01 Sep 2018
Ask the Expert: Delivering the Goods
What’s in store for the future of parcel delivery?Re: Francis Tapon (MBA 1997); John Ickis (MBA 1971); Rodrigo Abdalla (PLDA 15); Boris Tsimerinov (PLDA 16)by Jen McFarland FlintTopics:
Image by Edmon de Haro
The US Postal Service prides itself on delivering through rain, sleet, and snow—but what about serious debt? After 11 straight years of losses and declining first-class mail volumes, the USPS saw one glimmer of hope in 2017: an 11.8 percent increase in parcel delivery, thanks to last-mile business from FedEx, UPS, and Amazon. Unfortunately, the online retailer is piloting its own delivery service that would put it in direct competition with the Postal Service. And Amazon isn’t alone in the search for last-mile innovation: As e-commerce companies set sky-high expectations with promises of same-day delivery, the logistics industry is looking to completely new models, like crowdsourcing, autonomous technology, and on-demand delivery.
Robert Reisner (MBA 1971), who led the Postal Service’s technology and strategic planning initiatives from 1993 to 2001, sees this as an exciting time for opportunity in the logistics industry. “It’s going to raise a lot of questions, none of which are without consequence for the Postal Service,” he says. Through his consulting practice and now as director and strategic advisor in PWC’s public sector practice, Reisner has advised clients on e-commerce, supply chain, delivery, and global postal transformation. Here, he fields your questions about what the emerging race to your front door means for the future of last-mile delivery.
Will 3D printing do to the Postal Service in the 2020s what email did in the 1990s?
—Francis Tapon (MBA 1997)
REISNER: More than email itself, what really had an impact was the loss of first-class mail to electronic bill paying, starting in 2008. But the point is a good one, and 3D printing is likely to cause substantial change to the character of logistics and the operations of major supply chains, eliminating much of the distance products are shipped today. There will be great opportunities, especially in niches like cross-border shipping, for those who can use 3D printing to avoid regulatory constraints. What is less clear is the impact on the USPS. In fact, 3D printing may offer new opportunities for last-mile delivery if the USPS can be proactive in building supply chains around printing centers. Of course, this opportunity may be seized by others if it delays.
How quickly will last-minute delivery become a global business, particularly in regions like Latin America?
—John Ickis (MBA 1971, DBA 1978)
REISNER: One of the hottest areas of investment growth is in cross-border shipping, but there are two core problems: In an age of terrorism, customs are commercial constraints and also valuable public safety services. The other is pricing in the international marketplace.
We are likely to find in coming years that the problems borders create are easily solved by forward positioning goods and services. Free-trade zones and special warehouses that preposition products for anticipatory delivery, helped by data analytics, are helping the USPS and others to think in terms of multiservice supply chains. That trend is likely to grow and will facilitate delivery in oneand two-day services, at least in high concentration areas like Latin America.
How can the USPS reinvent itself to deliver a superior customer service? What other businesses can the USPS look at to stay relevant?
—Rodrigo Abdalla (PLDA 15, 2014)
REISNER: If, in spite of regulatory and political pressures, the USPS is permitted to build a long-term, trusted relationship with its carriers and customers, it can continue to change to meet that higher bar. Part of the problem is in the regulatory system that limits innovation and efficiency. Stay tuned to the political debate to see whether the USPS will be allowed to improve.
What complementary businesses need to be built? Let the market drive the answer to that question, whether it’s new warehouses or logistics management or other facilities. Unlike private companies, the USPS has to have even its best ideas reviewed by regulators and contested by competitors. But inevitably making tough choices about technology to create new services has to be market-driven, in spite of the challenges.
How do you see the evolution of the role of the public sector in mass communications, shipping, and delivery, in light of all the technological advances in the next 5 to 10 years?
—Boris Tsimerinov (PLDA 16, 2017)
REISNER: The public character of the Postal Service is a question that goes right to the heart of the institution, which is probably the largest public-private partnership in the world. The core mission is universal service: going everywhere six days a week, and a seventh day for package delivery. Some people believe that only a public agency can be trusted to provide this kind of universal service, and that a service mission rather than a profit motive is needed.
One argument for ending monopolies and opening the market for private services is that this might lead to more rapid technology introduction and innovation. You don’t have to look very far to find examples of alternative business models. Whether public or private, in the end if the model is to work it has to provide competitively superior service to the customer, and that needs to be the ultimate decision point.
Class of MBA 1971, Section I