home Technologies & Innovations Strenghtened automation The first and last miles

The future belongs to the “PUDOs”

The first and last miles cause high costs for logistics service providers. In addition, the number of failed delivery attempts to private customers is constantly rising as a result of demographic changes. Increasing automation of the drop-off and pick-up processes for parcels can counteract this trend and simultaneously increase customer satisfaction. Automated pick-up points and drop-off points (PUDOs) are cost efficient and always available: They are the future.

The definition of the first and last miles

As a rule, the shipment of a good begins with the so-called “first mile” and ends with the “last mile.” The following section covers the process for postal parcels. But, in principle, it can be applied to every type of good: Even for the “good” called a telephone conversation, the terms “first and last miles” are used in the same way.
The first mile refers to the good’s entry into the transport network. Some examples include: The parcel can be picked up at the sender’s office by a courier, can be dropped off at a postal retail outlet by the sender or can be handed to a courier by the sender at any particular location.
The same principle applies to the last mile. Here, the focus is on the period when the parcel leaves the transport network, that is, the last step in the delivery. Usually, the parcel is brought to the recipient’s home or office. It can also be stored until the recipient picks up the parcel or forwarded to another address.
Compared with the main leg Main leg of a shipment, the first and last miles involve only small distances that must be covered. But they cause disproportionately high costs.

 

The new challenges for the organization

In past years, many companies have developed new concepts for organizing the first and last miles. These efforts were driven by two developments that have taken place in society. Both are described in the following section:

  • The Internet is changing people’s habits. Consumers are shopping online and are receiving goods in the mail that are supplied not only by companies but also by other consumers, including eBay purchases. This change has resulted in both an increase of parcels and of returns - and this is occurring at above-average rates. As part of this shift, consumers have grown accustomed to being able to shop all day, any day on the Internet. They also want to have this convenience when it comes to sending and receiving parcels. This option is supposed to be available 24/7 as well.
  • People are working more and longer, and the number of single households is rising - particularly in urban areas. Consequently, the share of parcels that can be successfully delivered on the first try is decreasing for private households: The carrier frequently finds no one at home. And in offices, employees are not always allowed to receive private packages.

 

The rising number of parcels sent to private customers and the simultaneously increasing share of unsuccessful delivery attempts are forcing logistics service providers to act. Deliveries to private customers are now up to four times more expensive than deliveries to companies. This has a direct impact on the financial position of logistics service providers. For this reason, these providers are developing new concepts to cover the first and last miles.

Pick-up point and drop-off point - the PUDO concept

The widespread introduction of “pick-up points” and “drop-off points” can be seen as a reaction to the new challenges. They are called “PUDOs” for short.
First, a distinction must be drawn between staffed and automatic PUDOs. Staffed PUDOs are generally located in businesses or filling stations - preferably those with long hours. They are frequently operated in cooperation with logistics service providers. Recipients can pick up their parcels there and senders can drop off their packages as well. The PUDOs are equipped with barcode Barcode scanners and are connected to logistics service providers via electronic data interchange Electronic data interchange (EDI). As a result, the drop-off and pick-up of parcels can be automatically recorded.
Automatic, or unstaffed, PUDOs are electronically secured containers that come in various sizes. With them, parcels can be picked up or dropped off at any time and on any day. Because of their high level of innovation, the following section will address them in detail.

 

The functional principle of automatic PUDOs

The PUDO user normally registers online. In the process, he or she receives a user code and a PIN to prevent misuse. After making an order on the Internet, the user can have the parcel delivered directly to the PUDO. Instead of providing his or her own address, the user provides the address of the PUDO and the user code. The logistics service provider assigns a reference code to the parcel. This code is reported to the user and linked to the user in the system.
When the carrier brings the parcel to the correct PUDO, he or she scans the parcel’s barcode Barcode , which contains the reference code. A cubicle in the PUDO automatically opens and the carrier places the parcel inside. Once the cubicle closes, the PUDO records the successful delivery of the parcel and informs the logistics service provider’s central server via EDI Electronic data interchange . From there, the PUDO user receives an e-mail or text message informing him or her that the parcel is ready to be picked up. From this point on, the user can pick up the parcel whenever he or she chooses: The user only has to enter the user code and PIN.
People can also drop off parcels for shipping. No previous registration is needed for this service. Using a touch screen, the sender enters all required information. Afterward, the PUDO prints out an individual barcode Barcode . The sender applies the sticker to the parcel, scans it on a device attached to the PUDO and then places the parcel into a self-opening cubicle in the PUDO. Once the cubicle is closed, the central server is informed of the need for pick-up. Payment, including the use of a credit card, can be made at many PUDOs as well.

The strengths and weaknesses of the PUDO concept

The benefits of PUDOs from the sender’s point of view

PUDOs - particularly automatic PUDOs - provide significant benefits to the recipient and the sender as well as to the logistics service provider. The following section describes the benefits experienced by the sender:

  • Parcels can be dropped off for shipping at any time. There are no opening hours to observe or long lines at retail outlets to stand in.
  • Express parcels that must be sent on the same day can be dropped off at a later time than in retail outlets.
  • The number of parcels returned to the sender because the customer could not be located decreases.
  • Fewer parcels have to be left with the customer’s neighbors or at the customer’s door, resulting in fewer customer complaints. The length of time planned for the last mile Last mile also falls.
  • As a result of these benefits, the inventories of the shipping company and the share of tied-up capital drop over the long term.

 

The benefits of PUDOs from the recipient’s point of view

For PUDOs to succeed in the marketplace, the benefits from the recipient’s point of view are critical. They are:

  • Flexibility and convenience - recipients avoid useless time waiting in retail outlets and are not bound by opening hours. They are promptly informed by e-mail or text message about the arrival of the parcel.
  • Recipients can also send parcels at PUDOs, a service unavailable with delivery at the house door.

 

The benefits of PUDOs from the point of view of the logistics service provider

The introduction of PUDOs is also beneficial for logistics service providers:

  • The costs of the first mile are lower because PUDOs enable demand to be bundled. Automatic PUDOs also eliminate staffing costs.
  • The costs of the last mile Last mile fall as well. Trips to private customers are very expensive. From a statistical perspective, private customers live farther apart than commercial customers, whose postal addresses are concentrated in downtown areas or in industrial parks. As a result, fewer deliveries per time unit are possible for private customers than for commercial customers or even PUDOs.
  • In addition, logistics service providers can use the data provided by registered customers in connection with their purchases for targeted marketing purposes. Of course, this can be done only with the customers’ consent.

 

The limitations of the PUDO concept

Despite the convincing benefits, the PUDO concept has some weaknesses that should be mentioned:

  • The costs of product development are high. So are initial investments and maintenance costs, including cleaning, repairs, electricity and IT.
  • Much time also has to be invested in finding a suitable location - for instance, a place near a popular shopping center - and in setting up the PUDO. First, a leasing agreement has to be negotiated with the owner of the property.
  • PUDOs are the property of a particular logistics service provider and can usually be used only by this company’s customers. Every company can make a delivery to a person’s home.
  • Because the customer is actively brought into the process, the potential for error rises to a certain extent. For instance, the sender prints and scans the barcode Barcode when he or she drops off a parcel. But if the sender is dropping off a return, there is a chance that he or she will scan the “old” barcode by mistake and cause a wrong delivery.

The Packstation

The Packstation is the implementation of the automatic PUDO concept for Germany. Deutsche Post World Net set up the first generation of PUDOs five years ago. Since then, the concept has undergone constant modification, and the network of Packstations in Germany is being constantly expanded. Today, there are more than 900 Packstations in use across the country.
Two different models of the Packstation are being used: one with 160 cubicles in a rotation system and one with 76 cubicles in a classic mailbox-type system. Sophisticated technology is required in order to fulfill customers’ wishes:

  • To ensure customer security, the Packstation uses methods similar to those of automated teller machines: Customers receive a customer card, a customer number and a four-digit PIN. All are sent by registered mail in order to provide the highest level of security.
  • Depending on the customers’ preferences, two different communications channels are used to inform them about a parcel’s arrival: e-mail and/or text message. After receiving the information, customers have nine days to pick up the parcel.
  • The Packstation is already awaiting the parcels. In the very first parcel sorting center that a parcel clears on its way to a customer, information that includes address, weight and volume is read and transmitted to the Packstation. When the carrier scans the parcel’s barcode Barcode at the Packstation, all of the information appears on a screen. This feature helps prevent wrong deliveries and accelerates processes.
  • A 17-inch touchscreen with simple, user-friendly navigation helps the customer drop off the parcel. The postage can be paid without cash right at the Packstation - and, thanks to track and trace, the status of the parcel can be monitored in the Internet from the minute the parcel is dropped off.
  • If something does not work, help is immediately available. Customers can call a service center from every Packstation. The calls are not made over the traditional telephone network. Rather, they are done using “voice over IP” on the Internet.


The Packstation has been tremendously successful ever since its introduction: About 800,000 people have signed up for the service thus far, and more continue to do so. Work is already being conducted on the future expansion of the service. For instance, shipping to other European countries is to be added.
More and more employees of major corporations are likely to be able to profit from the practical advantages of the Packstation in the future. Today, companies such as SAP, Siemens and Microsoft have already set up their own Packstations at their headquarters. By using this high-tech equipment, the companies are taking a burden off their own internal mail services - after all, many employees have made the transition to having their parcels sent directly to their work sites.

The Paketbox

The DHL Paketbox is a supplement to the Packstation. Pre-franked parcels and packages for DHL and Deutsche Post can be dropped off here 24/7. Paketboxes are emptied daily and enable customers to do such things as conveniently make returns without going to a retail outlet.
The benefits for customers arise from the following features of the Paketbox:

  • The Paketbox is completely independent of opening hours, comparable to traditional mailboxes.
  •  Parcel shipment is done without waiting.


Since September 2006, more than 1,000 Paketboxes have been used in many German cities.

The Post24/7

The Post24/7 is a combination of the previously described services. It bundles the service offerings of Deutsche Post World Net under one roof. These services include the traditional mailbox, a stamp machine, a Packstation, a Paketbox and, possibly, an ATM and a bank statement printer.
The customers can buy stamps, mail letters, drop off parcels and, possibly, make bank transfers and print account statements - 24 hours a day, seven days a week without any waiting. In 2008, 45 such service islands will be tested in a pilot phase in the German cities of Berlin and Bonn.

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