Royal Mail is undergoing a major transformation to modernize its operations and ensure its long-term viability in a declining mail volume environment. The presentation outlines Royal Mail's modernization programs which include investing over £1 billion to automate mail processing, rationalize the mail center and distribution center networks, and introduce new delivery methods. The transformation is intended to reduce costs by over £0.9 billion annually while maintaining high quality service. While there have been successes in automation and network optimization, fully modernizing delivery operations remains a challenge. The transformation is supported by governance structures and over 1,000 change management professionals.
2. Agenda …..
• Why is this transformation important?
• What are we trying to achieve?
• What are the challenges?
• How are we governing this?
• What have we delivered?
• What have we learnt?
But first, some context……
3. 3
After 400 years of existence, Royal Mail
continues to have a major presence across the
UK and Europe…...
Our letters and
parcels business -
covering the ‘one-
price-goes-anywhere’
UK universal service
Our pan-European
parcels business
employing over
14,500 employees
across 42 countries
Our growing UK
based express
parcels business,
delivering around
150,000 parcels a
day
4. 4
The UK mail operation currently delivers 54m
letters and 4m parcels to 29m addresses daily!
• We collect from 115,300 post
boxes, 10,700 post offices and
79,700 business customers six-
days-a-week
• We operate 24 hours a day using
a network of 40,500 vehicles, 56
flights and 11 trains
• Today, we employ 137,400
people, operating out of 50 mail
sortation centres, 8 regional
distribution centres and 1,356
delivery offices
5. 5
Overall postal volumes have been in decline as
technology and competition take effect…
m ITEMS
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19,000
20,000
21,000
2007 2008 2009 2010 2011
20%DECLINE IN 5 YEARS
6. 6
Limited
access to
capital to
modernise
In addition, several other factors converged in
recent years to create a challenging situation….
Market
liberalisation
before
modernising
Legacy
pension
deficit
Intrusive
regulatory
price and
conduct
controls
Artificial
sortation
competition
7. 7
By March 2010, the prospects for the company
looked pretty bleak…..
Group revenues were in decline, £120m less than 2009, due to
the recession and the structural decline in our core volumes
The IT network and capability represented a huge risk to
business continuity
Cash was flowing out, not in!
2%
£213m
£
£
The cost response was too slow, with the company unable to
reduce costs at the same pace as revenues were falling.
Unsustainable operating losses were the result
0%£
The network continued to lag behind other postal operators in
terms of automation and efficiency. This required significant
financial investment to address changing mix and falling volumes
Our pension deficit had ballooned to over £9bn, with the pension
trustee threatening tough action£ £9bn
8. 8
By March 2010, the prospects for the company
looked pretty bleak…..
Group revenues were in decline, £120m less than 2009, due to
the recession and the structural decline in our core volumes
The IT network and capability represented a huge risk to
business continuity
Cash was flowing out, not in!
2%
£213m
£
£
The cost response was too slow, with the company unable to
reduce costs at the same pace as revenues were falling.
Unsustainable operating losses were the result
0%£
The network continued to lag behind other postal operators in
terms of automation and efficiency. This required significant
financial investment to address changing mix and falling volumes
Our pension deficit had ballooned to over £9bn, with the pension
trustee threatening tough action£ £9bn
9. 9
The Postal Services Act 2011 provided a level
playing field…..
®
Historic pension
deficit to
Government
Private investment
Post Office in
public or mutual
ownership
New regulator and
regulation
10. 10
• Trays not Bags
• Collections
Optimisation
• Digital
handheld
devices on all
collection
routes
COLLECTIONS
• Network
Optimisation
• Optimised
Vehicle
Service centre
Network
• SAP HR –
PSP
• Track & Trace
LOGISTICS & TECHNOLOGY
• Optimise Plant
Capacity
• State of the Art
Automation
• Enhanced
Address
Interpretation
Infrastructure
PROCESSING
• Use of
Automation
• New Delivery
Methods
• Digital
handheld
devices on all
delivery routes
• Convenient
delivery
DELIVERY
The modernisation portfolio is extensive and
covers every aspect of the operational pipeline,
e.g....
11. We have invested £0.5 billion in proven
technology supporting a high quality operation
INTEGRATED MAIL PROCESSOR x
138CULLER FACER CANCELLER x 74 LARGE LETTER SORTERS x 27
i LETTER SORTING MACHINES x 69 COMPACT SEQUENCE SORTER x 574
INTEGRATED MAIL PROCESSOR x 138
12. 12
We are almost two thirds of the way through an
investment programme worth £0.75 billion to
modernise our Mail Centre sortation network…
Key design principles:
Safety: Safe ways of working with common
standards
Quality: Optimal locations meeting quality of
service requirements and
delivering standardised performance
Efficiency Highly efficient, standardised layouts
and cost: with modern automation equipment
Reduced logistics and Mail Centre
networks
People: Right tools for the job and an
enhanced working environment
Enabling £0.2 billion of annual recurring benefits and property
disposal proceeds in excess of £0.3 billion
13. 13
CLOSE
Farnborough
Liverpool
Crewe
Bolton
Coventry
Northampton
Milton Keynes
OPEN
Warrington
South -
Midlands
CLOSE
Watford
Stevenage
Hemel
Southend
OPEN
Home –
Counties
North
Medway
Mount
Pleasant
CLOSE
Maidstone
Tonbridge
Dartford
Canterbury
Teeside
York
London East
London South
Worcester
CLOSE
Darlington
Bradford
Hull
Leicester
Derby
Shrewsbury
Gloucester
Cambridge
CLOSE
Doncaster
Ipswich
CLOSE
Portsmouth
Modernising the Mail Centres….
….our journey is well advanced
CLOSE
Paddington
CLOSE
Reading
Oxford
Oldham
Stockport
Key: Completed Final Decision Authorised for consultation
2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
69 68
64
59
57
48
40
38 37
14. We are half-way through a £0.5 billion investment
programme in our delivery operation….
1
• Safety
Reduce unsafe acts and conditions
2
• Quality of Service and Customer Satisfaction
Maintain regulatory Quality of Service and to provide leading customer service to
a changing market
3
• Methods for a Changing Mail Mix
New equipment enabling staff to carry increased volumes and complete a ‘single
journey down the garden path’ to complete delivery of letters and packets
4
• Productivity Increases and Cost Reduction
Enabling a cost reduction of £0.2 billion p.a. from the introduction of sequenced
mail, outdoor walk planning and new delivery methods
5
•People and World Class Mail
Involvement through engagement and training programmes in new methods and
expansion of World Class Mail continuous improvement to all units
15. 15
And achieving a visible change in the way we
deliver mail, creating capacity and capability for
parcels growth…..
16. ...delivering seamless change on
this scale, whilst maintaining a high
quality ‘business-as-usual’ service
to the UK public every day
Our single biggest challenge to date….
17. 17
Supporting the transformation through skilled
resource and robust governance….
• Projects aligned to programmes
• Reporting into a centralised PMO with satellites
• Working to a standard governance model
• Supported by a strong leadership and engagement focus
• Enabled by a peak of over 1,000 internal programme, project
and change leadership professionals plus multiple suppliers
18. 3
2008 2009 2010 20122011 2013 2014 2015
COLLECTIONS
Visibility &
Tracking
PROCESSING
• Materials
Handling/Traying
• MC
Rationalisation
DELIVERY
Collections Traying
Re-engineering
Large Letters
Automation
Walk Sequencing National
Deployment
LSM Replacement & Single Pass Sorting
Traying– Retail & Wholesale
Delivery Methods Deployment
People Systems
Programme
RFID Install to DOs
Collections Activity Georoute Enabled
CFC upgrade and rationalise
RFID to All CSS sites
Address Interpretation
Service Centre Estate Review
Delivery Office Estate Review
Annual Network Review
Parcels Sortation Simplification
•Automation
•Sorting
LOGISTICS
Mail Centre reduction 69 to 37
Regional Distribution Centre Rationalisation
PDAs for All
WORLD
CLASS MAIL
Mail Centres & RDCs
Delivery and all of rest of Collection/Logistics
SYSTEMS (OPS)
PDAs for Tracked
Plus
Our modernisation activity is at an advanced stage with programmes tracking to time, cost and quality
Parcels Automation
Safety
Industrial
relations
Improving
customer
interaction
Deliver what we
promise
People
engagement
Automating mail
processing
Reduce delivery &
collection costs
New delivery
methods
Mail Centre
efficiency
World
Class Mail
Optimise
networks
and logistics
Upgrade our IT
estate Corporate
Responsibility and
Sustainability
Reduce delivery &
collection costs
Dec 2012
Delivery Office Revisions
PDAs on Collections
19. 19
Mar 2008 Today
Lost Time Accidents per 100,000 hours 4.11 1.29
Collections Trayed to MC’s 29% 69%
Machines – new, refurbished or upgraded 40 992
Mail Centres closures 0 24
Mail Centres opened 0 5
% Outward Mail Automated 72 94
% Mail Sequenced to Delivery Point 1 78
Delivery Offices Fully Modernised 0 693
Number of PDA Devices 0 48,015
People Employed (000's) 158.9 137.4
Cost of operation £5.4bn £5.0bn
Real savings (including inflation) £0.9bn
1c Quality of Service 85.2% 92.5%
Evidenced by our journey over the past 4 years…
20. 20
Plus external recognition for the Programme
continues to grow….
Winner of the Association for Project Safety Awards 2012:
• CDM Co-ordinator of the Year Award
• Regional Health & Safety Award
Finalist for 3 major Association for Project Management Awards 2012:
• Programme of the Year
• Shell HSSE Award
• Project of the Year
Runner-up for the Constructing Excellence Awards for London and the South
East 2012:
•Project of the Year, Client of the Year and Outstanding
Customer Satisfaction
21. 21
We continue to learn as we go….
What’s going well?
•Safety and service at the heart
of the modernisation
•Clear governance
•Major successes in automation
and mail centre rationalisation
What do we need to do better?
•This is tough for all of our people
•Ensuring we deliver ‘sticky change’
•Establish momentum in modernising
the rest of our delivery operation
22. 22
Summary • Transforming Royal Mail is essential
for our future success and ability to
deliver the USO
• The Postal Services Act 2011 has
been a major enabler
• We are delivering a huge technical
programme – but at the core it is a
people programme
• We have invested £1.8 billion to date
and enabled £0.9 billion of recurring
annual benefits
• We have many successes under our
belt and are hugely proud of what we
have achieved!