Is it time for dynamic parcel networks in the CEP industry?

By Søren Thing Pedersen

We talked to PostNord’s Christian Østergaard, Lead Visionary & Senior Group Strategist, about the possibility of CEP processes moving to intelligent network operations through central planning software solutions.

The emergence of dynamic parcel networks

The CEP industry is potentially on the brink of a huge transformation where an intelligent network operation could become the industry standard, revolutionising the way the industry operates.

A dynamic parcel network integrates the latest advances in automation, software and artificial intelligence to connect, automate and optimise the delivery process across the entire network, from the point of shipment to the consumer’s doorstep. It will enable a CEP business to scale up and down easily, responding in real time to dynamic circumstances.

Østergaard believes this orchestrated connectivity in the CEP industry is very ambitious. But it is becoming a possibility more now than ever because developments in software intelligence are moving faster than previously predicted – just look at the launching of OpenAI – and the technology is becoming more and more affordable.

Intelligent network operations in other industries

We are seeing other industries make the move towards intelligent network operations.

The telecoms sector has already put in place central planning software solutions, scaling up and down depending on traffic, moving operations to other places accordingly and offering pricing models based on predictions of customer needs. Retailers in electricity are similarly using intelligent network operations. In baggage handling, intelligent network operations in airports are enabling baggage travelling across multiple terminals and multiple airports to be transferred efficiently and arrive at the destination when the passenger does.

Most CEP operators, too, says Østergaard, have moved on from any idea that the value chain is unconnected and are now discussing and asking about the possibilities of network-wide connected systems.

The need for a dynamic parcel network

Østergaard not only sees the possibility of a connected network through digital intelligence, he also sees the need for it.

Current CEP operations exhibit many incidences of sub-optimisation and uncoordinated processes. Yet, he notes, every year, CEP companies experience peak times in which processes need to be coordinated in order for the company to succeed. He states:

“Information from pick up, transportation, customers and sortation is used to formulate a distribution plan that can address the peak. Why should this skill be limited to peak times? In an ideal world, this way of operating will form a natural part of our processes all the time.” 

Increasing connectivity and cost-effectiveness of the tools empowering it, makes this possible, he says. Sensors, smart labels that save millions of scanning activities and using tags in roller cages are already making in-roads into connecting processes.

The stumbling blocks to dynamic parcel networks

Despite the potential, the concept of a dynamic parcel network is highly ambitious and the CEP sector has a way to go before it can become a reality, says Østergaard.

He differentiates between the telecoms and electricity industries cited above and the CEP industry in that the former are completely digital transmissions, while the latter is very physical. Østergaard says:

“We need to figure out how to get physical systems to follow the digital. After all, it’s not possible for a SaaS solution to operate the whole delivery process.” 

CEP businesses need to look at present processes

In addition, says Østergaard, CEP companies have to look inside their current processes first. Piece by piece, they need to start utilising their data, data analytics and digital tools to work in more dynamic ways before each part can be orchestrated as one connected entity.

Are the processes standardised enough to enable such network-wide agility? Østergaard cites sort plans as an example, noting many sort plans of CEP businesses today are quite static and could be much more dynamic. He says:

“There are many parts to bring together before scaling up and down across a network will be possible. The CEP industry may lag a little behind digital industries, as a result, but it will happen.”

Digital twins play a key role in building dynamic parcel networks

The first digital tool to implement on the road to building a dynamic parcel network is a digital twin. This doesn’t mean a simulation model, warns Østergaard, it is much more advanced than that. A digital twin is a virtual 3D replica of physical systems that can look into the future using predictive digital tools.

PostNord itself has built digital twins of both its sortation systems and line haul transportation to create computer visions of fill rates, parcel types, volumetric detections, security analyses and productivity tracking. As Østergaard says:

“The digital twin can be a virtual copy of the future, where you actually start visualising things you couldn’t do in real life.”

By collecting historical data, the digital twin connects the data in one system to which it applies intelligence to predict important criteria such as parcel volumes and arrival profiles.

To get to this level will require, however, deep collaboration and sharing of data between all parties in the network. Says Østergaard:

“There is a symbiosis that needs to work. When it comes to an intelligent network operation, you need to have a collaboration across all players.” 

In this respect, system integrators will play a vital role. The very same data that is used to conduct predictive maintenance in the sortation part of the process, for example, will be able to be used in the parcel execution part of the process – the last mile.

Applying software intelligence in the last mile

Which brings us nicely to the costly last mile.

According to Østergaard, most of the current optimisations concern the sortation or middle part of the parcel delivery process because that’s where most of the data is being gathered. But it is actually the last mile that sets the pace for the rest of the process, Østergaard says, because being able to meet the end customer’s convenience needs is paramount to the CEP company’s success.

CEP businesses therefore need to make last mile orchestration far more intelligent, Østergaard continues. With accurate master data in the last mile and applied intelligence in place, the right questions can then be asked of the terminal in ways that will help the last mile. It means a reversal of the order of things, to some extent.

Østergaard explains:

“This orchestration will be completely different. It will involve a lot of questions around customer convenience, costs, return solutions and so on … it’s a matter of working out how you can use your network for a backflow, starting with the end-customer, and then figuring out how to sort for that solution.” 

Sortation plans will be aligned to customer and shipper needs, rather than based on predictions of inbound volumes. And given the emphasis on environmental concerns, it is highly likely these intelligent systems will take the most sustainable options available.

But in order for this to work, Østergaard says, the work of system integrators will be vital.

Use of dynamic parcel networks will still require domain knowledge

According to Østergaard, the use of dynamic parcel networks will still require domain knowledge, to ensure the right questions are asked of central planning software. He says:

“Answers will not be the most important thing in the future; it’s actually the questions. We will need to ask questions in a way that can fill the gaps about the things we don’t know. It’s only by asking the right questions that we will get the answers to what we don’t already know.”

The right kind of questions will not only be necessary to find solutions that are presently unavailable but needed to fit the future, but to ensure CEP operators are the better choice for their end customers and shippers. Otherwise, says Østergaard, there is the danger of conformity in solutions and an inability for CEP operators to distinguish themselves. In effect, solutions will be found through a system ‘fighting’ a system.

Critical thinking will play a crucial role here if CEP businesses want to avoid conformity, predictability and lacking a unique selling point.

Takeaway

There is much to be optimistic about in the new frontier of intelligent network operations for CEP businesses. Developments will be fast, affordable and will be transformative despite some inherent obstacles.

System integrators will be integral to making possible central planning software across an entire network. By using existing software functionality, data analytics tools and digital twins, the CEP supplier can help CEP companies get ready and leverage capacities already available not just for their sites, but across entire networks.