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Meeting e-commerce growth opportunities with automated parcel sortation

Learn how organisations are using automation to sort and manage outgoing parcels due to growth in e-commerce.

“We have seen a yearly increase [in annual consumer spending on e-commerce sites] of at least 16 percent in Europe.” Stefan Berndt,
Senior Product & Business Development Manager,
Sortation Solutions, Europe & APMEA, Pitney Bowes

Throughout Europe and many other regions, parcel delivery has seen enormous growth, primarily as a result of the boom in e-commerce. Certainly, this has been a positive development for customers who have much greater access to the products they want to buy. But for many online merchants and delivery services, the increase in parcel volume presents significant challenges.

How do you get all these parcels sorted to the correct destinations, both quickly and efficiently? If your organisation is experiencing increased demand for delivered products, it may be time to consider automation to sort and manage your outgoing parcels. The trends suggest that demand for quickly delivered goods will continue to rise, and in such a competitive market, it’s critical to future success that you ensure your business is offering top-notch, value-added delivery processing services.

e-commerce Is a Huge Growth Area

How fast is global e-commerce business growing? “We have seen a yearly increase [in annual consumer spending on e-commerce sites] of at least 16 percent in Europe,” says Stefan Berndt, Pitney Bowes, Senior Product & Business Development Manager, Sortation Solutions, Europe & APMEA. That may even be a conservative estimate. For example, according to a May 2013 report published by e-commerce Europe, a trade organisation for online retailers, European annual revenue from online goods and services grew by 19 percent to reach €311.6 billion in 2012.

“But if you look outside Europe,” Berndt adds, “we have [online sales growth] numbers that are even higher in emerging markets.” He points to regions such as China and India, where internet access has been slower to develop initially, but has been growing rapidly of late. On a global scale, e-commerce sales are estimated to rise to more than $1.5 trillion (U.S) by the end of 2015.

Clearly, businesses have a prime opportunity to sell to this eager market of online customers. Given that all of these purchases must be delivered physically, it’s imperative for retailers and carriers to look at their entire parcel delivery system to find ways to increase efficiency, reduce costs, and meet clients’ service agreements and expectations.

Automated Sortation

Delivering a larger number of products naturally requires more mailroom resources. “As the volumes increase, labour costs continue to increase,” says Eric Kempton, Pitney Bowes Manager, Sortation Solutions & Product Marketing. “It puts you in a less competitive position in a market where people are looking for a combination of service and price. So, the more you can automate, the more you can achieve efficiencies, reduce costs, and capture more market share.”

Berndt has had experience helping enterprise companies, private carriers, and national postal systems implement automated parcel sortation systems to manage growing volumes. For instance, he recently worked with a postal service in China that needed to process an enormous number of deliveries. “Over there, they currently need to handle up to 200,000 items daily in one Sorting Centre, with the tendency to grow up to 500,000 items per day, and therefore they cannot go down to manual. They need to invest in automation.”

Automated sortation uses technology to do much of the processing that would be time-consuming and repetitive to do by hand. For example, automated systems can weigh, measure, and certify parcels as they travel along conveyors, and the machines can print and apply labels to boxes and route them to the appropriate loading areas. Comprehensive parcel tracking is fully integrated with advanced software. Berndt explains that Pitney Bowes’s automated sorters use a common infrastructure that can be customised to the appropriate size of the parcels being sent, the delivery time specified by service agreements, the features required for specific types of parcels, and especially the volume of items the company processes.

“Our systems are very modular, very flexible, and upgrades take less time and cost less money, based on the way we build our systems, and they are built to suit,” Kempton adds. “It’s not a model that we force-fit into an operation; it’s based on your requirements and your potential for change or growth down the road.” These systems can be designed to handle a throughput range from fewer than 1,000 items per hour to 14,000 items per hour.

“It really depends on the application requirements,” says Berndt. “It’s our vision to sit down with the customer and the client and identify the needs, and then we step back and design something for the customer with our engineering team along with our vendors.”

Future Innovations

Fast delivery is a priority for competitive merchants and carriers. Berndt notes that some websites already offer customers the opportunity to receive their items within hours. “That’s just crazy, but it’s also something that I can foresee as a value-added service in the future,” he says.

“People want things now; they want that experience of buying something and having it without driving to a shop,” Kempton says. “Certain retail carriers and shippers are partnering with some of these e-commerce e-tailers and distribution hubs, so if an order comes in at a certain point in the day, you can receive your product that day. They’re really looking to emphasise this as a differentiator in the market.”

As e-commerce continues to grow, additional delivery options will increase. Customers will be able to receive more orders the same day, or pick up items at electronically operated locker boxes in front of their homes or at a central location. These “intelligent lockers” are already popular in regions including Germany, Norway, Poland, and parts of Asia, with emerging growth in the United Kingdom. Customers will be able to do precise tracking and tracing, or easily re-route parcels during shipment, because automated sortation allows these computerised capabilities. In addition, further innovations could be incorporated into current automated sorting systems due to their modular design.

“For at least the next two years, more and more value-added services will be established,” Berndt says. However, he explains that customers may benefit in other ways, as increased e-commerce competition will bring down postage and delivery charges.

In other words, increased demand for parcel delivery translates into tremendous business opportunities for savvy online merchants. But with growing success, it becomes increasingly important to implement parcel sortation technologies to efficiently manage deliveries. Automated sortation gives businesses the capabilities to merge physical and digital solutions to compete in an online retail marketplace.

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