As the VP of Transportation at DCL Logistics, Shawn Compton brings 30 years of experience in all aspects of domestic and international fulfillment, logistics, WMS/TMS and supply chain management. Shawn has been strategic in aligning DCL’s carrier portfolio and supporting systems with the diverse needs of our client base.
For many years, the ecommerce parcel shipping industry was simple. Today, not so much. The industry has been in a state of disruption over the last few years.
For one, the United States Postal Service has slowly released its longstanding position as the backbone of economical ecommerce shipping due to the elimination of their consolidator model with services like DHLeCommerce, UPS Sure Post and Mail Innovations.
Simultaneously, many new carriers have entered the market and are more than proving themselves. Brands and logistics vendors who saw this coming have implemented new technology to diversify their carrier portfolio and meet the evolving market in stride.
Changes at The United States Postal Service
In mid-2024, changes at the United States Postal Service (USPS), as part of the Delivering For America plan, significantly altered their consolidator partnership programs. At the direction of Postmaster General Louis DeJoy, the pricing previously available for lightweight parcels (under one pound) was eliminated. In addition, the discounts available for injecting parcels very close to the end delivery point were also eliminated. PMG DeJoy’s intent was to force the parcels farther upstream in the USPS network, to realize more revenue.
Concurrent with that change was a hard push on their newest internal USPS parcel product, Ground Advantage.
The problem with both changes is it has resulted in much higher prices in the market. The consolidators had no choice but to raise prices, and some went out of business. Ground Advantage, originally a bit appealing, was touted by the USPS as a very fast-growing product. The inconvenient truth, though, was that it was not pulling in new volume, it was cannibalizing existing volume from their costlier Priority Mail offering. So, the same packages but for less revenue. In the last 14 months alone, Ground Advantage has incurred three price increases to the tune of a net increase of 18.8%.
Needless to say, the USPS has problems. That is not all they have. Amidst this turmoil, DeJoy was ousted and a new Postmaster General, David Steiner, was installed. New Postmaster General, same problems.
The biggest problem the USPS has is the fact that their current fiscal trajectory will render them insolvent in about 12 months. I was in a meeting with the new Postmaster General in late January where he said he can’t cut his way out of this. Meaning labor reductions, etc., will not solve it. Either a congressional bailout is needed to keep it from failing, or more price increases are needed. Both are very likely to happen.
The New Era of Parcel Shipping is Diversification
With these past changes at the USPS, and the projected turmoil unfolding in real time, the backbone of economical ecommerce shipping has been broken. As a result, the USPS is no longer the gravitational force at the center of the ever-expanding ecommerce universe.
The exponential growth of the entire ecommerce industry, coupled with the chilling price increases that largely point back to the USPS, has resulted in a strong need for newer models to help stabilize delivery costs. In 2020, the pandemic did not create the at-home delivery model, but it certainly accelerated it. Likewise, the disruption caused by the USPS did not create newer delivery models, but it did fuel their exponential growth.
This need is being met by an ever-growing group known as alternative carriers. Some, like OnTrac, are somewhat well-known. The newest groups, however, are a direct product of the technology enabled gig economy. Some are Delivery Service Providers (DSP’s) and are groups of drivers with a management layer that aligns with a carrier. Others are gig drivers that are directly aligned with a carrier. Whichever they are, they are expanding rapidly and most are here to stay.
Much like anyone that meets the hiring requirements can download a rideshare app and meet your needs for personal transportation, they can also download an app and deliver your restaurant food and groceries. And now, probably the safest, they can deliver your parcels. Sometimes it may be the very same person. Layered within the technology are geo-fencing safeguards, perfect delivery guidance, and other features that are designed to enhance the service. These new services also ushered in the customer expectation of photo proof of delivery and delivery on weekends. The feedback loop creates a system whereby high performers are recognized and rewarded. Poor performers are removed.
New Era Technology is Matching Variant Needs of Ecommerce Parcels
The industry has been disrupted and is evolving in a new direction, and it’s a direct result of the variety of shipping needs that match the variety of products, packaging, and consumer demands. It must be understood that there are limitations with each of these new carriers. In some it may be price, with others it may be parcel size. Some are considered regional carriers, and only service certain zip codes. Lithium-ion batteries, fragrances, and other product types may have special limitations that vary from provider to provider. The challenge that exists is how to put this together, at scale, and in a manner that is approachable to our customers.
There are new platforms (it would be too reductive to call it a TMS) that address these dynamic industry changes. They allow brands and logistics vendors to offer a multi-carrier model in a more simplified way. Distinct transit times are offered and will be dynamically assessed and assigned based on the geographic and regulatory characteristics of each shipment. Not all carriers or carrier service methods can be used to handle all shipments. The new era of parcel shipping solves that. Those, however, are basic functions.
There is a world where these new platforms go beyond these basic, primary functions for delivery experience. The new technology is AI-facilitated; a machine learning model uses historical performance from a common origin zip code (from a distribution center, for example) to reduce the available pool of carriers for each shipment to the ones that have exhibited the ability to deliver it within the desired transit time. Each shipment processed in the platform expands the model further, to account, in real time, for network volatility. This includes poor performing hubs and regions, as well as factors such as weather and civil unrest.
The Road Ahead: A Return to Simplicity
While the disruption in the industry has wreaked havoc with pricing and carrier models, forever changing the status quo that existed for many years, new technology has ushered in a new model adaptation. Technology is enabling new carriers to improve delivery experience. Powerful platforms that can consume mass amounts of data to guide complex decisions is not a Sci-Fi fantasy; it is reality. And it is at the foundation of these new shipping tech platforms.
Benjamin Frankin once said, “When you are finished changing, you’re finished”. As constant as change is to the many factors that impact delivery experience, so too is the certainty of change in the market. He also said, “Without continual growth and progress, such words as improvement, achievement, and success have no meaning”. Our ability to adapt to change, with this evolving platform, this remarkable technology, these new carriers, and this novel offering, is fundamentally designed to take complex shipping problems and reduce them once again into simple shipments. By its very nature, each new data point collected will serve to improve the model over time.
In addition to saying those things, Benjamin Franklin was also appointed as the first Postmaster General. Were he able to assess the solvency of the Post Office today, I fear he would be saddened. However, his independent and catalytic spirit would certainly be impressed by the evolving changes in the industry and the pioneering efforts to drive it forward by using complex change to create simplicity.
