NetDespatch was among the first to develop Software as a Service (SaaS) solutions. The web technology developed by the company had a huge impact on the parcel delivery sector; new business models, such as CollectPlus, could be brought to market quickly, and operators could increase volumes without the heavy investment and operational restrictions imposed by conventional IT systems.
We spoke to CEO Becky Clark, who gave us some insight into the challenges faced by industry players, as well as achievements and future strategies.
TechRadar Pro: Where did the idea for your software come from?
Becky Clark: Back in 1998, having previously provided PC-based parcel despatch solutions, we realised that the internet would provide the ideal method of communication between shippers and their postal and parcel carriers. We came up with the concept of an application hosted on a web server, delivered through any web browser, which would allow carriers to offer their customers a fully managed and hosted solution through which they could easily label their parcels and track their shipments.
The pricing model was unique; retailers could use the SaaS solution free of charge, as all costs would be met by the postal or parcel carrier on a pay-per-parcel basis. All the carriers and their customers needed was an internet connection and a web browser. The platform would provide everything else – hardware, software, monitoring, security, resilience and scalability – and automatically produce the correct barcode shipping labels, manifests and even customs documents.
Over the last fifteen years we have seen a paradigm shift in the IT solutions required by retailers for parcel delivery, with exponentially increasing volumes of parcels due to online retailing and home delivery, and more delivery options such as leave-with-neighbour, time-slots, click-and-collect and locker boxes. Web-based solutions are now the norm, and seamless integration of sales order processing and warehouse systems, sub-second label production, real-time parcel tracking and automated pre-advice to the carrier are considered must-haves by the major carriers and their customers.
TRP: What were the technical issues and challenges 15 years ago, and how did you overcome them?
BC: The web servers that were available in 1998 were designed more for reading data than for writing it. We tried every major manufacturer before deciding that we had to have servers especially made for us that could both read and write data at high speeds.
Pre-broadband internet connections were slow and the cloud didn't exist. In the era of dial-up modems, access to the internet was not widespread and was unreliable. There were no application servers, load balancers or message queues, and web services were in their infancy. So we had to create all of this software ourselves. Gradually over the years we replaced all of these with industry standard applications and middleware components, and today our processing power is delivered through hundreds of virtualised servers from industry standard hardware.
We worked closely with a few early adopters to produce the software that they and their customers wanted, and we had to develop fast, efficient, highly resilient and expertly monitored systems.
TRP: What factors helped to drive the market?
BC: The development of omni-channel retailing, starting with the move from catalogue to online retail, changed the market from a B2B (Business to Business) model to a B2C (Business to Consumer) model. Both retailers and parcel carriers needed systems that would handle significantly greater volumes of parcels, for delivery to home addresses as well as businesses.
It became absolutely essential that home delivery address data was accurately gathered at the point of booking, and seamlessly streamed through to point of despatch, to ensure that the correct labels were produced for each parcel.
In addition, expected despatch times were decreasing: pre-2008, a five day order-to-despatch pattern was acceptable, but today's customers expect their parcels to be delivered within a few hours of being ordered online.
All of this made it essential that cost effective solutions be offered to retailers of all sizes, or they just would not be able to handle the volumes and speeds required for despatch. Carriers realised that web-based solutions were the answer, but these needed to be able to handle millions of parcels each month, had to be secure and reliable, and so would be complex to produce and costly to maintain. The market then began to accept that SaaS solutions were a real option.
TRP: How did technology help to boost growth of the online shopping industry?
BC: The increasing availability of high-speed broadband and improved web tools have had a significant impact on online shopping over the past five years. Consumers want to complete the online purchasing process with as few clicks and delays as possible.
The recession was also a significant factor, with shoppers utilising price comparison across multiple websites and looking for effective returns processing.
More recently, the ability to seamlessly integrate with online order processing and warehousing systems using real-time web services enables retailers to handle much higher volumes, despatch goods within a few hours, and deliver them to the consumer's choice of location or collection point.
TRP: Was there a particular innovation that had a greater impact than you expected?
BC: Yes, the development of our International solution. In 2008, we expanded our portfolio of services to include all the global rules required for cross-border shipping. This option illustrates all the advantages of SaaS, as we have created a knowledge-based system that 'knows' the rules for each country – the address format, the type of label required, the customs documentation, the currency and the customs rules.
TRP: What are the drawbacks of using a SaaS solution?
BC: The use of SaaS is not very different from any other type of outsourcing. Some organisations would consider an outsourced solution to be a risk – in terms of both business continuity and meeting service levels. This shouldn't be a problem if there is a very high element of trust between solution provider and customer, and if the relationship with the customer is that of a business partner rather than a supplier.
The counter to this is that proven service levels and industry expertise developed over 15 years, as well as the methods for delivery of reliable, secure and scalable software 24x7x365, are hard to replicate within an individual organisation.
TRP: The industry has seen some structural changes. How have these changes been led by developments in technology?
BC: The change from B2B to B2C has meant that deliveries of individual parcels have increased exponentially, together with the numbers of parcels returned. Order to despatch times have reduced from five days to just a few hours. The ability to seamlessly integrate retailers' sales order processing and warehouse systems with their postal or parcel carrier has eliminated manual data entry, multiple carriers' labelling systems and data duplication, and minimised the risk of human error.
In terms of the delivery market, this helps improve order fulfilment and first time delivery rates, which is essential as failed deliveries cost the industry over $1.4bn (around £840 million, AU$1.5bn) each year. Technological developments will continue in the industry as consumer preference moves towards convenient/alternative delivery options, and carriers and retailers work to keep up with consumer-led expectations.
TRP: What does the future hold for the sector?
BC: These are exciting times for post and parcel carriers. The latest Interactive Media in Retail Group (IMRG) figures indicate that, in the UK alone, 940 million parcels will be despatched this year, an increase of 19% over the previous year. The question is: who will deliver them?
As well as the existing carriers – both postal and parcel – now in heavy competition with each other to own both domestic and cross-border delivery, we can see new players in the market. This is particularly true of the fast growing Click and Collect sector: those who would own their supply chain, such as Amazon and Google; and Asian newcomers, AliBaba and Rakuten; in-store Click and Collect, such as Tesco and Argos; and locker boxes from Inpost and Nightline's Parcel Motel.
Over the past 15 years, we have accumulated a wealth of data on parcel deliveries, and we plan to launch a SaaS-based analytics service for carriers and retailers that will evaluate things like consumer patterns to help them recognise potential business opportunities and formulate future strategies.
About Becky Clark
Becky is the CEO of NetDespatch which she co-founded in 1999 with the vision of delivering integration software for postal and parcel delivery companies from a web-based platform. NetDespatch is now the fastest growing global player in the delivery of innovative web services-based solutions to major postal and parcel carriers and their customers.
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