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The rise of e-commerce has shifted the function of the global postal service industry from simply delivering mail to providing digital logistics, with this ongoing transformation occupying the time of Esa Viitamäki, CIO at Posti Group, Finland’s state-owned postal and logistics company.
“Disruption driven by digitisation is happening in retail right now and if it happens there, it happens in logistics,” Viitamäki tells Computer Weekly.
“As a company, we’re going through a major transformation as a result of developments such as decreasing mail volumes and changes in the retail sector,” says Viitamäki.
In fact, Posti Group’s traditional business of delivering mail has reduced by up to €75m every year for the past few years. Now, almost half the company’s business comes from e-commerce-related services, in particular IT systems that help companies optimise their logistics.
In a September 2015 report, Accenture argued delivery companies must change if they are to share in a global sector that will grow by 9% annually and be worth more than $343bn by 2020.
“The industry has become increasingly data-driven. Previously, information was given in small segments with an importer knowing what a wholesaler was buying but nothing more than that,” says Viitämäki.
“Today in e-commerce, delivery companies know [the whole supply chain] and very specifically which product is going where, who has purchased it and how.”
New methods and responsibilities
This digital transformation is what attracted Viitamäki to Posti three years ago following a career in financial services IT. It has meant building Posti’s IT competences to match the demands of digitisation and to serve customers across Finland, Russia and the Baltic countries.
“Previously, Posti had a decentralised IT organisation based on divisions, such as mail, parcels, transportation and warehouses,” says Viitamäki. “My first task was to introduce centralised IT and at the same time outsource all basic IT services, including datacentres.”
Now Posti has a unified IT team of 200 people with capabilities that are core to the company’s business and development in-house.
Esa Viitamäki, CIO, Posti Group
Viitamäki has also steered Posti’s outsourcing towards a more collaborative ecosystem approach. Instead of rigid agreements, he works with a network of partners and harnesses their competence based on the needs in different projects.
Viitamäki has taken a similarly flexible approach regarding Posti’s IT infrastructure. He hasn’t waited for the modernisation of legacy systems to be finalised, but built a more agile layer on top to enable rapid development of new customer-facing products and services.
“We use IaaS [infrastructure as a service] and take the required capacity from the cloud and add open source software and build the new services on top of that,” says Viitamäki. “This is the recipe for fast development, because it’s an agile and cost-effective model. And if an application, or the business it serves, doesn’t catch on, it can be removed without any major difficulties.”
Posti has also streamlined its IT by terminating 50 of its 300 legacy applications and is looking at ending a similar number again in 2016. It’s crucial for the company to be able to both purposefully build up its IT competence and rapidly react to changes in the business environment, says Viitamaki.
“The aim is the development of customer interfaces and modernisation of legacy systems aren’t married to each other, but go forward simultaneously on their own paths,” says Viitamäki. “It’s an ongoing balancing act, kind of like wearing a shirt while ironing it – it hurts at times, but the shirt will get ironed.”
IT drives logistics
The first services on Posti’s new architecture layer were deployed in 2014 and were aimed at its retail customers. The application Viitamäki is particularly excited about is using IT to transform bricks and mortar stores into warehouses for e-commerce: “If a product is on the shelf in a store, it is also available on the online store,” he says.
“When a customer orders something online, but wants to collect it in a store, our system knows what’s in the store, prints the pick-up lists and order stickers for the products the customer will collect,” says Viitamäki. “In this case the role of the logistics provider is only to collect data and provide IT services, we don’t transport the product anywhere.”
And if an ordered product is not available in the store, Posti automatically analyses data from the retailers’ other stores and warehouses and chooses the optimal route to pick up and deliver the product to the store where it is needed.
For Viitamäki, this is a prime example of how deeply integrated IT is in Posti’s business. It also brings new demands for IT as the services need to run reliably all year round, although Viitamäki stresses this is only possible if IT and business divisions work closely together.
“Technology drives changes in the business environment, such as e-commerce, and you need to be able to work with the business side to find solutions for the opportunities and threats they bring,” says Viitamäki.
Posti is not only targeting companies with its digital development. Viitamäki points out Posti is constantly competing with other logistics companies in e-commerce and it is the consumer who makes the final decision on what delivery method they want to use when shopping online.
“B2B and B2C are actually quite hard to tell apart now,” says Viitamäki. “Consumers are at the end of the chain and user and consumer experience are critical things [for success]. It needs to be effortless and transparent.”
As part of its plans to better cater to consumers’ needs, Posti isn’t afraid to be experimental and currently is trying out parcel lockers for peer-to-peer deliveries. This works when a consumer sells a product to a buyer living nearby and Posti will provide them with a locker they can rent online for drop-offs and collections.
After the seller has left the product in the locker, the buyer automatically receives a code to open it via SMS and offers a seven-day window for collection.
Such experimentation is the key to Posti’s future services, says Viitamäki, adding that companies can only learn what really works on the market if services are rapidly tested in the real world and with real customers.
“This is a completely new culture of doing things. We can do something that from an IT perspective isn’t sustainable, barely works and is not meant to have a long life cycle,” says Viitamäki. “But if we see it works and can bring in revenue, we build the same functionalities almost from scratch to make it scalable and sustainable. But first we have to try it out.”