RM needs to deliver on modernisation plans, post haste

[POSTMAN]

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From late summer, Royal Mail parcels will for the first time be sorted and labelled by machines so they can be tracked electronically.
It is high tech for the 500-year-old postal operator that is struggling to keep up in the world of online shopping — but already old hat for Amazon and other rival delivery companies.

Almost a decade after an independent government report declared that Royal Mail must “modernise or decline”, there is serious doubt about whether it can adapt fast enough to claim its place in the market.

Letters are in terminal decline, while the parcels business — where Royal Mail’s growth is focused — is developing fast as internet shoppers expect increasingly rapid, traceable and conveniently-timed package deliveries but want costs to remain low.

“The parcel market has become a lot more competitive since the initial public offering in 2013,” says David Kerstens at Jefferies, the US investment bank. “Royal Mail is making progress on modernisation but is it fast enough?”

Underscoring these concerns, the postal watchdog Ofcom launched an investigation into Royal Mail’s progress on Tuesday. The withdrawal of its main competitor — Whistl — in the door-to-door letter delivery market has sparked concerns that Royal Mail will lack the impetus to become more efficient in a declining market.

The announcement came days after the UK government raised £750m by selling half of its remaining 30 per cent stake in Royal Mail at 500p per share. Royal Mail was privatised in an IPO in October 2013, which priced its shares at 330p.

Royal Mail’s parcels delivery business generates more than half its £9.4bn revenues and is critical to its future.

But the group faces two immediate challenges as it modernises this business.

First, it is starting from too far behind its rivals. Competitors such as DPD, DHL and Hermes are building new delivery hubs and introducing new technology. Amazon is already on its way to testing the use of drones to deliver packages in the UK.

Roger Sumner-Rivers, founder of Parcelhero, the courier company, says that even where Royal Mail is modernising services — such as the introduction of automated parcel sorting — “it is simply playing catch-up with the rest of the industry”.

“Even as its new tracking service is being rolled out, technology has already moved on,” he says.

As an example he points to DPD, Royal Mail’s French state-owned rival, which operates a nationwide seven-day service that uses GPS technology to give customers a one-hour delivery window.

Royal Mail operates Sunday deliveries only for certain retailers. It has started trialling Sunday deliveries within the M25 for other packages but provides no definite time slot.

Second, Royal Mail is grappling with costs and a less flexible workforce than rivals.

Newer entrants to the market such as Yodel and Whistl have leaner, cheaper workforces, many of whom are on zero hours contracts. Royal Mail, by contrast, is still in the hold of the CWU union, which has agreed a 2.8 per cent pay award in 2015/16 and no forced redundancies.

Sam Bland, analyst at Investec, argues that Royal Mail is “chronically inefficient”. Employees deliver fewer parcels per person than postal operators in comparable countries, he says. A postal worker in Britain will deliver to 191 households compared with Deutsche Post’s 244. If Royal Mail was as efficient it could support its business with 7 per cent or 10,000 fewer staff, saving around £300m a year, according to Mr Bland.

Greater competition in the parcels business is also eating into Royal Mail’s business.


In 2013 it forecast that its parcels market would grow by 5 per cent a year. Last November it had to downgrade that increase to 1 or 2 per cent over the next two years as a result of Amazon’s decision to deliver its own packages.

Similarly, retailers’ attempts to steer online customers towards “click and collect” services, which reduce costs and use store networks more efficiently, undermine the package delivery volumes that Royal Mail might once have relied on in its revenue projections.

Royal Mail dismisses the concerns. “Our significant investment in IT and technology for our parcels business is not about catch-up, but about building scale,” says Nick Landon, managing director at Royal Mail Parcels. “We already scan more items than any other company in the UK.”

He points to figures showing that Royal Mail increased its share of the UK parcel market from 51 to 52 per cent by volume between 2012 and 2015 and from 36 per cent to 38 per cent by revenue.

This is evidence that its self-help measures are working, it says. Between 2006-2007 and 2013 Royal Mail invested £2.8bn in modernisation plans, saving around £500m a year. It has cut the number of mail centres from 69 to 39 over that period; reorganised management to deliver a further £80m a year savings, while letter sorting has been automated and mail delivery improved through the introduction of lightweight trolleys. Employee numbers have also fallen from 172,000 in 2008 to 143,000 and will keep shrinking at the rate of around 2,000 to 3,000 a year, says Royal Mail.

The question for the organisation is whether improvements such as these will be sufficient.

Mr Sumner-Rivers says Royal Mail has “a long way to go”.

For the industry, delivering packages profitably in the current environment is hard; for Royal Mail, building a competitive parcels business looks even tougher.

[Poshpost]

"A postal worker in Britain will deliver to 191 households compared with Deutsche Post’s 244."

Is that so, my walk has 498 "households".

[britwrit]

He points to figures showing that Royal Mail increased its share of the UK parcel market from 51 to 52 per cent by volume between 2012 and 2015 and from 36 per cent to 38 per cent by revenue.

So, by any rational measure, we're a smashing success.

Like Ronald Reagan always said, the nine most terrifying words in the English language are "We're from the government and we're here to help."

[wannabeek]

"A postal worker in Britain will deliver to 191 households compared with Deutsche Post’s 244."

Is that so, my walk has 498 "households".

I think the guy made a simple maths error - he probably divided the number of households in the country by all the RM staff, not taking into account the ones who don't actually deliver.

I believe there are about 26 million households in Britain, and 60,000 delivery routes in RM, so that would make an average of 433 calls per duty. Sounds low but in the right region for our area, smallest being below 400 calls, largest being almost 700.

[DB1100]

They expect us to deliver ever increasing numbers of parcels in the future,fair enough but why are we still using tiny vans,I don't know about the rest of the Country but vauxhall combi's are way too small now,we often cannot fit it all in and,if we manage to get it all in,when you pull up at the first loop and open the doors quite a lot spills out,it's like something out the keystone cops.

[Newbie001]

Deutsche Post held a ceremony to celebrate a big new distribution centre in Berlin on Wednesday -- even though workers at the mail and logistics company have been on strike since June 8.

While the strike continues to hit postal services, with millions of letters and packages not delivered over the past week, the company went ahead with the "Richtfest" or topping out ceremony for the new mechanised distribution centre, toasting the event with wine and schnapps.

Deutsche Post workers began the strike on June 8 to demand better pay and conditions.

Germany has been hit with the most strikes since 1993, according to the IW economic research institute, with more than 500,000 work days lost so far this year, triple the number of 2014, in a country where strikes had been relatively rare.

Seems like Deutsche Post has it's own issues

[Newbie001]

Sam Bland, analyst at Investec, argues that Royal Mail is “chronically inefficient”. Employees deliver fewer parcels per person than postal operators in comparable countries, he says. A postal worker in Britain will deliver to 191 households compared with Deutsche Post’s 244. If Royal Mail was as efficient it could support its business with 7 per cent or 10,000 fewer staff, saving around £300m a year, according to Mr Bland.

Also someone from an asset management company, that specialize in getting rid of a company's biggest assets (staff). What else would they say.

[wacko74]

I'd imagine the size of the duties in London would drag the national average right down.

[Dozen]

I'd imagine the size of the duties in London would drag the national average right down.

I've covered somewhere in the region of 90+ different duties in London, ranging from very inner-city to much more suburban areas. Going to be completely honest here, by far the shortest one i've ever seen had about 420 calls. Thought it'd be easy looking at it but surprised me how much longer it took, due to the larger size of the houses and incredible volume of packets it received. That was the shortest walk i've covered by a long shot, i'd say the "easier" duties here seem to have between 520 - 600 calls. Most of the duties in general are more in the region of about 640 to 700 calls, but i've done some that had upwards of 840, even some that must of been approaching or going over 1000 that were absolutely brutal and virtually impossible to finish within time.