Related to:
Jan. 11 2016 03:40 AM

The US domestic small parcel market is growing much faster than the UsS economy and we expect this to continue for years. We estimate the 2104 market at approximately $62.5 billion, reflecting a 14.4% increase over 2013. This is based on US domestic small parcel revenues from delivery providers including UPS, FedEx, USPS, regional carriers, etc. in addition to economic data from GDP and personal income spend. The growth rate is attributed to rapid changes in consumer behavior and new supply chain solutions. E-commerce has been the primary driver, however, alternative delivery locations, same day and one hour delivery solutions are also driving the change. These innovative solutions are found across the entire small parcel supply chain, but most noticeably within fulfillment and final mile delivery.

Fulfillment Businesses Thrive

Over the last several years fulfillment services have been radically changed loosely due to the “Amazon effect.” Fulfillment companies are getting closer to the end consumer, fulfilling orders and constantly improving efficiencies and technology. Robotics is playing a huge role in Amazon’s facilities. Amazon acquired robotic company, Kiva, in 2012 and has implemented 30,000 robots in Q3 2015 alone. This doubled the number of robots in place at the end of 2014. These robots have supposedly improved efficiency by 25% and allowed for 50% more inventory in Amazon facilities.

Augmented reality is also becoming an accepted means towards improving efficiency. In early 2015, DHL tested smart glasses and augmented reality for ‘vision picking’ in a warehouse. Staff members were guided through the warehouse by graphics displayed on the smart glass to speed up the picking process and reduce errors. According to a DHL press release, the test found a 25.0% efficiency improvement during the picking process.

3D printing is also driving significant change. UPS is hedging its bets on 3D printing technology and has been one of the early embracers. UPS started by placing 3D printers in select UPS stores and then followed with an investment in 3D printing company, CloudDDM. They opened a facility with more than 100 industrial 3D printers and is located next to UPS’s Louisville, KY, Air Hub. The venture can take orders from businesses for a 3D printed item in the afternoon and ship product overnight.

Final Mile Delivery Locations Change

Final mile delivery no longer assumes delivery ends at a residence. Final mile delivery points are now located at convenience stores, grocery stores, dry cleaning businesses, and lockers.

UPS is at the forefront of alternative delivery locations. It recently expanded its European ‘click & collect’ solution, Access Points, to the US and by year end UPS expects to have 8,000 alternative US locations for consumers to pick up or drop off packages.

FedEx, UPS, and USPS offer locker facilities for consumers to pick up packages around the clock. FedEx’s Ship&Get locker system is primarily available in Texas; UPS’ lockers are being tested in Chicago; USPS’ GoPost lockers are located predominantly in New York City and Washington DC.

Competition and speed continue to drive final mile delivery. For many customers, five to seven-day delivery seems pre-historic — they want things the same day. Numerous start-up companies have joined Amazon, Google and eBay in this market.

FedEx SameDay City is now available in 20 US markets. The service includes uniformed FedEx drivers, branded vehicles and real-time tracking. Uniformed drivers and branded vehicles may be a differentiator in the growing same day delivery space especially when considering many start-up companies utilize crowd-sourcing. Crowd-sourcing as a delivery vehicle is an interesting idea and one that has certainly benefitted Uber, but still faces security hurdles.

The Small Parcel Horizon

One size definitely does not fit all. Instead, it’s all about customization, speed and efficiency. Start-up companies are bringing new ideas to a mature small parcel market, but shippers will need to determine the value of these new inventive solutions and at what cost to offer them to customers. For the old guard, FedEx, UPS, USPS, it’s an entirely new mindset that has these companies seeking ways to prove their agility and adaptability in the new environment.

Innovation is vital in today’s environment of technological change. To stay ahead, one must innovate or face extinction. It’s amazing how today’s small parcel market differs from the one just five years ago, and it will undoubtedly differ from the one five years from now.

What’s next? Stay tuned.

{bottom_comments_ads}

Follow