There is definitely place for manual processes, the question is, how to make them smarter?Manual processes obviously relay on people. Humans make typically 2-3 % error. Even the most diligent, qualified and trained people can’t help making these errors – it’s just in human nature. Many posts are not positive about automating some manual processes because they don’t know, how sustainable this business is. How posts can than, make a quality, which they would have from automated processes, by using people?
There are various technologies to support manual processes. One of them is using agency labour, especially in peak times (Christmas, Mother Day, Black Friday, etc.). This allows posts to have staff whenever it’s needed and have them gone after couple of days. Having long-term contract is also an option here, but the actual people stay for the short-term, after which they move to the next job or do something else. It’s different than investing in a full-time employee and hoping that he/ she will stay. Agency staff come and go every day.
The challenge here is training. Loosing couple of days of pay or resources in order to train the agency labor is often a problem. This is where the process automation can support their work. Essentially, it’s about using technology at a simple level to guide the operator through the process, which means that anybody can do this job and follow the instructions from a terminal, a handhold or a computer. Good example of this are sorting cabinet that talk back to an operator and/or direct him/her to the sorting location. All that they need to do is scan an item and everything from that point is instructed by voice.
Nobody says that everything has to be automated. There is definitely place for manual processes. It’s just a case, how to make them smarter so the posts can get a quality control, reduce the error, have tractability, make them faster and more efficient. This is where an expert consultant can help.
While letter is declining, how to transform the business and manage existing facilities?The postal business is being scaled for different volumes. From the 1950’s onward, it has been invested in automation to be able to process this huge letter volumes. Letters are very consistent in their size, handling and addressing format, and so posts got very good and efficient at sorting that mail. If we look at mail today – parcels and bundles – they are all different shapes, sizes and weights, so the challenge to automate is even greater than for letter, where it was invested in.
Most posts are suffering currently a letter decline, which brings up two aspects:
- The postal machine is optimized for handling letters which are constantly reducing and the efficiency come from handling volume. If the volume is reducing, the costs are actually increasing even without any further investment. It’s an out of control situation in the business. The make the machines efficient, the high volumes of mail are required and the mail isn’t there.
- What to do now with this equipment which is becoming obsolete and the facilities which are processing those items.
The solution to these two issues is the review of how many machines are required and where they and other facilities should be located. That’s where an expert consultant can come and look at the business, the network requirements, take a 10 to 15 review and put in the transition plan that minimizes the cost of the business. This will answer the questions how to transform the business, manage existing facilities and adapt an automation.
Letter are huge cash cow for postal industry. Basically the margin contribution for standard post is primary from the letters sorting, the margins on sorting parcels and packages are much lower. The average margin on parcels in around 3-4% while on letters in access of 20%. Looking at the balance sheet for the business it’s a huge risk because posts need huge growth in parcels to be able to make up the revenue and margins that they are losing on letters.
Many posts are facing this challenge now of how to make their balance sheet sustainable for the coming years, because they are losing their cash cow on letter. This brings them to seek for the best area of investment, which would diversify their business and increase a revenue.
E-commerce brings a positive drive in traffic but how to handle massive peaks and drops in volume?E-commerce presents post and parcel industry with major peaks and drops in volume. Peak moments take place mostly during special national holidays, such as Christmas, Mother’s Day but also commercial events as Black Friday. Companies can really fall apart at this part of the year because they just can’t handle the volume. Volume increase in some cases by 5 till 10 times than normal daily volume.
E-commerce is actually the safer of post companies because while the letter decline is happening, small parcels and packages volume is growing massively. Postal organizations need to be more flexible and be able to up-scale and down-scale their business just for the few days a year in order to handle big peaks and drops in volume, whenever it’s related to Christmas, Cyber Monday (UK), Singles Day (Singapore - 50 – 60 million parcels in one day), etc.
The challenge is of having the business that is flexible, scalable but also cost conscious. Many companies have damaged their reputation because they have let customers down. This is an example, that one day can ruin your business. Reputation damage is incredibly difficult to repair and people remember a bad service for a long time. Especially when that bad service is with one of the major shippers (Amazon, EBay), where by losing a contract, you can lose 10 thousands of parcels per day.
E-commerce bring a positive drive in traffic. However another challenge is being smart on deliver prices. It needs to be low cost because customers don’t want to pay for the delivery. Nowadays customers expect premium delivery services but they don’t want to pay for them. The cost models are very important. Postal and parcel organizations, not necessary have to deliver for free but you have to be smart on your prices at Delivery Company but also delivery costs need to be subsidized by the retailer.
Data modelling is a unique service by Prime Competence, due to its expertise within postal industry and understanding both the operational, commercial and operational impact that posts need to consider while finalizing their business plans. It can concern anything, e.g. changes to automation or recognition systems, and finding out what’s the possible impact of these improvements to network optimization or route planning. This concerns many different aspects of decision making processes and various scenarios that need to be prioritized, either by the project team or the board while looking at areas to invest and deciding which business plans may have the fastest return on investment.
Prime Competence can look, first of all, what the industry’s best practice is. Often posts have several positive choices of business plan, but they don’t know which will have the fastest and best impact. That’s when modelling comes into place. That could be, e.g. a quick guide of modelling the unique post’s environment. Once the model is built, whether these are automation systems, operations, deliveries, routes or planning, Prime Competence can create a custom model, which is relevant to that post’s unique situation.
While creating the model, we have some quick steps based on our best practice across the industry. Once we have created a model, we can give guidance on how to use it and either hand it over to the project team or look at different scenarios ourselves to make a final report on different scenarios. Prime Competence can provide a full service or just a step in that service – both are possible.
SummaryIt can be an advantage for the management to have a modelling done outside of the core team – because all teams have a biased. Having some core competence being done by third party expert can give greater clarity and an independence of that data.
C-levels have a fear of doing too much in-house. They wonder how they can remove the biased or understand where the team is coming from, while making recommendations. It may not be purely based on facts, e.g. use of automation in oppose to keep something manual and flexible. It’s not always a case that automation is the best. Sometimes in rapidly changing situation, it’s better to keep the higher costs, maybe in the short term of using people, but with ability to respond more rapidly as things change. If the growth model is quite a constant over months and years, then it’s a time to look how to automate and improve these processes with investments in systems. There are often a biased by the team which is pro-automation – who want to automate everything. Then at the C-level they might not be able to distinguish between the recommendations because this team likes automation or because it’s the best choice for the business. That’s where the expert, independent consultant can help and give an unbiased view.
Prime Competence with its unique expertise is able to fulfil creation of the model all the way to full service of running data and providing a final report. We can equip the post’s team with additional modelling expertise or we can run the whole program for the post from start to finish in terms of making recommendations.
The investment decisions are based on these models, so it’s crucial to trust that they include the best options for that specific organization.
Prime Competence can do a little or do a lot. Some posts have already have large teams for doing some of those tasks already, and they need maybe one small part of expertise. Another cases they have got rid of these teams and they need a lot of help. We can fit in with posts situation (small part of the project or the whole project).
The is not one story for the postal industry with regards to growth of decline of bulk mail -in some parts of the world it is reducing very fast, in other parts of the world is increasing substantially.
It’s all about making bulk mail smarter, so people want it. If it’s traditional bulk mail, it can be regarded by a receiver as a SPAM, which they didn’t request and they don’t want, so it goes straight to the trash.
How to make bulk mail more relevant? Personalization! The key development is in the production process!
Posts that are seen a growth in bulk mail, are taking the production of the mail in-house. They are not receiving it on trucks and sorting it, they are making this printing in-house and sorting them in the delivery routes. These posts can also print personalized correspondence, e.g. rather of having a specific format, they have a folder with inserts, which allows to have a hundred advertisers on a book set that moment. They also would know through a marketing that receiver A will be interested in a topic “X”, so out of one hundred, ten are inserted, which are relevant for this specific receiver.
In the countries where the bulk mail is growing fast, the posts have made it more relevant, more targeted and more personal. The good example is Sweden, where they have adjusted printing technology. Now it’s possible to personalize mail, where the receiver gets a mail piece which it’s not just one of several hundred thousand copies, it’s personalized and it addresses user/ receiver by name.
Bulk mail is about the relevancy, rationalization and making it efficient to produce. Keeping the cost down and flexible. Posts need to realize the importance of bulk mail. Properly organized it can bring a lot of financial profits.
Private companies have set the standard for premium services. Before postal operators even toughed about developing their services, DHL and UPS made it accessible for their clients to see the location of an ordered item, estimated time of delivery or where it will be delivered. Every stage of delivery was well-documented and communicated. This set an expectations of customers also on the economy services. The challenge of the post is to provide now premium customer services at everyday cost.
To face this expectations, posts need to start thinking from customer prospective, which may sound quite obvious, but it’s not necessary clear to many posts. The main focus should be on technology and processes to become customer centric.
Premium services are about making it easy for the customer and to give them a reason to choose your services for item delivery. Some posts provide a possibility to reschedule the delivery, some are using parcel lockers or to the neighborhood collection point. The customer expectations differ on each market.
The challenge is to make premium services, a day to day services and become friendlier to your shippers and receivers in providing them information about the service. However, posts should look also for the other angles on customer’s services and think of their own way how to meet the needs of their customers.
What’s your way to stay relevant to the local market?There is no traditional postal operator and no formula across the world for success. In moving forward there are different way to respond to the competition. It’s not only about being smarter, being lower cost, but it’s also being relevant to your customer and to know what your customer expects. What worked in one country, not necessary must be a way to performance in other countries.
How posts can become more relevant to their customers? Let’s look at the example of Belgium post which on the side with traditional delivery, made a deal with grocery companies to deliver the groceries through the postman and with pharmaceutical companies to deliver pharmaceuticals. They also are responsible to make sure that person who is receiving medicines, understands the pharmaceutical and how to use them.
Belgium post is the best example, that there is much more to be delivered at the doorstep than just a delivery item and that the posts started offering services which are not anymore traditional delivery services.
The other side of competition is, how to beat the others.
How to beat the others who are doing similar things in the industry?
Diversification is one answer to that, so start doing something which other guys aren’t doing! It’s off course crucial to be very careful on cost control in order to offer competitive services and take under an account numerous local barriers.
The reality however shows that posts need to start taking actions, because if there still are monopolists on some markets, they won’t stay in this position for long. Even if they don’t feel a pressure yet of having an open market yet. But they need to take action because the market will open, sooner or later.
The time for post and parcel companies have come to reconsider, what added value could they bring to their customers and become more relevant to the local market.
There are many different application for big data within postal industry, some key areas where big data is useful is about, e.g. capturing more data that it is in line with your existing operations. Posts have universal service obligations, they are visiting every doorstep every day, every business every day or every couple of days.
What more could be done, to make most of this service? Could you do more things, basically at the same time as going to every doorstep? So, it’s about piggybacking additional services on what you need to do anyway.
It might also be about looking for cost efficiency. Data is huge valuable resource within the post and a lot of the time, this information, this valuable data is not used by posts. What we know from the recent survey, 67% of organizations know that they need Big Data strategy, but only 23% of organizations have started on that road. There is a big gap, knowing that they have to do something, what could be valuable for their business, and actually having knowledge being able to do something about it. Prime Competence can, first of all, look out for quick wins both in terms of internal efficiency but also about facilitating new services for clients.
Increasing cost efficiency by unlocking data across the organization, e.g. route optimization, network planning, impacts of events that may impact your delivery service causing delays, working around work roads, major events, being able to adapt your operation to maintain service level in spite of changing environment. All of that information is genially available, it’s just about being able to unlock it and make us of it.
Facilitating new services or improve service level for client, e.g. smarter route optimization or network design may enable you to have a later cut-off with both in receiving parcels into your sorting center. What impact would that be if your major shipping customer can deliver it to your sorting center up to 3 AM in the morning and you can still make 8 AM delivery runs, as the posts are telling them that they must have their parcels in the sorting center by 9 AM. It’s a huge competitive advantage and it’s typical of what can be done by unlocking this valuable information and making best use of tools for optimizing routes, operations and networks. Could you monetize valuable data that is already captured as part of your operations? You could maybe sell that information, anonymized as intelligence to third parties. Posts are in unique positions in the fact that they are going across the country to every address, every week and sometimes every day. Other organizations will find that information valuable, e.g. when people are moving, new addresses, new developments, updating, and mapping. There is a lot of different applications there that you can do as a post anyway, that would be valuable information to other third parties.
Posts are like other big organizations in this regard that data is locked away. It’s for particular purpose or particular application it was designed for and there is no sharing of that information across the organization. Information that might be valuable to e.g. finance but originally comes from operations (and vice versa) – that information isn’t shared in the smart way. Often it’s locked away in property systems, so it’s not easy to share that information. However there are ways of opening up that data, so it can be used. Take an example of automation and sorting systems of looking at proactive maintenance regimes. When is the appropriate time to do maintenance, before something will fail? You can plan and predict different system failures before they happen and have proactive maintenance system that maintains up-time. That’s about collecting all that big data that is already e.g. in the sorting systems, automation platforms or the operations. Bringing it together and being able (as an outcome) plan your proactive maintenance strategy. The benefit being that you maximize up-time. There is huge benefits there in making sure that you can offer the service that you need to and do it predictably.
Environmental monitoring is a good example how the posts can utilize their existing network and investment in being out in the environment for other purposes. If your mail trucks are traveling all over the country, through neighborhoods or through towns. Why not fit an environmental measuring systems on those trucks and collect environmental information, like pollution levels. Also different characteristics which you can capture that valuable information the alternative is that municipalities, governments need to install fixed measuring stations and those cost a lot of money. The post is going to every street to every part of the country, every day, every week. Why not make a use of that need to develop additional revenue stream to be able to sell that as a service to government, municipalities and third parties.
Is about unlocking the potential both for cost saving in the organization but also new intelligent services that can be sold to third parties. Essentially the net result is that you are improving your revenue and you are getting the most of your investment that you need to have anyway to deliver the mail.
How Prime Competence can help?It comes to Prime Competence traditional model. That is to do a quick scan of IT environment within the post and listen what their goals are (high-level goals from the management), what they would like to achieve. That quick scan analysis can result with a top prioritize list of what that post could achieve both in terms of costs efficiency, savings as well as new potential services. Also some early steps on recommending how they might go about it.
Prime Competence is involved in this programs all over the world, so we can come in with already some understanding of postal market from other similar situations and really focus on what the steps might be, specifically to that organization but already using a proven business model that is being looked at industry by others. It’s about responding quickly because going back to that need of 67% - they already know that they should be doing something but they lack the tools and knowledge to be able to say how they should get started. Prime Competence can bridge that gap for relatively low cost. It’s about sharing the best practice around the industry and looking at each post specific situation.
What is your strategic vision: increasing or reducing number of facilities?What should the future shape of the network be? If the posts haven’t taken a look at their facilities for many years now, there is a huge chance, that some of them are not needed anymore, some are outdated or would need a relocation. Like it happened in the Netherlands, they used to have numerous mini sorting locations) at the local distribution point (at the post offices in towns) where they would do some final sorting. Finally they got rid of (hundreds) those and centralized it.
That’s the case for many posts and parcel companies. They have huge networks of facilities that may not fit the future need of the business. This requires from them to take a ten or fifteen year perspective and have a transition plan from today that takes them to the future.
Sometimes it’s about reducing existing facilities. In Denmark, for instance, they are closing down all their sorting centers and are just going to have two for the whole country. These centers are going to be multi-centers (so that they sort everything). Looking at this, we see that the days of having letter sorting centers and parcel sorting centers are numbered, because the future is, to basically do everything in one big building and locating that in a very smart place, so that the companies are not increasing their transportation’s cost.
It might not only be a case of reducing centers, but also of increasing the number of them. PostNL is also an interesting example, they went from 4-5 large centers to 18 mid-size centers. It’s all about adjusting to the local conditions. PostNL decided to make this move because the Netherlands is a very high density area. They have created sort of a network – a mesh – for transporting items through the system, so the distance between a sorting centers (which is on average less than 50 km).
The challenge is to have the long-term strategic vision of where the business would like to be. Looking at existing facilities and making suggestions through the transition plan for facilities/ the network you might need in five/ ten/ fifteen years’ time and being ready for that. Prime Competence brings in an independent prospective and also the best practice from the rest of industry to make some suggestions of what the post could do. With the outcome of minimizing the cost and maintaining flexibility.
NEW SERVICE DEVELOPMENT
New Service Development isn’t an option, it’s essential for survival!New Service Development is not an option anymore, it’s a must, and it’s a survival. Without New Service Development posts will not survive, they will die, because once the letter mail goes, the money goes. New Services Development is about creating the services which meet the needs of the consumer, e.g. launching e-commerce shipping service requires having very data-rich service where the receiver knows the status and exactly when it’s going to be delivered and can set delivery slots him/herself, etc. It’s about becoming relevant to your customer.
However, it’s not only about enriching the existing services, but also about diversifying them and adding new ones. Posts should review their customer base, both shippers and receivers, and check if there is something complementary they can add as a new service to that existing client base or if they want to move to the new areas.
The post is a trusted brand, because of the postmen who is going to every door, every day - they have been around forever and people know them and they trust them. That means that as the brand, posts can bring new propositions to the market and they have instant brand approval. The actual post person is a trusted person of the community, the people see them every day and they can be a trusted source of bringing in new services to the doorstep, whenever it’s groceries or instructions of how to use pharmaceuticals, making sure that person takes the pharmaceuticals (Belgium). That is a perfect example of utilizing your existing structure to deliver more and higher value added services, and makes your delivery business more sustainable.
There are posts that look totally out of the box, out of logistics, out of delivery services. In UK, post went into financial services. Post offices were dying and closing for many years because nobody was coming to post anything anymore. The government spent few hundred million pounds to upgrade post offices to service centers. In that service center post is just one thing customers can do, it is also possible to open a bank account, get the benefits (if getting government benefits), buying a mobile phone, get cash, etc. Many services within post office network to make those post offices sustainable.
In India postal service opens furniture factories and steel processing mills. They do this, just to employ people because they are an arm of the government but in different parts on the world people would never expect postal companies to be active in steel industry.
The expectations need to change because logistics and posts might be a core service but people need to get use to the fact that the post is going to do many different things, depending on the country and what fits. Posts will be getting into many different areas because it’s the only way they can survive.
New Services Development is about making the right choices for a financial sustainable future of postal companies. All posts need to develop their services whenever it’s in-post or out-of-post, in financial services or whatever it might be, every post needs to do diversification. They are not going to get their revenues from the letters anymore, and the revenue is not going to be replaced with the growing e-commerce and parcels. That’s way if they want to stay that scale of business, they have to do New Service Development. It’s about being more relevant to your customers and getting new customers in (maybe) new markets.
And what the best investment for your business would be?It isn’t good enough to have a good business case – there are numerous great business cases within the postal business – it’s about finding the most advantageous business case and knowing where to invest.
There are plenty areas for investment, such as looking at optimizing delivery routes, return, sorting technology or route planning software. In order to make transparent analysis, it’s important to have a consultant on board, who can look at different scenarios, net reductions in vans, the net reductions in hours worked, etc. It is sometimes very useful and important to have an independent prospective because when it comes to modelling and looking at different scenarios of business and “thinking out of the box”, people inside the organization aren’t objective.
Some organizations could say, that they don’t need a consultant and that they can do it in-house. The difference with Prime Competence is, that we are not a general consultant, we are an expert consultant, so we understand posts and their processes – we are different than other consultants.
There are many ideas but business cases need to line up with company’s strategy, business focus and other business cases. This is where an expert consultant can add a lot of value by offering an independent analysis and modelling to make those decisions. It’s not about finding something to invest in, but it’s finding the best, suitable investment for the company which is in line with its longer goals and strategy.
Sustainability is a must have policy for corporate social responsibility. It’s not about money saving and costs reduction, it’s a corporation duty to be sustainable in terms of environment.
However, who said that it’s not possible to kill two birds with one stone. Savings can be made, e.g. in one of the highest cost elements in the distribution – vehicles and energy. There are emerging technologies such as electronics vehicles, which is more feasible today than it was couple years ago. Electronics vehicles can be rolled out with charging stations and there are savings to be made in long-term as well. As transport is the biggest cost it’s definitely an area where you can become more sustainable by using different vehicles or reducing a number of miles on the road (route optimization), it’s another great way of cutting your carbon footprint.
Another example are facilities. Installation of smart mobility systems, wind power and solar panels attached to the sorting center can make it become a net energy generator. This way it’s not only about using own energy, but also generating money and energy that is going to the grid.
There is an expectation now in the market place that delivery service should be as sustainable as possible. There are some European regulations already regarding carbon trading scheme, where corporations can offset their carbon by essentially buying other people allowance. It’s probably only a matter of time before a legislation will step into postal world for the road transportation, which will require to reduce and offset their carbon. Using too much carbon will mean paying somebody else’s allowance and that is net a money from their bottom line.
Sustainability is a must have for corporate social responsibility and the consumer expectations these days but increasingly it’s going to hit a bottom line if posts don’t have a sustainability measures. Transportation and facilities are definitely realistic areas where posts can be sustainable but also, at to the bottom line – save some money.
It’s time for posts to be smart about sustainability and think about their bottom line and their impact in the future.
How to turn your biggest cost drivers into your cash-flow channel?There are a lot of cost efficiency which can be made in the transport. Transportation is not only related to the truck on the road, it’s about making the whole transportation process more efficient. This process starts at the sorting hub, where the sorting process is adapted to place the items in the cage or the van, in delivery ready sequence. Making the planning process smart by putting the mail items in the right order, saves a lot of time on the road and makes it much easier for the driver. As a result, posts can have a longer routes and fewer vans.
Another challenge for posts regarding transportation process is to provide the customer with a frequent update of their delivery status. The customer expects now the time-slot of their item. By optimizing the delivery routes beforehand, posts can give their customers much more accuracy when he/she is going to receive the parcel.
Transport is still one of the biggest cost drivers in the parcel industry. It is important that through the optimization process post and postal operators can get cost savings, as well as increase job efficiency by quicker deliveries for customers and more consistent deliveries.
How to determine on which stage the technology is already required?Technology is still a quite specialist area. Many posts are struggling if they need a technology or if they can do some of these processes manually. Very often an advice of independent expert consultant is priceless in this matter, who can objectively determine if the technology at this stage is required or is there a different way of doing things.
When the technology is required, posts are finding suddenly themselves in the position with a lot of people knocking on the door, all with different equipment and solutions, saying that theirs the best. Some posts have automation experts in-house and some don’t. Often however, when it comes to a specialist area, they might want to add some expertise and know-how.
This is where Prime Competence can help and do an independent review if the automation is required and if yes, what is the best solution – “don’t listen to the vendors, listen to an independent expert”. The expert consultant will do some modelling, look at the cost and handling per piece, what investment is required and what the future potential is. Supporting the process of RFQ (Request for quotation), assisting in purchasing process – independent opinion on received quotations – are also the areas where the consultant support this process.
The posts may just want to hire an expert only for two/ three days to add to their team a specialist expertise e.g. on OCR recognition, which is a quite specialist area. This way the posts can essentially add an expertise to their teams by the hour.
It’s all about getting an independent advice and a gain from the expert consultant not from the general consultant. Prime Competence is an expert in the automation technology, recognition Sorting, handling, loading, recognition technologies, scanning, are our everyday business.