There has been a flurry of automation activity in parcel over the past decade, and while some in the industry may have a bit of automation fatigue, we’ve only scratched the surface. Inside the four walls, most of the current parcel infrastructure is built around manual systems developed 30-40 years ago. Even though a number of companies have made an effort to automate key nodes in their networks, parcel is still dominated by a preponderance of outdated, manual systems.
There are lots of opportunities for parcel operations to automate in the next decade. But what are they? And where do we start?
The Changing Dynamics of Parcel Shipping
Parcel distribution networks were built around a Pareto distribution system – a statistical concept, also known as the 80/20 rule, that posits that around 20% of customers or delivery locations generate about 80% of overall shipping volume. This principle allows operations to optimize logistics by focusing on those high-volume areas first.
Around 2020, the distribution Pareto shifted dramatically as the COVID-era e-commerce boom changed the makeup of what the parcel industry handles, with more small parcels and more large parcels – typically non-conveyables and non-sortables. A great example is exercise equipment that’s much too large for normal conveyor and sortation systems in distribution centers. Simply put, this material mix was pushed through a funnel of warehouse infrastructure that wasn’t designed to handle it. As the number of non-conveyables increased from three percent to eight percent of packages, even newer facilities as little as 10 years old struggle to keep up with an influx of volume unable to be handled on existing automated systems. Take a facility designed to move 1,000 parcels per hour through the door. An influx of non-conveyable items could bring that throughput down to around 600, reducing capacity at a typical 60,000-parcel-per-hour facility to around 40,000-45,000 per hour.
New trends in packaging present their own difficulties. The shift from weight-based to volume-based charges has incentivized shippers to use efficient packaging, leading to a wider variety of packaging types, like polybags, jiffy bags, and flats, traveling on conveyor that may have only been designed with standard corrugate boxes in mind. This causes challenges for the parcel handling infrastructure and puts up another hurdle that makes it difficult to completely leave behind manual sortation.
The Upside and Downside of Trying New Approaches
At this point, the impact of Amazon on parcel goes without saying. Half of its business revolves around improving its own parcel network, but unlike other players, it is not tied to decades-old systems in hundreds of legacy facilities. Amazon builds its systems quickly, from the ground up, never ceasing to innovate. Of course, not even the most successful businesses completely avoid mistakes along the way. But a “fail fast, fail often” philosophy – experiment, adopt what works, and move on from what doesn’t – enables faster progress beyond established ways of doing business.
By contrast, companies with huge, established networks populated by legacy typically have near zero tolerance for experimentation. When a parcel carrier evaluates new automation technologies, they must weigh potential advantages against their network’s sensitivity and appetite for risk. If you’re operating an air hub where minutes matter, are you willing to risk introducing an unknown, unproven technology into your legacy operation? The challenge is finding a way to capitalize on new technologies without upsetting the applecart.
The Elusive "Holy Grails" of Parcel Automation
Two major areas could be considered the holy grails of parcel automation, with various providers and technologies in hot pursuit of a solution. But the criticality of these processes and the risk-averse nature of parcel operations are real headwinds, to say nothing of the actual technology development necessary to provide viable solutions. The first is the loading and unloading of inbound and outbound trucks, which, in its current state, involves a lot of manual touches. This process feeds downstream systems and is also the first decision point that determines whether a parcel enters the system as a non-conveyable, a small, or part of the regular mix – qualitative decisions that parcel handlers are asked to make now with greater frequency than in the past, and an added challenge for potential automation solutions. The second target is a solution to automate the sorting of packages to delivery vehicles in the proper sequence in which they’ll be unloaded on the delivery route. This process involves merging small packages, normal packages, and non-conveyables together at the load position.
These two tasks bookend the shipping process and a reliable automation solution remains elusive, due to the unpredictability and variety of the product mix and intense performance requirements. Given these challenges, operations looking to keep up with the changing parcel landscape concentrate most automation efforts elsewhere, mainly on processes up and downstream of the sorter, with a combination of more established technologies (robotics and so on). It’s just a matter of determining the best technology to make that happen and where in the process to apply it.
Where Automation Can Make the Most Impact
In parcel networks with many hubs, smaller facilities are typically last on the automation list. A boost at a small hub that moves volumes in the neighborhood of 4,000-10,000 parcels an hour is much less impactful than a boost at a larger hub that handles six times that volume, and that gulf in relative impact dictates a larger focus of automation efforts on medium and large hubs.
The next frontiers beyond medium and large hubs are first- and last-mile facilities. In fact, many of these facilities are dual purpose with both outbound and inbound flows. Unlike automation solutions targeting the “holy grail” applications listed previously, the technology for these applications is much more mature. That shows in two key ways: performance and cost. Rather than requiring one system for inbound and one for outbound, there are solutions to automate last-mile facilities that are now bidirectional, and there are examples of facilities implementing these systems for a cost equal to or less than the manual-intensive sorting systems from 20 to 30 years ago.
Putting All the Pieces Together
Operating a high-volume, modern, automated facility is akin to being a maestro for an orchestra. Facilities are designed to work at a certain rate, and the biggest challenge is finding a way to balance unload, sort, and load so that everything flows properly and reliably. The key to making automation work is finding experienced leaders who can manage technologies to play their parts in the symphony and understand how their individual roles affect everyone up and down the line. In the current landscape, automation is not the complete solution. Building that complete solution requires a blend of technology and process to support your end goals.
Brad Radcliffe is Vice President, Parcel, FORTNA.
This article originally appeared in the March/April, 2025 issue of PARCEL.
