The winning strategy for postal service
Over the last 10 to 15 years, postal services have strived for improved efficiency, and according to McKinsey, it has yielded a consistent 1 to 2 percent improvement for most businesses. However, this continued level of improvement is becoming harder to achieve, yet it is more mission-critical than ever in view of current market dynamics. So, what can be done to achieve a real change in efficiency? Rather than immediately opting for futuristic fantasies of drones and delivery droids, postal services must go where it hurts most to further optimize their current operations. They must work to improve operational excellence, especially in the last mile where the potential for vehicle and labor productivity improvements are high.
To set the scene: In a very simplified example using an electric vehicle, it is not uncommon for salary costs in most western countries to make up more than 85% of the total costs of running a delivery route for 5 years.
If postal services can increase productivity and flexibility in the last mile, they will be able to reduce costs in this expensive part of their operation and refocus on initiatives that accelerate profitability and growth. To do this while meeting environmental targets will require significant rethinking – and efforts.
A look at what passes through the mail centre
In order to “do more” with the same resources, we first need to look into the “more” part. Together with leading postal services, we have taken a closer look at what passes through their depots. The volume and product composition has changed significantly over the years and it is a source of great uncertainty for many in the business.
Addressed mail still makes up a significant proportion of the goods to be delivered, and it often comes pre-sorted from a central sorting facility ready to be loaded onto the van. Unaddressed admail represents another large proportion, but the volume can be seasonal and vary by day of the week. Postal services may also experience larger, more sporadic peaks caused by admail, for example when IKEA is distributing their catalog or similar examples.
Finally, parcels make up an increasingly large proportion of the goods. Physical dimensions of the packets and parcels may vary, but the vast majority are smaller than a shoebox in size, although some larger parcels also pass through the depots. This varies from operator to operator, but for most traditional postal services the smaller parcels will represent the greatest share of volume delivered.