Bob Trebilcock: Welcome to The Rebound, where we'll explore the issues facing supply chain managers as our industry gets back up and running in a post-COVID world. This podcast is hosted by Abe Eshkenazi, CEO of the Association for Supply Chain Management, and Bob Trebilcock, Editorial Director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now to today's episode.
Hello and welcome to today's episode of The Rebound, how Pitney Bowes is innovating with autonomous vehicles. I'm Bob Trebilcock.
Abe Eshkenazi: I'm Abe Eshkenazi.
Bob: Joining us today is Stephanie Cannon. Stephanie is the Senior Vice President of Operations Excellence and Collaborative Innovation at Pitney Bowes. Stephanie, welcome.
Stephanie Cannon: Thanks. I'm looking forward to this today.
Bob: We're thrilled to have you. This is the second of three episodes Abe and I are recording on autonomous and electric vehicles in the supply chain. In the first, with Aaron Campbell from Daimler, we talked about the strategy the world's largest manufacturer of industrial trucks is taking for autonomy, including the bottlenecks, barriers, and benefits of widespread adoption. If you haven't listened to it yet, be sure to check it out. One of the things Aaron pointed out is that right now, southwestern states like Texas and New Mexico are the most hospitable environments for companies that want to introduce AVs into their supply chains. That's both from a regulatory and a climate standpoint.
One of the questions we had for Aaron was, "Well, what does it take to actually introduce autonomous vehicles into your fleet?" That's the question Stephanie is going to answer as Pitney Bowes is working with Gatik AI to roll out autonomous vehicle trucks for middle mile deliveries from its distribution centers to postal centers. Stephanie, to kick us off, just tell us a little bit about your role at Pitney Bowes and more importantly, where Pitney Bowes plays in the e-commerce supply chain.
Stephanie: Yes, sure. I oversee the Operations Excellence and Collaborative Innovation Group. That's a pretty long title. What I'm really set to do is create a cohesive partnership between our operations and our cross-functional teams to modernize and expand our transportation and logistics network, and that's physical transportation, really looking at all the different practices around that. Some of the practices that I own within my organization around physical innovation is like the automation, robotics, really looking at our collaborative innovation, emerging technologies, and then workforce optimization, operations excellence, and industrial engineering groups. All of this is really to foster long-term growth and profitability for Pitney Bowes.
It's probably good to do a little bit just on Pitney Bowes. It's pretty interesting. It's over a hundred-year-old global and shipping mailing company, and we've gone through a lot of transformations over the years, really thinking like, "How do we continue through another hundred years of Pitney Bowes?" Last year, 2023, came out at $3.3 billion in revenue for the entire company.
The global e-commerce sector is the sector that I work on, and we're highly geared around the logistics part of Pitney Bowes. We're purpose-built for B2C e-commerce, and we're using the post office to deliver our last mile. They're our largest partner throughout our entire company. I think what's a differentiator for us is most of our competitors were built for B2B, and they're trying to retrofit for B2C. We actually were built purposely for B2C. We have 500-plus clients, and we're highly focused around consultative and client-centric approach to make it easy for our customers.
Abe: Stephanie, I love your title, collaborative innovation. First, was there a predecessor for you? Give me a sense of trajectory of this role that you have, and how did your team approach innovation specifically on EVs, and how did they fit into your strategy?
Stephanie: Yes. Collaborative innovation did not exist. Global e-commerce really was a birth of a shipping API that had been created in the legacy Pitney Bowes company. Then really from there, after the purchase of Newgistics, we really created an automation technology, digital and physical technology strategy, transportation strategy on how are we going to build this e-commerce global logistics company that's really going to be high growth and then turn into profitability later.
The collaborative innovation group I created together-- my entire organization is new, over the past three years. I think that helps a little bit. The way we thought about collaborative innovation was we really wanted to go out and look at not just traditional automation, but how can we supplement and really look, sort of be early adopters to technology within that sector. Because traditional automation does lots of great things, but as you think about how you pivot and really scale for the future, innovation like robotics and EVs are really important to those strategies.
We partnered with a lot of startup companies that were solving either the real-world problems that we had at Pitney Bowes, or that we believed had some sort of technology that we thought we could help build their product roadmaps with them collaboratively. That's where it sort of started. We went out and really thought about what are the things that we need to execute on and what are the problems we need to solve. We targeted specific startups to do that. Robotics world, AV world, different things like that.
The way that we thought about collaborative innovation, to be honest, is it was not about looking at cool technologies and then not going anywhere with it. For us, we had a very strategic, defined type of way that we looked at it. It was more about, "Let's identify who our partners can be. Can we build a product roadmap with them, or do they have something that's interesting to us that can solve our problem? Then how do we build out a solution that we can rapidly put into our facilities and pilot? When we pilot those, how do we define success very quickly and create an avenue where our operators and our hourly employees and everybody, executives working through these technologies, could really get quick and fast feedback into these companies so we could reiterate."
It's constantly reiterating the product until we had exactly what we needed. We thought about that in about three to six months. If we couldn't get to where we needed to be in three to six months off the metrics we had, then that meant we're probably not going to move further. Because for us, it was about quickly implementing, quickly hitting the success metrics we need. Then how do we scale quickly so that we can be those early adopters within our warehouses and our transportation network on these technologies?
Bob: Stephanie, that was a great description of the framework you use there. In a second, we're going to walk you through how that framework applied to AVs. To put it in context, just tell our listeners a little bit about what exactly are you doing with AVs? How do they fit in your supply chain? Where are you using them and what have you rolled out so far versus pilot? Then we'll walk through the process.
Stephanie: Sure. AVs actually are playing a significant role in PB right now. If we think about how we needed to optimize our transportation network to create a reliable, consistent service to our customers, it's important to really start to think about how you partner with people. We process about 230 million parcels a year. Last year, we did that we're delivering to the post office.
If you think about how Pitney Bowes does this, we pick up origin-- When I say origin volume, it's from clients. Clients finish label on there. We're sort of a sortation center. We're pre-sorting all of this stuff for the post office and inducting it later into their network. We pre-sort this. Finished product comes to us, label on it. We sort these through the facilities, and we sort what we would say to what I call a DDU, but it's really a post office.
Then we have this huge middle mile network. That middle mile network then leaves our facilities and delivers to 86% of the post offices in the United States every single day. Then the post office, we hand those parcels off and they deliver that. Where Gatik came into that or AVs came into that is we were thinking about, how do we diversify, but how do we also look at previously we had couriers or some of our own assets, driver shortages, capacity constraints. I can get into detail with that later. It was really important that we diversified how we looked at these technologies and who we partnered with.
Gatik, the reason we picked them is, they were a courier that was highly focused around the middle mile. Our routes for the middle mile are very repeatable, consistent day in and day out. They never leave the state. They go anywhere from a hundred miles a day to 300 miles a day. Really, the reason that we needed to look at AVs and other strategies was, Pitney Bowes, how quickly we needed to accelerate the modernization of our transportation network and ultimately to the technology around it to deliver those reliable, consistent regional service to our customers, AVs really fit great into that strategy because it promoted growth and it also allowed us to what we call design delivery. We service and we tailor our needs to the clients.
Bob: Stephanie, before we again go back to the process, can you tell us-- now I know you're using them for middle mile, where geographically are you using them and where have you rolled out versus piloted?
Stephanie: Yes, so we have piloted five vehicles in DFW. With that pilot, we had a subset of routes, we set up expectations, we compared costs with other couriers, we compared their technology and what things we got out of that technology like track and trace, dispatch, human AV interactions, fleet type upkeep and we rolled those out. What we've done now is after we completed those pilots in Dallas, we have now added nine new additional trucks that are going to be rolling out on April 1st.
The way that we break up our regional networks and how we serve the post offices by regions, Dallas-Fort Worth is a region, it goes clear down to Houston and greater Dallas-Fort Worth and Austin areas. We rolled out nine additional trucks in there and then we are currently working on the finalization of the designs and everything. We'll be rolling out in Stockton, California, as well as Ontario. When all of these rollouts are done throughout this year, we'll have 55 autonomous vehicles across three regions and that is really just the tip of the iceberg for us.
Abe: Stephanie, when you identify your suppliers, obviously you've gone through a pretty rigorous evaluation process. Give us a sense of how you executed the pilot with this organization because it's a fairly committed relationship to build these and to put them into operation. Give us a sense of what was involved with the supplier, how closely did you work with them and continue to?
Stephanie: I think there's a few different things on here. When we partnered with them, we picked them because when you're looking at autonomous vehicles, if you think about the market right now, people are solving about three different problems, the way that I think about this. They're solving long haul, they're solving middle mile, and they're solving more of the personal, like the cars and inner-city urban type solutions.
We picked Gatik because Gatik was solely focused around the middle mile, which was exactly what we needed to solve was middle mile. When we thought about, how do we design these pilots? We picked strategic routes within our regions, ones that were subset of routes that we really needed to figure out how do we get better service in those regions? How do we help work on capacity constraints in those regions? The reason we picked Dallas is, the regions had very repeatable routes. I would say very repeatable, very known routes. Routes that we could easily scale. Then also the service metrics were really important for us when we picked those.
What is involved in it. What's involved is really three main criteria for us. On-time delivery and on-time pickup. The ability for Gatik to pick up at our facilities 99% on time, because in a transportation network, if you think about it's critical that you're picked up on time, you're delivering on time. Everybody has schedules. On-time delivery was 99%, on-time pickup was 99%. Those were our criteria metrics.
One of the other important critical components to Pitney Bowes is in order to improve service for our clients, early entry is what we call it. If you can deliver to a post office between 4:00 to 8:00 AM versus after 8:00 AM, they'll deliver same day for you. If we can get picked up at our facilities and delivered before their dispatches go out for that day, we've now improved service for our clients and we've helped. That's one of the biggest things for us too, is how many of these loads can they get early entry into?
Another big thing too is misloads. Every time a parcel doesn't get delivered to the right place, it has to come back and then there's a tail there. A longer cycle. Then some of the other stuff that we track with them is dwell time at the post offices. We can give feedback to the post office on how long it took to unload. Dwell time at our own sites. How long did our own operations team hold the loads? One of the big things too that we're constantly looking at with them is truck utilization, stops per truck so that we can continue to optimize these routes over and over.
Bob: Stephanie, when you were first getting started with this, you're going to do a pilot. How did you do your pilot?
Stephanie: How do we approach the pilot phase?
Bob: Yes, in other words, even after the rollout, you're slowly building up, but you probably didn't start with nine vehicles as the pilot, or maybe you did. Just to understand that it was going to work and it was going to do what you wanted to do, you can start with one truck on some trial routes. Just what was the process for that?
Stephanie: The process was, is we looked at our entire network and we identified a critical region, which I spoke about a little bit earlier ago. We signed to get pilots only five trucks. The reason we picked five trucks and five routes, was those routes were ones that we had some service issues with already. They were repeatable routes. We started in Dallas with only five trucks.
When we rolled those trucks out, typically a day starts around 3:00 a.m., it includes the deliveries to about 15 to 19 post offices per truck, if that makes sense. Then they return to the facilities in about 10 to 12 hours. Some of those trucks will also pick up other routes and go back out for the day, because ultimately if they don't need the 10 to 12 hours, we have a longer period of time there. For the Dallas region though now, with the five that we have and then the other nine that we're rolling out recently, we'll hit about 190 stops per day for the Dallas region.
Abe: Stephanie, let's dig in a little bit more into the idea of the AVs. Give us a sense of the business case. How did you develop it, and what were the key metrics that you guys were focused on?
Stephanie: I think one of the important things just for everybody to understand on Pitney Bowes is transportation is our second largest cost in our global e-commerce sector. If you think about, where's your biggest bank for the buck when you're thinking about how do you create technologies around it? How do you create cost cutouts? How do you really create efficiencies within your operations? We had two really transportation, I guess what I would say is, things that we really needed to solve. That was middle mile and long haul. Middle mile, that's all going to the post office. Long haul, a little harder because you're going across state lines.
We tried to think about, "What's the biggest bank for the buck?" That was the middle mile because, like I said, we delivered 86% of the post offices a day. The business cases really drove around-- and this sort of started in COVID times, even pre-COVID times, honestly, was the amount of driver shortages and courier capacity shortages. It was plaguing us during COVID, plagued us before COVID and it continued to plague us after COVID.
We really started to say around that business cases, "We have got to look at transportation strategies and technologies that can help supplement capacity, create a more cost-effective and reliable transportation strategy." Because when couriers get out of capacity, they don't have capacity, your parcels sit and that impacts your customers. Service is actually the most critical thing in retaining customers in a growing e-commerce business. Right now, the e-commerce business is incredibly competitive.
To put a little perspective, there are 80,000 open driver wrecks in the US currently. That is expected to double by 2030. AVs in my opinion is not about removing jobs or replacing jobs. This is really about how do we supplement capacity so that we can continue to service our customers? It also brings upskilling opportunities to a lot of our transportation people. We thought about it too, even with just the L2 driver assist technologies when supplementing capacity, one of the hardest things to do is to recruit and retain good talent in long haul.
When you have L2 assisted technologies in the long haul, you're able to recruit and retain drivers incredibly better because you can also hire drivers that have less experience because the safety is actually building because the safety is always the issue there. Safety is built in with these L2. We also found that drivers are more likely to stay at a company that has L2 driver assist for long haul or that has AVs for middle because they really believe that there is a lot better value proposition to their jobs and we have better opportunities to get those people to work. Our business case is totally geared around reliability, consistency, and cost-effectiveness and being able to have the capacity we need to service our clients.
Bob: Stephanie, when I've talked to suppliers of AV vehicles and then a couple of companies that are trying to do this, there seems to be a measured approach where they might start with a driver behind the wheel but not driving. Then they'll move the driver into the passenger seat so that they can take over there if there's an issue. Then a remote pilot who might be overseeing one truck and then, ultimately, a remote pilot overseeing a fleet or a large portion of a fleet. How are you approaching getting the driver out of the truck?
Stephanie: Ours is actually pretty simple. Gatik has a really fantastic program and detailed program and how they do that. The way that we worked on that detailed timeline is, when the route starts, the driver is in there mapping that route out. Making changes to that route, also riding in the different variations of the route. On a Monday, your route may be slightly different than on Tuesday, Wednesday, Thursday, Friday. There's probably more three to four months sitting in the driver's seat, mapping those routes out.
Once they feel really comfortable about those routes and they can become repeatable, then they do. They move over into the passenger seat and they just allow the route to work. They're using a lot of their technology on the backend too, to gain a lot of the data in order to make optimizations for our routes as well. They're giving us incredible insights on, "Here's what you can do to optimize this route to continue to save money within your transportation strategy." We do that.
Then usually about after 9 to 12 months of those things happening simultaneously, then they do move to fully autonomous. With us, we have a little bit of a challenge with the fact that we're going to the post office. The postal service. I spent some time going down and meeting with their leadership on what is their strategy with the autonomous vehicles coming onto their properties, we're the first people to do this. How do we work together?
One of the challenges if you think about this, is it gets there, the truck gets there, who unloads it if there's nobody in there? Typically, it had been our drivers that unloaded that. We're working with them on roadmaps on what can we do at the site? Can we use other technologies to automate that unload and be able to scan that you guys have received that? Do your people come down and receive those and unload them and scan them and working on what their product roadmap is as well so that we can create a really seamless end to end. I feel that Gatik has created a-- it's pretty simple. It's driver in, map it out, get the driver in the passenger seat and then remove the driver.
Abe: Stephanie, really interesting in terms of the design and the implementation here. Obviously going autonomous is a significant change for a lot of organizations. Another decision point that you have is electric versus ICE. What are you currently using and what are you planning on?
Stephanie: Great question. We have carbon neutral goals just like every other company does. It's a really incredible sustainability strategy for Pitney Bowes and how we get there. I will say the first three regions, the 55 trucks that were rolling out across the network, those are going to be gas powered and they're going to be gas powered simply because the timeline and what we needed to be able to build infrastructure wise in our facilities to be able to charge those, to be able to do different things was going to take a little bit longer of a timeline than we wanted to delay because the benefit of the AVs is so critical and important to our strategy. We didn't want to delay that.
Simultaneously what we're doing is we're rolling out these gas powered while we're building out our electric strategy for the remaining regions and the facilities, and then we'll come back and then fix the other ones back into that. The only thing that we have a little bit of a challenge with is when you go to electric, you don't get as many miles a day. It does decrease the ability for us to optimize. We have to balance that as well with, the cost savings that we are expected as well. We are fully on it and working in order to build that strategy for us here at Pitney.
Abe: Really interesting, Stephanie. I'm sure everybody's going to be watching on the pilot programs and you guys are really out front on this. It's really an interesting design and implementation. Thank you again, Stephanie. That is all the time that we have today. A special thanks to our guest, Stephanie Cannon from Pitney Bowes, and to you for joining us today. We hope you'll be back for the next episode. For The Rebound, I'm Abe Eshkenazi.
Bob: I'm Bob Trebilcock.
Abe: All the best, everyone. Thanks!
Bob: The Rebound is a joint production of the Association for Supply Chain Management and Supply Chain Management Review. For more information, be sure to visit ASCM.org and SCMR.com. We hope you'll join us again.
