FINNISH EXPERIENCES ON A PRODUCT- SPECIFIC DELIVERY EXPERIMENT. 15th Königswinter Seminar 11 February 2015 Päivi Rokkanen, Posti Ltd.
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1 FINNISH EXPERIENCES ON A PRODUCT- SPECIFIC DELIVERY EXPERIMENT 15th Königswinter Seminar 11 February 2015
2 POSTI Posti Group in brief Services Postal services Logistics services ecommerce services Financial process services Net sales in ,977 million euros Number of Personnel 26,000 Operations in 11 countries Share of international 32 % net 56 sales % 24% 12 %
3 POSTI Four business groups Postal Services Parcel and Logistics Services Itella Russia OpusCapita
4 Our services are used by over 200,000 business customers annually Posti delivers over 2.7 million freight shipments annually Posti delivers 31 million parcels annually Nationwide network of more than 1,450 service points for businesses and consumers. We deliver on the same day or the next according to the customer s needs. Online service orders and tracking 24/7. 4
5 The postal market in Finland 5
6 Universal Service Obligation Posti is the sole operator subject to the universal service obligation defined in the Postal Act USO in three product markets Letter delivery in the whole country Domestic parcel delivery in the whole country Delivery of inbound items in 12 municipalities Five-day delivery and collecting of items and products paid for with cash. These consist mainly of letters and parcels from consumers paid by stamps. The obligation does not apply to letters and parcels sent by contract customers, i.e. corporations and companies. 6
7 Non-USO obligations and services outside the postal regulation A license is required for the delivery of addressed letters. Posti's license to provide postal services allows for three-day delivery of addressed business letters and bulk mail. Four competing licenses granted in 2014 to local delivery operators, all owned by newspaper publishers. Competitors' licenses allow for one-day delivery. The Postal Act does not cover unaddressed shipments (advertisements), newspaper deliveries (including early-morning delivery) and the delivery of magazines. Competition is also free in the delivery of parcels. 7
8 Early morning delivery and day delivery Delivery offices ~ 400 amount decreasing delivery points Daily delivery routes 5600 by car 3400 by bike 1100 by foot 1100 totally approx km/day Early morning delivery routes approx Personnel approx
9 The structure of delivery routes Area of apartment houses Delivery by foot or bike, less than 15 km Area of one-family houses Delivery by car, over 15 and less than 70 km Sparsely populated area Delivery by car, over 70 km Households Delivery routes Kilometres/day Population density 340/km² 39/km² 4/km² Share of land area 2 % 18 % 80 % Share of households 34 % 44 % 22 % 9
10 Distance is of great significance to delivery costs Delivery costs are twice as high in the sparsely populated areas compared with densely populated areas One third of the households live in the densely populated areas, which are only 2 % of the land area of Finland 80 % of the country is sparsely populated, with 22 % of the population Extra costs for delivery in the sparsely populated areas are generated mainly by the longer distance between delivery points 10
11 Volumes are declining In January-September 2014, volumes of postal items developed as follows compared with the corresponding period in the previous year: Total volume of addressed letters: -10% Unaddressed direct marketing: -32% Newspapers: -9% Magazines: -10% Parcel services: +1% Electronic letters: +5% 11
12 Addressed letter volumes since
13 Estimated volumes of letters, bulk mail and magazines by year million items average change million million million million million
14 POSTI S PRODUCT-SPECIFIC DELIVERY EXPERIMENT 14
15 The target Posti s vision for year 2020 is that the declining postal volumes should be allocated in a new way to the days of the week in order to gain more efficiency in the daily delivery work. This concerns especially the work done outdoors in the delivery route. Mail sent by consumers accounts for less than 5 % of all sent mail. Most mail deliveries are based on a contract between Posti and the sending customer (e.g. addressed and unaddressed advertisements, bulk mail as well as newspapers and magazines). Delivering less volumes on certain weekdays can be done by changing the agreements between Posti and its customers. We want to solve the problem of how to secure a good level of postal deliveries together with our customers. 15
16 Light delivery on Tuesdays Posti conducted a product-specific delivery experiment in six areas in autumn 2014 ( ) During the experiment universal service products, as well as newspapers and parcels, were delivered five days a week as usual. Non-USO products, i.e. letters, advertisements and magazines sent by companies, were not delivered in the experiment areas on Tuesdays. The experiment aimed at testing the product-specific delivery days and what cost effects it would have. In the long term the aim is to keep costs stable and more predictable although the volumes of mail continue to decline. A survey aiming to gather feedback from mail recipients, companies that send mail and mail delivery personnel was also conducted during the experiment. 16
17 This is how mail was delivered Post was delivered during the experiment on five days per week but on Tuesdays without letters sent by companies, magazines or advertisements. The delivery times may vary from the usual. Mo Tu We Th Fr Letters and postcards paid for with stamps Parcels delivered to home Newspapers * All letters and postcards * Newspapers * Advertisements * Parcels with home delivery * Magazines 17
18 Starting points from operations point of view In the background was theoretical modelling of how the delivery work done outdoors and the delivery distances behave in different areas if the delivery coverage is reduced. In addition a model for work shifts was built to support the new kind of production environment. This was meant to decrease the effects on the personnel and also to support the possibility to offer full time employment. The experiment was then planned on the basis of the theoretical models and agreed preconditions. ü Tuesday was chosen as the light delivery day ü Low volume delivery routes were made of existing delivery routes, as much as possible as full time working days. ü The presumption was that outdoors delivery work would not be affected much by the volumes transferring from Tuesdays to Wednesdays as the drop of items is not so significant parameter to costs. ü By rationalizing the delivery routes it is possible to shorten the travelled distances on the light delivery days and thus reduce significantly the workload. 18
19 Three models experimented The experiment was conducted with three different basic models and combinations of them. 1. Mail of low volume days was directed to early morning delivery network 2. Mail of low volume days was directed to parcel delivery network 3. Low volume delivery was done with changed delivery routes. In practice all models used the lighter delivery routes at least partly. 19
20 Informing the public and collecting feedback A lot of information to the public in the experiment areas. In all areas Posti arranged information events where residents of the area were invited to discuss the experiment. A letter was sent to every household and company in the area to give information of the experiment. Press releases were published, which received attention in the media. Contact with residents was maintained throughout the experiment. A survey to gather feedback from mail recipients and companies was conducted. Basically customers were positive about the product-specific delivery model. Most customers were ready to accept this kind of delivery. Corporate customers were slightly more negative than private customers. Feedback was also gathered from mail delivery personnel with three surveys: before, during and after the experiment. Changes aimed at more efficiency in delivery work is a challenge to the personnel. 20
21 Customer survey, some results 70 % of recipients felt that delivery was working well 80 % thought that mail delivery was like usual during the experiment Almost 2/3 would be ready to expand the experiment permanently to the whole country 40 % said that mail delivery is sufficient every other day 5 % would be satisfied with only electronic delivery of mail Age group was the most positive towards the experiment and electronic delivery Otherwise no significant differences based on age, gender or home town 21
22 Results and the way forward The theoretical model was tested and proved possible to use in practice. The delivery work done outdoors in the delivery routes could be made more efficient, especially in the more densely populated areas. However, the savings in delivery costs were not as much as was targeted. Newspapers published 5-days a week is the most challenging product for this kind of delivery model. At the moment we study the results and investigate ways to improve the product-specific delivery models as well as possible needs to change product specifications. The decision about launching product-specific delivery in a wider geographical scope will be made later during
23 THANK YOU 23
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