5 ways to protect revenue in parcel distribution

Most hubs charge their customers based on a mixture of physical characteristics such as parcel dimensions, volume, weight and any indicia or labels. As such, parcel attributes and labels are directly proportional to revenue that a distribution centre earns. Let’s look at where distribution hubs are in danger of losing revenue.

Where distribution centres lose revenue

There are many ways insufficient parcel data becomes a money-losing problem for distribution centres, and some examples are: 

• The barcode is readable, but the structure of the data contained in the barcode is not compliant.
• The barcode is readable, but doesn’t contain data for further processing.
• The parcel’s profile data (its type, size, weight, sticker, danger, odd shape) is unable to be registered.
• The parcel label doesn’t provide adequate information as to whether it is express or economy freight. 
• The parcel “disappears” in the system, arriving at the next terminal as an unexpected “ghost item”.
• The parcel is odd-shaped or irregular and not able to be handled by a conventional sortation system.

Insufficient parcel data and poor packaging is costly to the hub: time and resources is spent on resolving these issues; accounts cannot be settled if handling processes are not recorded; and services are then provided for free. Even if a hub adopts a “no data, no delivery” approach, that too is a loss of potential revenue.

But there are ways in which distribution centres can protect their bottom lines. Here are five of them.

1. Data enrich parcel flows 

One of the best ways distribution centres can prevent revenue loss is by making sure they have basic parcel information or data enriching - enhancing and improving data - their parcel flows. By applying these intelligent offline coding technologies, operators can get the necessary data into their systems: 

• Video Coding System (VCS): Video coding technology captures images of parcels from different angles which are presented to an operator on a computer screen, allowing the operator to analyse the parcel remotely and supplement the data. 
• Optical Character Recognition (OCR): OCR technology similarly captures images of parcels, but the system analyses the details of the parcel label through letter and word recognition, rather than the operator.
• Off-line coding: Through its intelligent software, an automated sortation system can sort parcels using light-coded destinations, so that for no-read parcels, only postal codes need to be entered before they can be sorted to the next stop terminal. This type of off-line coding can be applied to parcels en route to their next destinations, to include further information such as exact destinations (street name, house number), which can be uploaded to the sortation controls system before they reach the next automated sortation terminal.

2. Use parcel intelligence 

The use of parcel intelligence and machine learning technology to inspect and categorise parcels is another effective way that CEP operators can safeguard their revenue earning. Parcel intelligence uses image analytics software and machine learning technology to identify parcel characteristics and to categorise and register by exception handling features and/or sort logic features. Areas for improvement using parcel intelligence could be:

• Non-conveyables
• Multiple items on the carrier or conveyor position
• Barcoded items with no-read results
• Image based tracking of items
• Damaged or fragile parcels
• Item types (such as cardboard boxes, polybags, parcel bags and flats)
• Label recognition

Parcel intelligence lets the system decide the category of a parcel, instead of a human. It is a smart and effective way to register unmeasurable parcels, without slowing down or reducing inbound capacities. Parcel intelligence works with any camera technology and can be installed anywhere and on any type of sortation equipment.

3. Optimise flow based on parcel mix profile

Distribution hubs can also prevent revenue loss by defining their parcel mix, which is calculated by knowing the minimum, maximum and average sizes of the parcels they process. While the parcel mix is becoming increasingly difficult to project, it is a critical factor in ensuring business viability.

Even in situations where the profile data is not available from the CEP operators' customers, there is still a possibility to obtain data if the parcel sortation system provides legal for trade data. Legal for trade registration actually offers operators a solution to defining their parcel mix. They can compare the system-generated size and weight for each parcel with the actual data coming in from electronic scales and volume scanners.

And if it’s not part of the business plan to implement the ‘legal for trade’ software option, hubs can always rely on their customer agreements to get an indication of the parcel mix.

4. Use data analytics in sortation

Data analytics gives distribution hubs insights into where errors are occurring in their systems, providing them with a basis for adjusting operations to prevent revenue leakage.

The distribution centre that is processing many small, varied and often low-cost B2C items is a good example. The packaging, shape or quality of these types of items are prone to cause sortation errors, such as:

• Jammed chutes
• Sorter stops
• Stray items on the sorter and 
• Stops on induction

But by analysing data from the sortation system, operators can map out the complete processing journey and detect and analyse the problems. Once hubs gain these insights, they are then in a position to work out how to resolve the problems, such as determining a less disruptive packaging solution together with their clients. 

Learn more in our introduction to digitalisation of distribution centres.

5. Pay attention to packaging 

Speaking of packaging, an important focus area for maintaining sound business cases for distribution centres is the packaging of parcels. 

It may be good business sense for distribution hubs to start demanding their customers use conveyable packaging for odd-shaped or odd-sized items. Alternatively, they could charge customers higher prices for 'non-machinable' services. Of course, both options would incur added costs for the sender, which is a competitive risk. 

Conclusion

Revenue can leak unnecessarily from distribution centres through insufficient parcel data and poor packaging. But there are many ways to optimise these aspects of the distribution centre's operations which are neither difficult nor time consuming. Data enriching technologies, legal for trade dimensioning software, parcel intelligence and data analytics are all manageable ways to overcome these issues and actually prepare the way for earning greater returns. Not least, distribution centres can also check their customer agreements and resolve packaging issues directly with their clients.