Escher Group. The Tale of Two Networks

A Tale of Two Networks and a Path to Profitability



A Tale of Two Networks and a Path to Profitability

The past few years have entirely reshaped the state of the postal industry. Posts everywhere made quick and efficient adjustments, moving from a diversified balance of services. For example, many operators have shifted from traditional mail & parcel, financial services, government, etc, to e-commerce parcels businesses, with many Posts making considerable investments in their delivery networks to handle the increase in parcels.

The latest Future of Posts survey noted 72% of Posts had indicated an increase in e-commerce parcel volumes due to the pandemic. So, e-commerce is clearly a driving force, but just how much impact is e-commerce having on postal operators’ networks? 

Accelerating Delivery Network Expansion?

37% of Posts noted they are accelerating their delivery network expansion, and 14% indicated they are accelerating their retail network expansion. Interestingly, about a third of Posts are rethinking their network expansion strategies (retail and delivery networks), suggesting some hesitation or caution.   

Increased Parcel Volumes Are Behind Most Challenges

With parcel volumes increasing, it would seem expanding the delivery network would be on the minds of 100% of Posts, but according to the Future of Posts this simply is not the case. 

But let’s take a step back for a moment and look at some of the challenges Posts are facing. 72% of Posts cited capacity challenges, 63% noted challenges in cross-border shipments, alongside other challenges like staff shortages, returns, groceries, and prescription drug deliveries. Indeed, most challenges Posts are facing have to do with too many parcels in their networks, creating bottlenecks, slowdowns, customer experience challenges, and other headaches.

This brings us back to an important point. With increased parcel volumes being the root cause of many postal challenges today, why are more Posts not expanding their delivery networks? 

Because expanding delivery networks alone, may not be the only answer. And as many Posts will tell you, it’s difficult to expand your network profitably using a strategy that accounts for all the opportunities across their entire network. So while expanding delivery networks might seem the correct response, a far better response may be to take a beat and think about how to develop and grow your business in a balanced way.

With the help of this year’s Future of Posts survey, here are four strategies that could help your postal operations grow more profitably:

1. Optimize the Last-Mile

We have all seen the incredible value (for both the customer and delivery business) of fast, efficient last-mile delivery over the last few years. This became essential to meet customer needs during a critical time. While the desperation factor is gone from home-based parcel delivery services, the demand remains, and customer expectations are higher than ever

According to the Future of Posts 2022, last-mile delivery is the highest investment priority over the next one to three years.

For most postal organizations, last-mile delivery is around 70-80% of labor cost and overall cost structure. So if postal organizations want to kic-on with their e-commerce parcels business, they will need to address the last mile labor conundrum. 

Here are a few ways Posts can reduce costs while providing premier last-mile delivery services: 

Repurpose the Depot for Local Fulfillment:

E-commerce businesses are snapping up urban warehouses to help manage their package delivery needs. Many posts have locations close to their customers, so with a few modifications, they could change their infrastructure, bringing inventory nearer and aligning closer to e-commerce customers’ needs.

Centralized sorting:

For many Posts, sorting is incredibly labor-intensive and inefficient. By centralizing sorting in plants and leveraging state-of-the-art yet highly cost-effective logistics solutions, Posts could dramatically improve sequence sorting.

Track and trace solutions:

A powerful tool for cost savings and efficiency Posts can use is track, trace, and last-mile delivery, which keeps tabs on parcels at every point and so much more. By enabling routes to start from the most economic points rather than forcing routes to start at a depot, Posts can achieve incredible efficiencies in their last mile deliveries. This will also lower your Post’s carbon footprint.

Making delivery routes more dynamic and efficient helps reduce costs, improve delivery rates, and lower carbon emissions. It also helps improve the customer experience and strengthen a Post’s relationship with its customers.


2. Deliver Automation Savings

According to the Future of Posts, automation is key to reducing overall costs and will have the third most significant impact on postal businesses over the next five years. We should also expect that many automation initiatives will focus on ‘touchless’ and reducing the number of interactions between staff and customers. Here are a few automation projects to think about:

Optical character recognition (OCR):

OCR is a key automation tool every Post can leverage to realize incredible cost savings, especially concerning mail and parcel sorting. The accuracy has increased from 70-95% over the past few years, thanks to OCR. That means less human resource costs and happier customers. 

 Self-service technologies:

Considered one of the top retail network cost-reduction initiatives every year, Posts understand the many benefits of self-service technologies. Self-service technologies dovetail perfectly with e-commerce activities, and Gen Z and Gen Alpha are the future and are very comfortable using self-service technologies.


3. Use The Retail Network to Expand Delivery Capacity 

This year, 37% of respondents noted that they accelerated their delivery network expansion strategies to handle the increasing volumes of parcels. Although often overlooked, a clever way to handle these increases in parcel volumes is to use retail capabilities to ease the pressures on the delivery network. Post offices, PUDO locations, smart parcel lockers and self-service kiosks are all ways Posts can handle higher parcel volumes. 

Of course, investments are still required in the delivery network, which explains why 61% of Posts are investing in logistics network strategies to increase parcel capacity. But the retail network can certainly help and should not be ignored. Posts can get started with this strategy of reducing delivery bottlenecks right away by leveraging assets they already have.
The Future of Posts 2022

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For more insights on what the future holds for postal operators, but sure to download the Future of Posts 2022.


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