A commercial business with a social purpose
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1 A commercial business with a social purpose Presentation to the Post Office Networks Seminar 6 th May 2009 Sue Huggins Programme Director, Network Change, UK Post Office 1
2 The Royal Mail Group has three principal operating units in the UK, of which the Post Office is the retail network business ROYAL MAIL GROUP (UK) ROYAL MAIL POST OFFICE LIMITED PARCELFORCE WORLDWIDE Royal Mail processes and delivers over 80 million letters and packages to 28 million addresses every working day, in line with its unique Universal Service Obligation. It is also responsible for designing and producing the UK s stamps and philatelic products The Post Office s national network of branches is at the heart of communities across the country. They provide a trusted access point for everyday products, services and information in postal services, financial services, travel, banking, telephony, bill payments, Government information, retail and the secure transportation of cash Parcelforce Worldwide is a leading provider of collection and delivery services for urgent packages and parcels within the UK and throughout the world, providing both business and private addresses with a range of timed delivery options 2
3 The Post Office plays a critical role as the primary retail channel for Royal Mail, offers government services, telephony and a suite of financial products MAILS GOVERNMENT SERVICES TELEPHONY FINANCIAL SERVICES Standard Urgent and valuable Parcels Overseas Stamps ebay Passport check & send Vehicle licensing Identity checking Pensions & benefits Drivers licence Rod fishing licence Home phone Broadband Phonecards etop-up Insurance Savings and investments Credit cards and loans Mortgages Business banking Personal banking Travel services Bill payment Foreign Exchange 3
4 Today, the Post Office network consists of a core of directly managed branches, complemented by a substantial number of urban and rural agency branches CROWN OFFICES COMMERCIAL AGENCY COMMUNITY AGENCY 373 directly managed branches Primarily located in dense urban areas including coverage in urban deprived areas ~3,500 commercial agency branches Primarily located in urban areas and typically multicounter ~8,200 community agency branches (includes outreach) Substantial coverage in rural locations to meet access criteria 4
5 The network has a backbone of 373 directly-owned Crown Offices which have been undergoing an extensive refurbishment programme 5
6 The UK Post Office has one of the highest rates of franchising for a postal operator with sub-postmasters as entrepreneurs at the heart of local communities Number of postal branches and percentage split of franchised, % = 12,373 1,458 2,114 1,200 4, ,501 10,047 1,359 2,832 13,700 17,000 36,723 24,540 1,512 18% 14% 29% 26% 2,408 9% 13,944 0% 62 0% 53% Franchise 97% 95% 88% 83% 81% 80% 78% 78% 74% 68% 71% 74% 82% 86% 91% 100% 100% 47% Directly Owned 3% 5% 12% 17% 19% 20% 22% 22% 26% 32% UK Ireland Holland 2 Finland AustraliaDenmarkNorway Spain 4 France US 3 Japan Austria Italy Belgium Portugal Germany Switzerland Singapore figures 2 Directly owned branches due to close 3 Franchise include Classified stations and branches, Contract stations and branches, Community post offices 4 Franchise includes Rural services, Auxiliary branches, Rural links Source: Annual reports, Press 6
7 And this is underpinned by innovation in operating models for service delivery particularly in rural areas where the cost structure is challenging RURAL AGENTS PUB IS THE HUB MOBILE POST OFFICE OUTREACH PARTNERS POLICE LOCAL AUTHORITIES 7
8 However, the economics of service were so challenging that a network change programme was required to ensure the viability of the network RATIONALE FOR NETWORK CHANGE The business was losing in excess of 3m per day due to the cost of sustaining a 14,500 national branch network Challenges around viability of existing branches as traditional product areas decline Some branches were hardly used and many were very close to other Post Office branches GOVERNMENT CRITERIA FOR CHANGE Seek to minimise the impact on customers Work with the Consumer Champion Equality of impact - urban/rural Minimum access criteria Local engagement 8
9 Government s criteria sought to protect the distinctive social and community role that the Post Office plays in UK society Post Office Ltd is a commercial business with a social obligation Hooper review of the UK postal services sector We are, however, clear that Post Offices are essential for the future of the universal service. They are an important access point for many customers ACCESS CRITERIA SUPPORT SOCIAL ROLE IMPORTANCE OF POCA 99% of the UK population will be within 3 miles and 90% within 1 mile of their nearest branch 99% of the total population in deprived urban areas across the UK will be within 1 mile of their nearest branch 95% of the total urban population across the UK will be within 1 mile of their nearest branch 95% of the total rural population across the UK will be within 3 miles of their branch 95% of the population of the postcode district will be within 6 miles of their nearest branch 9
10 The change programme was delivered on an area-by-area basis to allow deep consultation and to ensure that customer needs were met through clear local area engagement and planning AREA BY AREA PLANNING INTENSIVE CONSULTATION 10
11 The outcome of change Key statistics about the change programme 3000 local consultations 200,000 pieces of public correspondence 1500 public/stakeholder meetings What the programme delivered 2431 compensated closures 506 new outreach services 88% customer migration Impact of the programme A network of 12,000 post office outlets - compliant with access criteria Breakeven economics for the business (after social network payment) In summary The Network Change Programme reduced the size of the network by 18%, saved 45m pa in costs to the business, impacted fewer than 9% of customers and saw less than 1% reduction in income to the Post Office 11
12 In Conclusion: Enabling necessary change in a complex environment needed detailed planning and methodical delivery EFFECTIVE CONSULTATION/WORKING WITH KEY STAKEHOLDERS INTENSIVE LOCAL COMMUNITY ENGAGEMENT DETAILED LOCAL AREA PLANNING CLEARLY DEFINED IMPLEMENTATION PROCESS SUCCESSFUL PROGRAMME DELIVERY STRONG PROGRAMME OVERSIGHT & GOVERNANCE TRANSPARENT AND FAIR DECISION MAKING METHODICAL DELIVERY FLEXIBILITY TO ADAPT TO UNEXPECTED CHANGES 12
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