Challenges of planning a parcel locker network

Continuously increasing volumes and variety of packages, changing consumer expectations, and effects of delivery on the environment are all challenges parcel delivery companies face. To cope with them, parcel lockers have emerged as a more efficient solution. 

However, planning and designing a parcel locker network isn’t easy. 

This article aims to address related challenges and provide all the necessary information you need to know before placing your first locker.

Parcel locker networks as a concept

Parcel lockers, or Automated Parcel Machines (APMs), are unattended self-collection points, often available 24/7. They provide a convenient location for recipients to collect their parcels at a suitable time. 

We’ve already provided an introduction to parcel lockers and their benefits in a previous blog. But to better understand the concept, we’ll quickly review how they compare to home delivery. 

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Planning and designing a parcel locker network is a complex optimization problem.

The team in charge has to decide on the number of lockers, size and compartment structure, and where to place them. All while staying within the budget. Several factors must be considered, such as the demand for delivery services, frequency of online shopping, types of parcels, available infrastructure, and even characteristics of the users. 

The following text provides an overview of the challenges at hand. 

The total cost of parcel lockers

Parcel lockers come in various shapes and sizes and with different functionalities, meaning their prices vary. According to some European OOH experts, the average purchasing cost per APMs is between €6,000 and €15,000. 

But don’t focus just on the initial purchasing cost. There are long-term and short-term expenses following the purchase, such as:

• Cost of installation and site preparation (if the locker requires concrete flooring or additional construction)
• Cost of location rent or obtaining permits
• Cost of electricity and internet connectivity (if the locker is not battery-powered and connected via Bluetooth)
• Cost of all required software (e.g., firmware, interface for carriers and e-commerce companies, an app for recipients)
• Cost of additional features (e.g., payment terminals, label printers.)
• Cost of maintenance and servicing 
• Cost of insurance and security 

Opting for renting lockers or using the existing infrastructure of an open parcel locker network is a way to minimize these expenses. However, you still have to think about operational costs - shipment processing costs, cost of delivery to the hub, cost of delivery from the hub to a parcel locker, etc. 

The parcel delivery company usually has to allocate funds for branding and promotion. Although the teams responsible for developing out-of-home delivery networks may not directly handle these activities, it is important for them to be aware of all associated expenses. 

By now, you probably have an estimate of the needed budget. 

Next, we will focus on determining the appropriate number of parcel lockers. This ensures a well-balanced allocation of resources, aligning with the budget while maximizing operational efficiency.

Defining the required number of parcel lockers

We’ve often heard “density is key” when talking about the success of a network. But there has to be a reason behind the number of parcel lockers a company decides to roll out. 

Usually, the optimal number of lockers is based on the projected demand. Delivery companies can use data such as the delivery frequency in various areas and expected fluctuations during peak seasons to make the forecast. 

However, not all recipients will want to use parcel lockers. Looking into their characteristics and then identifying demand sites with high potential helps determine the number more precisely. 

Equipping all demand sites with multiple parcel lockers would create extremely high operating costs. The demand should be partially covered by parcel lockers if you’re just starting to develop a network. The remaining demand can be serviced with other pick-up and drop-off points or home delivery. 

Another thing to consider is the number of couriers, their workload distribution, and the operational process of delivering and loading parcel lockers. There is no use for hundreds of parcel lockers if they only create a bigger capacity issue. 

Deciding on the configuration of parcel lockers

The configuration of APMs includes the size and number of compartments and the size of the station. 

Locker stations can be organized modularly, consisting of a control unit and additional modules with compartments of different sizes (usually S, M, L, and XL, varying in height, depth, and width) and features (for example, temperature settings). 

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Not all parcels can fit into a locker. When deciding on the configuration, consider the average size of shipments your company handles daily. This will also help you decide on the number of modules needed. There may be additional constraints, such as a limit set by the manufacturer on the number of modules you can combine.

If the parcel locker isn’t modular, then the decision comes to choosing the best combination of the number and sizes of the compartments. A good tip here is to look for manufacturers that offer lockers with larger compartments located at the bottom. Although parcels may not be significantly big, they can still be heavy, and it's best to prevent any potential accidents.

The APM configuration influences the total number of parcel lockers needed and vice versa. These decisions are highly dependent on one another and, most importantly, on the location. 

Choosing parcel locker locations 

The choice of location is crucial for the efficient utilization and profitability of the network. 

Factors influencing the choice of location are availability, accessibility, and safety. But we can’t forget to include the demand, distribution of shipments, movement patterns, and demographic characteristics of recipients. 

Usually, APMs are placed near recipients' homes and along their commute path - high pedestrian traffic areas, train and metro stations, convenience stores, petrol stations, etc. The decision of parcel locker location is closely linked to its configuration due to space and other requirements.

Conclusion

Even though these challenges may seem independent, it's crucial to approach them as a unified system.

It can become overwhelming to make all of these decisions for large areas (e.g., the whole city or country) at the same time. The recommended approach is to start with a smaller urban area with high potential. Then, once you roll out the lockers and start seeing results, it will be much easier to plan the expansion.

To ensure long-term success and efficient planning, it's important to have the right tool. Ideally, it’s a solution that will help you quickly scout the right locations, understand network performance and identify opportunities for further improvement.