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Eduardo Lopez-Soriano is vice president of marketing for UPS Capital, where he leads the development of insurance technology solutions to address the needs of small and midsized businesses (SMBs) in the U.S. and international regions. He helps SMBs understand their emerging supply chain needs and the evolving e-commerce ecosystems in which they operate. His team works to mitigate SMBs’ risk and improve their customer experience.
David Maloney, Editorial Director, DC Velocity 00:01
Personalized e-commerce shipping experience. A decline in warehouse tech spend. And can artificial intelligence help with logistics labor shortages?
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast.
Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome.
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As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insights into the top stories of this week. But to begin today: consumers want more than just speed in e-commerce delivery; they also want features like accurate parcel tracking and time-definite delivery windows. But can shippers provide these things profitably? To find out, here's Ben with today's guest.
Ben.
Ben Ames, Senior News Editor, DC Velocity 01:16
Thanks, Dave. That's right. For several years now, e-commerce retailers have been in a flat-out race with each other to keep their online shoppers coming back. They've been offering them free shipping, or two-day delivery, even next-day delivery. Those fast fulfillment terms have quickly become the gold standard for shipping and shopping experience for those online consumers. But recent research shows that consumers want more than just speed in their e-commerce delivery, as you said. Here to give us the latest in e-commerce fulfillment trends is our guest this week. He's Eduardo Lopez-Soriano, and he is the marketing vice president at UPS Capital, which is the shipping-insurance division of parcel carrier UPS. Welcome Eduardo.
Eduardo Lopez-Soriano, Vice President of Marketing, UPS Capital 02:02
Thank you, Ben. Great to be here.
Ben Ames, Senior News Editor, DC Velocity 02:05
Eduardo, to start us off, maybe you could describe what services UPS Capital provides and who its customers are, in case our listeners aren't familiar?
Eduardo Lopez-Soriano, Vice President of Marketing, UPS Capital 02:13
For sure. UPS Capital is a UPS business unit, as you mentioned, and we focus on improving post-purchase customer experience. Something important to note is that we do this across all carriers, doesn't matter if you ship with UPS, FedEx, USPS, even local carriers, we provide the same set of solutions. Now, within the post-purchase experience, we focus on providing peace of mind during the shipping process, and we do this by providing insurance solutions to SMBs in case their packages are damaged, lost, or stolen during shipping. Now, you also ask who are our customers, and that's important, because we're both serving merchants and consumers. We have several solutions where the merchants select which items to insure. They may select to cover all the shipments for a specific value, or only to certain destinations, or even for some specific carriers. But very importantly, we're also among the few insurance providers that give consumers the option to buy insurance for their purchases in case the package is lost, damaged, or stolen during shipping.
Ben Ames, Senior News Editor, DC Velocity 03:27
So, I understand that UPS Capital recently released some market research that found that retailers can no longer apply a one-size-fits all approach to shipping, but rather, online shoppers prefer last-mile personalization. Is that accurate? Can you tell us more about that report?
Eduardo Lopez-Soriano, Vice President of Marketing, UPS Capital 03:45
Yeah, that's right. In UPS Capital, we're always conducting research. We believe it is very important to listen to our customers, to understand how their needs are evolving, and how the dynamics in the market are changing. In this research, in particular, we found a couple of very interesting statistics that confirmed the trends that we had seen in other service, right? So, the first trend is about the importance of shipping experience, and we had already seen these in previous trends. We knew that 72% of SMBs have received negative reviews because of shipping incidents like damage loss and porch piracy. And we all know how important the reviews are, right? 91% of online shoppers look at reviews before buying from a merchant. Now, the results from this research go even further. 90% of shoppers told us that the shipping experience accounts for at least half of their overall online shopping experience. So this is big, right? Let's think about it. If you are an SMB, everything you do to attract a customer to your website, go through the path to purchase, take them through the checkout cart, all that counts for 50% of the shopping experience. The other 50% is shipping. So, that's one trend. The second trend that continues to gain momentum is personalization. We knew from previous research that 69% of shoppers are willing to pay for the ability to personalize their shipping experience, and then, in this research, 87% of online shoppers said that they would be more likely to shop with an SMB if they could personalize their shipping experience, right? So those are the two main trends.
Ben Ames, Senior News Editor, DC Velocity 05:32
Gotcha, that makes a lot of sense. That — it's really striking, that number though, that 87%. That covers nearly everybody, of course. And those 87%, they would prefer this personalized service around things, variables, like delivery speed and the delivery date and return options. It sort of seems obvious when we talk about it now, but what why weren't retailers offering those choices before?
Eduardo Lopez-Soriano, Vice President of Marketing, UPS Capital 05:58
Yeah, well, let's think about it, right? I believe a big factor is the Amazon effect. Many SMBs were convinced that in order to compete with Amazon, they had to provide two-day shipping and same-day delivery options, and that may have been the expectation for some consumers, at least for some time. But consumer needs are always evolving, and judging by the results of this survey, it seems that consumers have realized that they are not always at their house two days after they order their product, right? So now they see the benefits of personalization. Now, one of our goals of putting all this research together is to provide updated information to SMBs so they can adapt and be more successful. Other than awareness, another reason retailers may not be offering these choices is technical limitations. This research found that 24% of merchants have struggled with the logistics required to offering shipping optionality.
Ben Ames, Senior News Editor, DC Velocity 07:03
To follow up on that, I mean, the report also recommends that e-commerce businesses, both the large and the small ones, they have to evaluate if their current shipping practices can support that customized option — optionality, as you say, that we've been discussing here. So how can a business evaluate if they're ready?
Eduardo Lopez-Soriano, Vice President of Marketing, UPS Capital 07:22
Yeah, that's right. I think this research is a great guide. Look, the customers have told us what is important to them. So SMBs should evaluate if they're currently offering those options. Are they able to offer different delivery speeds? Do they allow customers to select a delivery date? Do they offer delivery directly to a retail location. If they're not able to do this, they should partner with a carrier that gives them that flexibility. Now, beyond that, there comes differentiation, right? And a good way to achieve this is by offering shipping insurance. We know consumers are interested in shipping insurance, but we found that 53% of online shoppers only saw this option less than 25% of the time. So, if you have the right carrier, if you have the right shipping insurance partner, then you have to think about what they're providing, and are they meeting the consumer needs? 49% of consumers said that they expect to see resolution to their claims resolved within three business days.
Ben Ames, Senior News Editor, DC Velocity 08:31
Gotcha. Very quick, then. So, that sounds like a good shopping experience, of course, but companies obviously have to be able to do that profitably. That's really the bottom line, so that there'll be around for the next time you want to shop. So what's the secret there? Can online merchants provide these personalized services and still make a profit?
Eduardo Lopez-Soriano, Vice President of Marketing, UPS Capital 08:54
For sure. Well, I believe some of these solutions have to be seen through the lens of return on investment. Usually, the carriers with the most delivery options and best reliability are not going to be the cheapest. But given all the statistics we discuss regarding the importance of shipping experience and personalization, it's clear that this investment will generate significant additional growth. Now, another way for SMBs to protect their profit is through shipping insurance and risk-management solutions. By partnering with a shipping insurance provider, they no longer need to absorb all the financial risks of reshipping or refunding damaged or lost packages.
Ben Ames, Senior News Editor, DC Velocity 09:33
Makes good sense. Eduardo, I've learned a lot here. I really appreciate your sharing some of the research and some of the advice that your company is providing for all those e-commerce merchants out there.
Eduardo Lopez-Soriano, Vice President of Marketing, UPS Capital 09:44
For sure, Ben. It was a pleasure.
Ben Ames, Senior News Editor, DC Velocity 09:47
Our guest this week has been Eduardo Lopez-Soriano from UPS Capital. Back to you, Dave.
David Maloney, Editorial Director, DC Velocity 09:53
Thank you, Eduardo and Ben. Now let's take a look at some of the other supply chain news from the week. Victoria, you wrote this week that cost pressures on operations have caused a fall-off in warehouse tech investment. Can you share some of the details?
Victoria Kickham, Senior Editor, DC Velocity 10:08
Absolutely, Dave, happy to. Yeah, so the tough economy is having an effect on the growth of the warehouse automation technology market, something that had been going gangbusters the last few years, thanks to all that accelerated e-commerce from the online buying we were all doing during the pandemic. Now that inflation remains high, though, and interest rates are going up, consumers and businesses alike are feeling the pinch and investment is slowing. We're hearing that from many corners. But this week, research firm Interact Analysis released an update to its 2023 global outlook for warehouse automation technology, revising down its estimates for growth through 2027, actually. So, essentially, the report is forecasting lower levels of automation spending globally this year, as compared to last year, with slight growth expected for 2024 and a return to more solid growth levels in 2025 to 2027. This is in line with an expected drop in new warehouse construction. The report estimates that about 6,700 fewer warehouses will be built globally by 2027, a reduction, that translates to a decrease of 1.4 billion square feet of warehousing space, so a lot of slowing down going on.
David Maloney, Editorial Director, DC Velocity 11:23
Yeah, it sounds that way, and that's a pretty significant reduction. Are there any bright spots in the outlook, or are we talking about an overall decline in types of warehouse automation?
Victoria Kickham, Senior Editor, DC Velocity 11:33
There are some bright spots actually. The revised report points to an uptick in demand for autonomous mobile robots and automated guided vehicles, especially in the latter category of forklifts, automated forklifts. The forklift outlook, excuse me, is due to higher-than-expected order intake last year, and more rapid adoption of that technology, especially here in the U.S., where larger fleet sizes are typically adopted. The downturn is in end-to-end systems, which involve more fixed automation, and those are tied to greenfield sites, which, as I said earlier, are expected to decline over the next couple of years. The report predicts a downward trend in automation demand among consumer-facing industries in particular, things like grocery, apparel, and general merchandise. And again, that's being driven by decelerating e-commerce levels and the decline in warehouses being built. Those segments had been major drivers of fixed warehouse automation investments in recent years, but again, that demand started to wane last year, and it looks like that will continue, so as I said earlier, just a general slowing of things here for a little bit.
David Maloney, Editorial Director, DC Velocity 12:41
Sure. And we'll continue to track those as we move through the year. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 12:45
You're welcome.
David Maloney, Editorial Director, DC Velocity 12:47
And Ben, you wrote this week about how artificial intelligence technology can help solve logistics labor shortages. Can you share more?
Ben Ames, Senior News Editor, DC Velocity 12:55
Yeah, I'd be glad to. And this sort of dovetails with some of the forces that Victoria was just describing, some of those business pressures, that they're really exerting some impact on corporate bottom lines, too. In this case, I'm talking about the rising cost of doing business, particularly seen through the lens of, like a 50-year low point in our unemployment rate. So, companies are really having trouble finding workers, enough of them with the right training and at the right pay to make it all work out. As a sort of response to that, I was down in Orlando, Florida, this week at the annual user conference for SAP Software, they call it their Sapphire show, and SAP's answer to those challenges is that they've been increasing the amount of artificial intelligence, AI software, that they use, specifically something called generative AI. That basically means artificial intelligence software that can create answers or generate answers to your inputs. Our readers may have heard of the popular website tool called ChatGPT, as one example. You can type in questions and it will give you answers in full sentences. Another example of that, of generative AI, is a digital assistant from Microsoft that's called Copilot. So, SAP is actually combining its human resources software with that Microsoft Copilot tool to create a platform that can both analyze and then generate natural-language responses. So, applied to the labor shortage, that combination can do things like write job descriptions; it can update the skills requirements; and it can even suggest and develop the right interview questions to ask. On the other side of the coin, that same tool can be used by employees, actually, to further their career goals. For example, they can ask the system to create personalized learning recommendations and give links to online classes so they can gain new skills for better jobs.
David Maloney, Editorial Director, DC Velocity 15:01
Well, those are some pretty impressive capabilities there. Do the statistics also talk about how well the technology works. Is it accurate?
Ben Ames, Senior News Editor, DC Velocity 15:11
Well, great question. There have been some concerns about that sometimes. ChatGPT, for example, comes up with some pretty creative answers. The SAP and Microsoft partnership that I was describing is a new one, so it hasn't really had time to be tested in real world yet, at least in terms of public statistics, but I did also track a second concept this week that's in the same sort of basket, from a company called Instawork. So this is a very different situation. Instawork makes a mobile app or a website that works as a job marketplace. So, they're focused on, particularly on the warehouse and logistics sector, and it matches workers with employers. Instawork saw a big uptick in use during the pandemic and the recovery, and then this week, they just gained 60 — six-zero million dollars in venture capital to continue that expansion. So, these guys also use AI, but they use it to, as I said, connect companies with workers who have the right skills, who reliably show up on time. And likewise, it will also provide workers with access to those training opportunities we were talking about, and that can, in this case, it can unlock jobs for users who might not be eligible for certain shifts due to a current lack of certification, say. According to Instawork that approach, sort of customer-focused approach, in this case where the customers are those scarce labor and workers, helps to reduce turnover, since Instawork says its philosophy is that workers want better schedules and career advancement, and not just higher paychecks. So, they're using their AI, really to, I guess, personalize the experience and to keep the workers involved.
David Maloney, Editorial Director, DC Velocity 16:57
Very interesting. And we know that finding and retaining the right workers for your operations is never easy, so hopefully, these new tools will help.
Ben Ames, Senior News Editor, DC Velocity 17:06
Exactly, it'll be an interesting thing to track.
David Maloney, Editorial Director, DC Velocity 17:08
Thank you, Ben. We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And check out the podcast Notes section for some direct links on the topics that we discussed today.
And again, our thanks to Eduardo Lopez-Soriano of UPS Capital for being our guest. We welcome your comments on this topic and our other stories; you can email us at podcast@dcvelocity.com.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded on Fridays.
Speaking of subscribing, check out our sister podcast series Supply Chain in the Fast Lane. Coproduced with the Council of Supply Chain Management Professionals and Supply Chain Quarterly. Subscribe wherever you get your podcasts.
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We'll be back again next week with another edition of Logistics Matters. Be sure to join us. Until then, have a great week.
Articles and resources mentioned in this episode:
- UPS Capital
- As cost pressures grow, investment in warehouse tech declines
- Generative AI tools could help companies solve labor and talent shortages, SAP says
- Instawork raises $60-million for warehouse labor marketplace
- Visit Supply Chain Quarterly
- Listen to CSCMP and Supply Chain Quarterly's Supply Chain in the Fast Lane podcast
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