Q&A: How PostNord handled the e-commerce tsunami

Over the last six consecutive years, CEP businesses have felt the significant impacts of the e-commerce tsunami at both the B2B and B2C levels. The arrival of the Covid-19 pandemic has accelerated this transformation in e-commerce.

PostNord, a national postal organisation that services the Nordic region, has certainly witnessed the surge in e-commerce. Christian Østergaard, Senior Group Strategist IT-production/ IoT/AI at PostNord, talks to BEUMER Group about how PostNord has responded to this transformation.

BEUMER GROUP: Firstly, can you describe how PostNord experienced the impact of the pandemic?

ØSTERGAARD: The pandemic impacted the different countries of the Nordic region differently so there were some regional variations, but overall, we experienced an increase in volumes as end-consumers moved their shopping activities online. As a result, we’ve essentially been running in Christmas mode continuously since March. But we had the production capacity to deal with these high volumes.

We’d already been working a lot with AI to help forecast increased e-commerce volumes, but the pandemic broke all our models when lockdowns around the world came into effect. It was difficult to get a grip on the forecast models with changing end-consumer preferences and the breakdown of the international supply chains. We were forced to figure out how the models should work, which segments were moving and which were not. In addition, we had to meet end-consumer demands for Covid appropriate practices such as contactless delivery.

This article is an excerpt of the report The State of Courier, Express and Parcel 2020 and Beyond - Challenges and Perspectives. Download the full report here.

BEUMER GROUP: How has the e-commerce surge, accelerated by the pandemic, highlighted the importance of digital technologies for PostNord?

ØSTERGAARD: Digital transformation has become more accepted. Take, for example, the end-consumers’ demands for contactless delivery. Meeting this demand has meant streamlining this part of the process and providing digital modes of delivery. Technology is clearly of utmost importance now. Computers are now capable of utilising the data we've been collecting for years and this surge has actually given us even more data which gives us greater possibilities.

BEUMER GROUP: What are the possibilities or opportunities for digital transformation for PostNord?

ØSTERGAARD: The connectivity we now have across the supply chain, from end to end, presents a real opportunity. It enables integration with our big shipper customers so that we're even starting to enter into their production plans. For example, using their data, we can arrange for our shipper customers to pre-sort their parcels which cuts out a step in our sortation process. In this respect, we're becoming more and more like a manufacturing company and I think this principle will be an opportunity more and more in the future. Connectivity provides possibilities for complete digital change.

Another possibility comes from all the data we capture from mobile phones, tags, trailers and distribution vehicles. We can connect all the parts of our process, rather than each operating as separate silos. We think this will benefit not only our operations but the operations of our shippers and end-consumers also.

Portrait of Christian Oestergaard, Senior Group Strategist at PostNord

BEUMER GROUP: How will PostNord ramp-up its transformation timelines to successfully realise these opportunities?

ØSTERGAARD: We're going to utilise AI tools more and more in the future and seek to enhance the data. We’ll be looking for better information and data certainty. Our technologies are increasingly able to connect and evaluate the data, so the forecasts of in-coming volumes will be increasingly valid. We can ramp up processes by actually cleaning the data all the way through the process to ensure we have the best possible vision of what’s going to happen. This is what we are working on.

BEUMER GROUP: How does PostNord see itself being able to improve upon the end-customer experience through digital transformation?

ØSTERGAARD: Being able to integrate with our shippers’ production plans will make for timely collaboration so that we can achieve better delivery to the end-consumer. Digital connectivity also gives the end-consumer the possibility to alter their needs, such as preferred speed, time and place of delivery. And increasingly, the data actually allows us to anticipate our end-customers’ needs before they know it themselves. For example, we have already done a proof of concept that we can make predictions about which end-customers will be home or not.

BEUMER GROUP: What do you consider to be best practices for PostNord when it comes to meeting the future with digital technologies?

ØSTERGAARD: Best practice definitely involves the utilisation of AI, the ability to analyse data and forecast modelling. With AI we have been able to analyse shipper customers at a very detailed level and create forecasts down to a distribution centre level. Another best practice is the use of technology and data for planning and security purposes. We can monitor the transport of high-value items, for example, and provide security with dongles and geofencing.

GEOFENCING

A geofence is a virtual perimeter for a real-world geographic area. A geofence can be dynamically generated - such as a radius around a point location - or can be a predefined set of boundaries (such as a school zone or neighbourhood boundary). If a vehicle or person equipped with a device crosses a geofence, a warning is sent to the user or operator via SMS or email. The use of a geofence is called geofencing.

 

BEUMER GROUP: Which digital services and solutions will help drive success for PostNord?

ØSTERGAARD: Pushing decisions to the edge - a new computing paradigm where algorithms enable edge devices to communicate autonomously and deliver information seamlessly to decision-makers - will definitely drive success and it’s already happening. With geofencing, for example, we can notify an end-consumer when a vehicle is approaching its delivery destination, rather than rely on a driver. In the same vein, it is the sortation system itself, such as BEUMER Group's systems, that alerts operators that machine parts are soon due for maintenance.

Read more about e-commerce logistics.

Another solution that will drive success is working on wasted capacity. We tend to always work on theoretical and operational capacity but wasted capacity is becoming more and more important. We need to be using digital tools to better utilise capacity and sweat our assets.

EDGE RULE-BASED DECISION-MAKING

The edge could be a device, such as a dongle mounted on a distribution vehicle, which makes the vehicle take a rule-based decision by passing into a defined range from an end-consumer, let’s say 300 metres. As soon as the distribution vehicle enters within 300 metres of the end-customer, the dongle sends a signal that triggers a message (SMS or email) to the end-customer that the vehicle is close to making a delivery. This type of “edge rule-based decision- -making” will reduce delivery time; the end-consumer will be ready for the delivery and could even meet the delivery vehicle instead of waiting until the driver rings the door.

 

BEUMER GROUP: What are some quick wins for PostNord on how to grow operational capacity or effect potential process improvements?

ØSTERGAARD: The quick wins will be working with wasted capacity, as mentioned, but also enhancing the last mile orchestration because that’s where most of our costs lie. We need to be using data to predict how to sort the parcel volumes, how to transport them and how to distribute them. This means capturing the data as early as possible so that forecasts can be made and solutions for the last mile will be in sync with the incoming volumes.

BEUMER GROUP: Let’s talk about strategies for the future. How will PostNord work to protect itself and lock in profitability during uncertain economic times ahead?

ØSTERGAARD: Even though this is a low-margin industry, there’s incredible growth. But that growth also provides plenty of opportunities for new players to disrupt the sector. We need to protect ourselves through constantly developing the way we work. This means embracing disruption - you can’t fight it, it’s going to happen. And this applies to our suppliers also. If they are fighting disruption, they’re going to be providing us with a worse product. It also means maintaining good communications with the end-customers and the shippers because we need to be on top of both of them. And of course, we have to remember convenience is king and this has increased even more during the pandemic.

BEUMER GROUP: Does PostNord use a particular framework or methodology to stay ahead?

ØSTERGAARD: Although we’re a national provider, we’re big and we’re leveraging this, as well as the direct contact we have with the end-consumer. We’re also working on standardising operations across the Nordics. Whenever we look at developing technology now, we only consider developments that can be utilised by all across the Nordics. Close to 40% of our parcels are cross-border, so obviously, this is very important. It’s also a matter of clearly defining our core businesses and being much clearer on our priorities.

BEUMER GROUP: What is it that PostNord would like to see from its suppliers going forward?

ØSTERGAARD: The most important thing is data sharing - our suppliers should be able to incorporate new technology that involves utilising and sharing data. Data will power the future so data sharing will be beneficial for both of us. We each have an interest in knowing in advance, for example, that a sorter part needs to be maintained. Also, we like suppliers to push our boundaries. To be asking us ‘have you thought about this?’, ‘what about that?’ - asking us questions we hadn’t thought about.

Download the report The State of Courier, Express and Parcel 2020 and Beyond - Challenges and Perspectives.

Preview of the report The State of Courier, Express and Parcel - 2020 and Beyond

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