Alleviating the pressure of cross-border shipping

Alleviating the pressure of cross-border shipping

This article is an extract from the Summer Edition of MER Magazine published in May 2020. You can read the full article as well as other articles from MER for free by becoming a member of Post & Parcel today.

Escher’s Chief Technology Officer, Wayne Haubner says postal operators still have time to become industry leaders in global e-commerce.

“The last two decades carry a powerful business lesson for posts: Harness your industry’s disruptive forces before they turn against you.

Luckily, postal operators have an advantage. Not only can they see the changes in their industry – parcels over letter mail, international shipping – they still have time to become the market leaders. Pivoting to a business model that prioritises the cross-border delivery of parcels is hardly a gamble. By 2022, e-retail revenues will hit about U.S. $6.54 trillion. In that same year, cross-border shipments will account for 22 % of all e-commerce shipments.

In addition, companies like Amazon and Alibaba have made online shopping a trusted, everyday activity ensuring customers will buy everything from cat food to cell phones online well into the future.

This is a great way for posts to change the narrative, because the current postal story is one of looming irrelevance. Letter mail volumes started declining in 2007 and have fallen every year since. Indeed, in every year since then mail volume growth has been lower than GDP growth.

In other words, news of letter mail’s death is pretty spot on.

But parcels – and cross-border parcels in particular – present a good news story. As more and more packages circulate the globe in higher volumes, both consumers and businesses need trusted intermediaries to facilitate these transfers. The average consumer, and to some extent businesses, don’t understand the intricacies of global delivery like customs regulations or tax and duty calculation. Plus, they need trusted delivery brands to work with today, not in a few years when a start-up has had the opportunity to prove itself.

This is where posts come in. At face value, posts have a lot to offer consumers and businesses, specifically:

  • A trusted national or regional brand that is a reliable deliverer of consumers’ and businesses’ letters and packages.
  • A pre-existing infrastructure, processes, and network for delivering to nearly every address almost every day of the week.

But as mentioned, this is at face value. Beneath the surface, posts have many challenges to overcome if they want to become the trusted facilitator of global e-commerce in the twenty-first century.

In other words, while the market views posts as the obvious choice for cross-border parcel delivery, that position can quickly be seized if posts don’t rise to the occasion.

And what specifically stands in the way of posts meeting these expectations?

Overwhelming volume of packages flowing through a system designed to manage letter mail, not bulky packages

Postal operators designed their sorting systems for flat letter mail, not bulky parcels. Plus, the traditional approach to last mile delivery is a driver parking the delivery truck in the neighborhood and going door-to-door on foot. Bulky packages can’t fit into a mail bag the way a neighborhood’s worth of letters can. As a result, posts are rethinking their entire delivery operation.

Outdated IT systems not designed to manage and share detailed shipping information with customs officials and other postal operators

Many posts are “stuck with expensive and complex legacy IT systems”. They can’t accommodate the digital tools that would make information sharing easier and more efficient. Despite their cost, these systems are not designed for the future. This is unacceptable since the movement of parcels across borders as well as evolving regulations will make it essential for postal operators to efficiently share parcel information.

Lack of a plan for managing changing customs regulations around advance ship notices and emerging international information sharing regimes

As more parcels cross borders, national governments are paying closer attention. The World Customs Organisation’s (WCO) recommendation that postal and customs authorities work together to share electronic parcel information in advance of their arrival is slowly being introduced into national laws.

By 2021, all postal authorities will have to provide U.S. customs officials with advance electronic data on international shipments to comply with the U.S. Synthetics Trafficking and Prevention (STOP) Act. Meanwhile, the European Union is working on creating a “fully electronic information exchange regime”.

And of course, there is the existing need to comply with restricted items and denied parties lists. International shippers need to know what they can and can’t ship to specific destinations and also avoid shipping to individuals or businesses that their regional government forbids. Failing to comply can lead to fines or even jail time.

As a result, postal operators will need to build the infrastructure required to facilitate the cross-border transfer of goods while complying with multiple countries’ or regions’ regulations.

Enhanced customer expectations about landing cost transparency

Consumers are spoiled for options, so ensuring an excellent customer experience is more important than ever. Landing cost shock, a very real reality of cross-border retail, undermines the customer experience. It also introduces a huge cost center for both e-retailers and the postal industry. If customers don’t want to accept a package, it is sent back to the shipper. The trouble is that re-deliveries cost posts £1 billion each year.

In addition, international taxes and duties are becoming more stringent than ever. As cross-border shipments become more prevalent, national governments are taking a closer look and one aspect of international shipping that’s come under greater scrutiny is de minimis laws.

In the past, countries used de minimis laws to give shippers a pass on duties for shipment under a specific threshold. But consumers’ growing comfort with international commerce has drawn the ire of domestic businesses who have to compete with companies who are exempt from the taxes they pay. For example, in 2018 the Australian government introduced a 10 % Goods and Services Tax (GST) on products imported into the country. Previously, imports under US$1000 were exempt.

Consequently, postal operators need to come up with digital products to help consumers and businesses easily access real-time, accurate estimates of taxes and duties.

How can posts overcome these obstacles and claim their share of the global e-commerce market?

It is entirely possible for posts to bridge the gap between where they are and where they need to be to facilitate cross-border e-commerce. In fact, by implementing a foundational solution, they can start building on it to develop the postal system of the future. That foundational solution is the right technology.

As mentioned earlier, postal operators have a legacy IT problem. They’re trying to service tomorrow’s market with yesterday’s tools. What’s needed is a stable, scalable, and secure transaction and customer engagement platform for posts to leverage.

Some posts are turning to the cloud to solve this problem. This way they can rapidly scale without compromising elements like data security. This can be a smart option, since cloud computing doesn’t lock postal operators into one solution with expensive upfront costs.

But what if a cloud option isn’t feasible for a postal operator? Are they then excluded from digital transformation and innovation efforts?

Hardly. Instead, these posts can employ a purpose-built, on-premise commercial off-the-shelf solution with open architecture capabilities. This solution can also be cloud-based or even operate in a hybrid environment. By choosing a commercial off-the-shelf solution, posts can reduce their set-up costs while also enjoying the benefits of a highly configurable solution. In addition, an open architecture solution empowers posts to integrate post-specific applications.

For instance, Escher’s Riposte platform offers a suite of applications for posts, including a taxes and duties calculator, product classification tools, product restriction screening tool, and denied parties list tool.

The taxes and duties calculator retrieves real-time data from treaty agreements and duty and tax thresholds and uses it to give customers accurate estimates of their landed costs.

The compliance tool, which consists of the product restriction screening tool and denied parties list tool, helps users stay current on customs regulations. For instance, a sender may assume that a product imported into their country can also be imported into their recipient’s country. A supporting feature, like the Riposte Product Restriction Screening tool allows customers and businesses to check a product’s status by entering the SKU and the recipient’s address.

Furthermore, the Denied Parties list application allows senders to enter a name and address and check it against their country’s Denied Parties list, avoiding fines and possible jail time.

Finally, Riposte’s Product Classification tool simplifies the process of creating shipping documentation. The application helps posts provide complete and accurate shipping manifests and ITMATT data, so that packages can successfully pass through customs.

These applications, in conjunction with service delivery innovations like PUDO lockers and agreements with third party retailers like drug stores and convenience stores, can help posts remain trusted and relevant in the brave new world of cross-border deliveries.”

Escher Portraits Dec 2018
Karl Hussey Photography 2018.

About the author

Wayne is a pioneering technology executive and change agent who has a track record for driving enduring results through leadership, agility and continuous innovation. Wayne has a proven track record of building world-class customer-centric engineering organisations by fostering a culture of data-driven continuous improvement and collaboration.

This article is an extract from the Summer Edition of MER Magazine published in May 2020. You can read the full article as well as other articles from MER for free by becoming a member of Post & Parcel today.

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