to multiple businesses within one building. With residential deliveries, the couriers are typically only delivering a small number of packages per stop, then they have to get back into the truck, drive a short distance, and repeat the process. This is why carriers typically charge more for residential deliveries, or apply a surcharge to packages delivered to residential properties—they’re trying to recoup some of the additional costs associated with the residential delivery. By pooling more packages into a single location, like for example a kiosk of parcel lockers, the carriers can start to increase their packages-per-stop ratio and decrease some of their costs.
  2. Missed deliveries are expensive because they’re a compounding detriment; each missed package reduces a carrier’s daily delivery capacity by two. In other words, a missed delivery reduces the number of packages that will be delivered in a given day (maybe because the customer wasn’t available to provide a signature), plus they reduce the number of packages that can be delivered the next day. This is because that package has to remain on the truck, taking up space that would otherwise have been used by a new package. This is where parcel lockers, delivering to the trunk of your car, and re-routing technology come in. If the carrier can deliver a package the first time, then they don’t have to keep spending money on courier’s time, truck costs, and opportunity costs to re-attempt the same delivery.

With the projected increase in eCommerce activity, parcel carriers are aware that they need to get in front of this trend before the trend gets in front of them. Time will tell whether it’s your customers, their shareholders, or both who will benefit most from these changes.