What will the future of logistics and home delivery look like? AlixPartners' Marc Iampieri recently sat down with Scott Ruffin, the founder and CEO of Pandion, an e-commerce transportation startup that is breaking new ground in this fast-paced industry. Read how Pandion is helping retailers meet ever-increasing customer demands for efficient and fast delivery in a cost-efficient way, using technologies like AI and machine learning.
Marc: Welcome, Scott. It is great to have you here and get to interview you in a more formal capacity. We've known each other for years – since 2005 in fact – and it's been really great to see you go from working in consulting, to founding Amazon Air and building out Amazon's powerhouse transportation business, to becoming the Founder and CEO of Pandion, one of the most interesting technology-forward logistics networks of today.
You've founded Pandion at the perfect time, it seems. AlixPartners has been surveying consumers on their home delivery expectations for a decade, and people want things delivered to them free – and fast. Expectations have gone from between five days and a week for a package to arrive in 2012, with the majority of consumers today expecting to get their purchase in under three days.
What's also of note from this year's findings is that consumer expectations are diverging from executive intentions and priorities – which is risky in today's loyalty-averse retail landscape. Pandion seems like the perfect business partner to bridge this gap.
So, with that background, will you tell us what, exactly, is Pandion?
Scott: Pandion is the first purpose-built end-to-end shipping network and delivery solution for e-commerce. We are geared towards retailers and our technology allows them to level the playing field by providing large, big-box retail-like experience at highly competitive price points. We do that by leveraging machine learning and artificial intelligence to make smart decisions about how we move packages throughout our network and then select from our marketplace to final mile providers to select the right final mile solution for the right time, the right day, the right hour for that particular package to guarantee it's on time all the time, and done so at highly competitive price points.
It was specifically designed for e-commerce to be delivered in population hubs, not for B2B shipments, and uses technology developed in 2020 not 1920. Our competitors use technology that is 20 to 30 years old.
What makes Pandion different?
Scott: It starts with technology that makes the daily decisions – different from static routes that you force deliveries into.
A path for a big-box retailer or transportation service package is based upon routes – or pipes if you think of it like a plumbing network – that were established months or even years before. They're making decisions on this package going from Point A to Point B is going to take this particular path.
What Pandion does that sets us apart is that we are always looking at all the possible permeations and deciding every hour what's best for that particular package, and then at those nodes then executing whatever that new plan is based upon – what the current status quo requires.
Marc: The thing that's really cool about Pandion is the innovation, the embrace of technology in what can be, at times, a traditional industry. The radial tire that connects the vehicle to the road is the same as it's been for 100 years. Maybe the vehicles have started to become electrified, but fundamentally it is a driver and a van or a straight or a truck. That technology in particular has been around for a long time. The big difference with your process is the powerful decision-making software that is really a differentiator for Pandion.
What challenges are your customers facing and how are you solving them?
Scott: What's different about us is that as our customers' challenges shift and change, we are in a position to shift and change with them. For instance, the way our algorithms work, we make decisions on every single package, and we can change today what that objective function is from what it's going to be tomorrow. So, the two days before Christmas, the objective function is to take the fastest route possible, maximize it delivers by the by the 24th so that everyone has their toys under the tree in time, so to speak.
In another time of year, that retailer may not be so sensitive to transit time, and they may be OK with being able to save money and take a slightly slower approach or slightly slower transit time. Three days from point A to point B versus two days may be more appealing to save on costs. And so, we can change that dial by package, which means we can change the dial by customer.
If I have a computer manufacturer that sells $3,000 computers, they're very, very sensitive that it gets there on time, when you say it's going to arrive, and it is crucial that the item isn't damaged.
But, if you've got a retailer that sells paper towels, not only is it expensive in many cases to ship it because of weight and size, so they're going to be more price sensitive. And so, I can change the dial for some packages, but not for others. Many won't care if the paper towels get there by the 24th of December, but others will care that the gifts reliably make it there in time to be under the tree.
What are the types of customers that want your services or who do you serve? Who some near-term and long-term customers you have in mind?
Scott: Retail and tech. We originally started with large enterprise retailers - Fortune 100 and larger.
Very, very quickly, we began to see that our value proposition resonates strongly with digitally-native brands, traditional brands that are going more direct to consumer. There are large apparel brands that have made a huge initiative to move the vast majority of their revenue to DTC. Our product resonates very strongly with them.
We've also started to see a significant amount of interest with marketplace merchants, smaller merchants that sell on the marketplaces like Shopify, Amazon, Walmart's marketplace, eBay, Etsy, because they are also looking for low-cost, high-quality delivery to keep their customers happy as well.
The only other area that's been a bit different for us is healthcare where we're starting to see an uptick in pharmaceuticals too. We have customers who are large health insurers with programs to deliver everything from canes and walkers to all kinds of Medicare / Medicaid items and pharmaceuticals as well.
Marc: Absolutely. A great example of that is a local program to try to have people retire where they live versus going to retirement homes. But if you are getting medical care, you then need that equipment and those supplies in your house. And there's much more demand for that kind of stuff today than there was ten years ago, that's for sure.
Scott: Yes - and we have this network of hundreds of thousands of drivers that are in these residential neighborhoods. And we're matching a particular item with where that driver is going to be and whether that item is a walker to send to my neighbor next door or it's a gift item for Christmas. Our job is to put those pieces together and then create density for those final mile carriers.
We also see final mile carriers as customers as well. They don't necessarily have the means to create density in their network and we can help them create that density.
Marc: Interesting. So, you would be supplementing parts of their network at times where they could use that that capacity?
Scott: Yes, think of it as these small businesses that were made to be small point to point, same day delivery, where I can start to bring in volume to their network that is coming from fulfillment centers that are 500 miles away or 2,000 miles away. But they don't have the means to do otherwise because they don't have the ability to do complete sortation. It's primarily around sortation as a service.
Where do you provide this service? Where can you help people?
Scott: We currently cover every time zone in the continental United States, and we're growing rapidly. In Q1 of 2023 we will cover twice as many Americans as we did in Q4 2022.
We started with the larger metropolitan areas, but we have really grown quickly into expanding coverage. Look at it this way: of the 31 NFL teams in the U.S., we cover 29 of those markets.
Can you explain how Pandion improves Net Promoter Score (NPS) for your customers?
Scott: We found that for all of our customers that utilize and track NPS with their consumers, partnering with Pandion results in a significant increase in their Net Promoter scores. We had one Fortune 200 retailer who saw a 33% increase in their Net Promoter score for packages that were delivered with Pandion versus the control packages because we delivered a significantly stronger consumer experience for them than compared to the control group
We are very proud that our shipments have a positive impact on our clients' interactions with their customers.
What are some of the data sets you use to train your machine learning & AI algorithms? Are they all customer-specific, or are learnings from one customer used to enhance the offering for others?
Scott: Inputs include everything from historical, on-time delivery performance to variances of the timing when our final mile providers scan packages against what we expected to see early indicator trends of their performance problems. We look at their delivery stations, that's a big key you know piece we look at weather data, we look at traffic data, and things like expectations.
Whenever we have a package that's presented to us, they call our API, our customer says here's everything you need to know about that package. And here's when we need that package to deliver. And we use that. We then return to them a plan to deliver that package. And many times, they won't give us the package unless the plan matches their initial expectations. That's how the typical rate shopping works. And then we based basically the benchmark that we deliver against.
What is changing with the consumer and is the marketplace reacting?
Scott: Something that we are working on for our large, omni-channel retailer clients is allowing them to use us to merge packages from their fulfillment centers to their stores. By enabling this middle-mile move, they can then merge and complete an order for a single final mile delivery cost from their store to the customer versus shipping an order in multiple packages.
This addresses a consumer experience problem going on. I just encountered it myself – my wife bought three barstools, but only two of them showed up in our delivery. This kind of thing is an issue for the retailer, who not only has to track down or replace a missing piece but incur an additional cost in delivering the extra package. But this scenario also impacts customer experience.
Ultimately, the best way to save money on transportation is to ship fewer packages for the same amount of revenue, right? But, just as importantly, is that this also makes for a better experience for the consumer.
Looking out over the next 5 years, what do you think will be the biggest changes to the industry and are there any significant trends that you think we should take note of?
Scott: This may not be the most unique answer or the most exciting one, but I really subscribe to Jeff Bezos's adage 'we should think about what's not going to change.' That's how you actually skate to where the puck is going to go as opposed to thinking about what may change.
People are always going to want more selection, faster delivery, and cheaper options. They are never going to want to pay more, never going to want their deliveries slower, and they're never going to want to have less things to choose from.
As it refers to supply chain ecommerce delivery specifically, where that framework drives you is an environment where the consumer has more choice and where we don't have supply chain delays that limit selection. It means retailers are going to have to compete more and more on the quality of the delivery service to those consumers and in order to get repeat business from that consumer, you've got to produce a high-quality delivery.
I think that the data from AlixPartners Home Delivery Survey really points to a lot of that. As we get into an environment where retailers have to compete more and more for each consumer dollar – particularly in a potentially recessionary environment, we're going to see a lot more need to compete on cost and on service together and the solutions that can provide that of the solutions that will win.
Any advice for entrepreneurs that would like to follow in your footsteps?
Scott: There's no time like the present! I would tell people, especially in a time of recession or a downturn, that there's no better time than now to take a leap.
I started Pandion as a 44-year-old entrepreneur with three kids about to go to college. You would think that's a relatively high-risk time for me to leave the largest, most stable company in the world to go start what began with just me as the smallest company in the world. But I would really encourage folks to take the leap.
If you look at startups, the vast majority of them fail. The odds are that you'll fail. But you want to be able to look back and not have regrets that you didn't do something – that's usually what people regret, not regretting that you did something.
The non-monetary payback – the learning opportunity – is also incredibly strong. I've learned more in 2 ½ years than I probably learned in the 22 ½ years of my career before Pandion.
Do it to be a better person, to be more rounded, and to grow intellectually and professionally. If a company has a $100 billion exit, it's a huge economic opportunity for a founder. But there's just so much more non-economic benefit that can be had. If you look back and say, 'If I spent a period of time building a business that ended up having no economic return, would it still be a good idea because of the growth opportunity?' For me that calculus was yes, and I'm still incredibly glad to have taken this leap.
It's still very early in the Pandion journey, but I'm excited about what's to come.
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