Royal Mail - More For Less?

[TrueBlueTerrier]

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Without a doubt, the Royal Mail is under pressure and I can't begin to map out just how much pressure or in how many areas. With a massive restructuring programme still under way in order to more closely match its modern business model and still hampered by regulation, the Royal Mail is fighting a marked drop in traditional stamped mail.

Some have incorrectly assumed that the rise in e-packages has made up for the losses incurred through a more competitive marketplace and a decline in letters but this has not been the case. Besides, the existing network is set up for a business model that barely exists now and to compete, the Royal Mail needs the equipment to do so.

Ask any postal worker and they will tell you they are delivering more - much more. So why the disparity? Well for one thing, many postal rounds (better known as 'walks') have been dropped and existing workers required to cover a greater area in a shorter amount of time - known as absorption. With even the time spent at each door carefully worked out, the changes have not exactly been welcomed by those that do the ground work and this ethos extends right the way through the distribution chain. There are more magazines, more unsolicited advertising mail and a tight time-frame in which to deliver it all.

All of this is nothing new in the private sector but the Royal Mail, traditionally a public sector organisation and with a large trade union negotiating every twist and turn, has had to dig its heels in and try to explain exactly why the business has to change. After numerous meetings, stand-offs and a great deal of number crunching, the Communication Workers Union and Royal Mail appear to have reached some kind of agreement on the way forward and these days tend to speak as one. 'Business' has already replaced the word 'service' amidst a certain degree of shrinkage, so if e-business has not saved the day, what about new housing estates?

As one postal worker explains:

"Delivery points have increased from 26.9million in 2003 to 28.8 million in 2012 - that's almost two million new delivery points all of which require a delivery of mail. To do that, you need human beings employed by RM which means man hours and wages.

"If you say 600 stops to a urban delivery round and divide the two million figure by 600 you'll see how many delivery rounds are in existence for no other reason than housebuilding. During this period RM has reduced its staff numbers as well. I would suggest this makes RM a lot more efficient as it is covering more and more delivery points with less and less staff.

"In my own area, we have loads of new properties being built all of which will end up receiving post and will need somebody to deliver that post. That means creating new delivery rounds - rounds and staff cost money. Now there is certain amount of spare capacity in my area which will be eliminated thus making us more efficient which is what seems to be a key requirement for RM at the moment from its stakeholders and commentators.

"However that does not always mean cheaper/less cost as the massive growth in delivery points will simply be covered by savings from the existing set up. The more houses that are built means the more savings have to be redeployed straight back into the operation.

"Over the last 5 years RM has made loads of savings. In my own area we have absorbed five delivery rounds and increased the amount of staff that are PT and reduced the number of FT. Outdoor savings are very difficult so all RM can do is ensure indoor work is done as quickly as possible which means the very best mail sorting technology being used. So in a few months time Royal Mail will be more efficient in my area but it wont be much cheaper if cheaper at all..."

This juggling act is at the centre of planning within Royal Mail, faced as it is, with even greater growth in electronic communications and I should point out that all incumbent operators face these challenges, not least of which is the US Postal Service which is at crisis point.

Price increases too are on the way, with even second class post set to rise from from 36p to 55p and first class likely to see it's price cap removed. The concern for regulators and consumer bodies is that we'll all pay more but receive the same or substantially less in return. Whilst the Royal Mail does have a plan to streamline the network (and Post Office Ltd too), it is not set in stone. The market continues to change and it is difficult to prejudge what new technological advance will further mess up it's plans. The price increases may temporarily take the pressure off Royal Mail whilst Ofcom figures out how to take the regulatory brakes off, but there is indeed a fine balance between increasing prices and losing business as a result.

As Gene Del Polito, President of the US-based Postcom warns:

"This should serve as a note of caution to all who believe the solution to the U.S. Postal Service's problems lies simply in the raising of rates. Take away the class-based inflation cap from rates and watch the mail as it marches out of the door."

[slave]

Besides, the existing network is set up for a business model that barely exists now and to compete, the Royal Mail needs the equipment to do so.

nooo, RM only provides the equipment providing it can make a cost saving, otherwise it's business as usual or force the equipment in after falsifying the figures to make the required saving. Modernisation my arse.