As postal and parcel executives scan headlines about gigantic sorting facilities with robotics patrolling all corners, they feel pressure to modernize. It's the industry's fear-of-missing-out (FOMO), and who could blame them when parcel volumes are putting extreme pressure on outdated systems.
But many postal operators would achieve better returns by perfecting their network design first. In postal, it's about survival through growth – if you can't move volume efficiently, you'll lose customers.
An optimized network delivers mail and parcels faster, with better accuracy, and at a lower cost. We're seeing a 15 percent YoY cost reduction once implemented – but this isn't just about saving money. If you can't move volume, you'll lose customers, full stop.
Postal organizations need to reimagine their physical footprint, starting with locating facilities at the "center of gravity" where demand is highest. By analyzing delivery patterns and optimizing facility locations, postal organizations can consolidate multiple facilities and transform fragmented networks into technology-enabled hubs that improve efficiency.
"By working out your center of gravity, you can position yourself to be more competitive with the right people, processes, equipment, and technology to enable efficient operations. Ideally, future facilities will integrate multiple operations into one intelligent scalable hub," says Fitz-Walter. "This approach considers the supporting infrastructure of vehicles, technology systems, and operational processes, as well as the physical footprint."
A reactive approach to automation without proper network design can lead postal and parcel companies into engaging automation vendors that recommend solutions without understanding the unique challenges of modern mail and parcel delivery networks.
How A will get to B
Before considering automation, postal businesses need to understand the function of each node in their network.
Tom explains: "The question is: what does your network look like? You need to design both the network and its nodes with a specific function in mind. Then, you can assess the level of automation required to achieve that function effectively. For example, it might be enabling a significantly higher product flow through the node to ensure on-time delivery to customers."
Without this foundation, postal operators risk making costly mistakes.
"The same person who asked, 'Why aren't we automating?' will be the same person in five years' time saying, 'Why did we automate?'" he says.
Design, before you furnish
There are multiple reasons postal and parcel companies consider automation, and they differ among territories:
- Labor shortages (particularly in Southeast Asia)
- Rising labor costs (especially in Australia)
- Safety concerns
- Strategic positioning for future growth
- Customer delivery promises and expectations.
Without proper network analysis, postal and parcel operators risk investing in automation solutions that don't deliver the expected benefits. Simulation modeling proves invaluable in these scenarios - testing vendor assumptions, identifying bottlenecks before implementation, and calculating realistic labor savings for accurate business case validation. By thoroughly analyzing network needs first, postal organizations can avoid costly automation mistakes based on vendors' optimistic estimates.
How to redesign a postal network
There is a method to designing and redesigning postal networks.
- Establish your baseline Answer: What is your postal business doing right now?
"We call it an operational diagnostic. Our team gets deeply embedded in a customer's operation to truly understand their postal supply chain. This process often reveals blind spots, shining a light on deficiencies of which executives weren't even aware. It's remarkable how often a postal organization comes to us convinced they have one problem when they're facing an entirely different challenge. The solution might still involve automation, but you absolutely need to illuminate the entire mail and parcel flow picture first," says Fitz-Walter.
- Apply growth parameters Map out what types of mail and parcels you'll be processing in the future.
"These questions keep postal executives up at night: Will our parcel business double or triple in the next five years? How quickly will traditional mail volumes decline? These aren't just planning questions - they're existential concerns when you're contemplating major capital investments in a rapidly changing industry," says Fitz-Walter.
- Test scenarios through simulation Test multiple scenarios through simulation. What if certain mail categories decline faster than expected? What if your parcel volumes grow exponentially? What delivery promises are you making to customers?
"You can't afford to guess when you're committing to automation systems with eight-figure price tags. When you're investing $50 million in technology that needs to serve your postal business for decades, uncertainty isn't just uncomfortable, it's potentially catastrophic. That's why rigorous scenario analysis is non-negotiable. You need to stress-test your assumptions before any vendor contracts are signed," says Fitz-Walter.
- Test scenarios through simulation Test multiple scenarios through simulation. What if certain mail categories decline faster than expected? What if your parcel volumes grow exponentially? What delivery promises are you making to customers?
You can't afford to guess when you're committing to automation systems with eight-figure price tags. When you're investing $50 million in technology that needs to serve your postal business for decades, uncertainty isn't just uncomfortable, it's potentially catastrophic.
"That's why rigorous scenario analysis is non-negotiable. You need to stress-test your assumptions before any vendor contracts are signed."
Singapore Post is an excellent example of a postal organization benefiting from the power of simulation and scenario testing. Facing sharp declines in letter volume yet huge increases in packet and parcel volume, the postal organization experienced processing capacity issues across their network.
TMX reviewed current processes end-to-end and used simulation to identify both tactical and strategic opportunities. A detailed flow path analysis was used to determine the optimal mix of processing methods and comprehensive cost-to-serve analysis.
The results were remarkable: They identified opportunities to reduce the overall network footprint by approximately 20 percent, delivering over $40 million per annum in operational benefits derived from labor cost savings and rent arbitrage. The analysis also pinpointed suitable processing technology (including targeted automation) to significantly lower labor costs and developed a 10-year transition roadmap and business case for board approval.
Grow your postal business
Unlike automation for automation's sake, a well-designed postal network delivers measurable business benefits.
An optimized network delivers mail and parcels faster, more accurately, and at lower cost compared with large, fixed automation. By redesigning network flows, organizations can reduce stem time – travel to delivery zones – and maximize actual delivery time.
By understanding the optimal configuration of your postal distribution network, you create a foundation that ensures any automation investments truly delivers customer value.
Postal authorities are uniquely positioned to own this space. With significant reach across businesses and households, and the scale to drive systemic change, the opportunity is theirs to take. Unlocking this transformation requires more than automation – it demands customer-centric network design, enabled by real-time intelligence and dynamic decision-making that will carry postal operators successfully from traditional mail to the parcel-dominated future.