Measuring Postal Performance

May 16, 2013

Balanced Scorecard Framework

The Importance of a Strategic Vision

MeasurableObjectives:

“Marching Orders"

Strategy Formulation:

What is the firm in the business

of doing?

• Digitising Australia Post• Connecting your business• Connecting your community

• Digital access• New marketplace initiatives• Brand reputability

Australia Post

Cascading Measures of Performance

Strategic

Tactical

Operational

Grow logistics revenue

Develop 3 logistics

alliances

Open 10 logistics

distribution centers

What Makes Postal Performance Different?

� Universal Service Obligation & Public Service / Public Good

� Quality postal service within their territories at affordable prices (EU)

� At least 85/97 percent delivered next/three working day(s) (Sweden)

� Dual identity: Public service / Business that must pay its own way.

� Those who stand to lose the most are the most isolated and vulnerable

� Network Effects

� How well is it configured?

� How well am I using my network?

� Connectivity – Capacity - Adaptability – Resiliency

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CustomerPerformance

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Traditional Measures of Customer Performance

� Traditional measures of performance

� Product or product line IRR/ROI, ROIC

� Revenue goals, Market share, Market position

� “profitable-product death spiral.” - profitability by product = index of benefit to

both the company and the customer.

� Consequences

� Product overlaps/competition within product line

� Product line thinning

� DHL: Portfolio of time-definite products simplified and strengthened

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Product Portfolio Approach

� Doing products right, and doing the right products

� Portfolio approach

� Consumers desire assortments of products rather than individual items

� Identify products that optimize the entire portfolio.

� Incorporate attributes specifically identified as attractive by consumers

� What is the right portfolio of products for postal operators?

� How do we know we are doing the right products?

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Customer Performance and Product Mix

� Concept of

� Customer lifetime value (CLV)

� Customer equity (CE) = discounted value of future sales for all customers

� “Selling more products to the same customers.”

� Performance Strategy

� Create close connections or emotional ties with the consumer.

� Positioning In Relation to the Competitor

� Measuring:

� “Knowing your customer”

� Customer value and satisfaction

� Customer loyalty and retention

� Customer equity, turnover, margins, profit, etc.

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Japan Post

� We are dedicated to assisting people all over Japan

lead more enjoyable lives.

� We sincerely provide services that people can trust and rely on.

� We will constantly redefine “Atarashii-Futsu” by evolving to meet the

changing needs of our customers, serving people nationwide, one by one.

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postal, banking, and

insurance services

Product Mix and Product Co-dependence

� Product co-dependence in the product portfolio

� Level of interaction between products in the portfolio

� “Leather Case Compatible with Apple iPhone 5”

� High versus low co-dependence?

� Swiss Post: My Newspaper

� Bpost: Home delivery of meals

� UPS: Broadens B2C platform with acquisition of Kiala

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Meeting Customer Needs & Leveraging Assets

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Customers

• Individuals/ Households

• Businesses

• Mailers

Internal Assets

• Retail Network

• Delivery Network

• Distribution Network

• Data

High Satisfaction + High Margins

Meeting needs andLeveraging Networks(distribution – retail – delivery – data)

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Levera

ges N

etw

ork

Leverages Customer Relationship

Custom

Newspaper

Home Services

Freight

SIM Cards

Fulfillment

Low

Low

High

High

Logistics

OperationsPerformance

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Measuring performance – an integral process to managing operations

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Manage

Operations

Plan operations

Execute operations

Measure operational performance

Adapt operations

Operational performance is measured across four performance indicators

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Operational Performance

Indicators

1. Service2. Costs3. Efficiency4. Profitability

Plan operations

Execute operations

Measure operational performance

Adapt operations

The performance indicators are reflected at various levels of a (networked) enterprise

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Co

sts

Se

rvic

e

Efficiency

Profitability

Specific effects of network layer on performance indicators

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R

E

P

S

M

Network Layer ElementsPrimary Performance Indicator Influenced

Real Estate Plants, FacilitiesCosts

Service

Equipment,

Fleet

Sorting & material handling systems,

trucks, planes

Costs

Service

People, Skills Clerks, drivers, planners, managers.

Costs

Efficiency

Profitability

Service

Sort Plans &

Schedules

Sort & operating plans,

transportation & other schedules.

Efficiency

Profitability

Measurement

Mgt & PlanningEvaluation, planning & forecasting.

Efficiency

Profitability

Measures of service performance

� Adapt network infrastructure to match volume levels� Measures:

� % on time

� Network capacity utilization

� Work in process and staged inventories

� Reduce time in transit� Measures:

� Speed of lanes – ground and air

� Eliminate manual processing� Measures:

� Machinability factor

� Address readability/interpretation

� % damage shipments

� Eliminate wrong addressing� Measures

� % undeliverable as addressed (UAA)

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R E

P

S

M

E

Measures of cost performance

� Integrate networks (e.g., express and deferred, or air and ground)

� Measures:

� Duplication of services between networks

� Value of network assets (e.g., vs. revenues)

� Transportation costs and fuel consumption

� Reduce labor costs� Measures

� Fixed to variable labor

� Workload planning and scheduling

� Reduce equipment/fleet operating costs:� Measures

� Fuel efficiency of fleet

� Mean time between maintenance

� Mean time to repair

� Reduce handlings� Measures

� Total pieces handled (vs. first handling pieces)

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R E

S M

PE

S E

Measures of efficiency

� Adapt the networks to meet traffic flows and levels� Measure:

� Asset utilization� Distributed capacity

� Work in process and staged inventories

� Increase sorting efficiency through technology� Measure:

� Machine throughput / machine jams

� Read rates

� Mis-sorts (e.g., out-of-sequenced DPS mail)

� Machinability/rework

� Improve delivery efficiency� Measure:

� Density of delivery

� In-office vs. street time

� Continuous improvement / six-sigma� Measure:

� Process deviations/ Trending

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MS

E

S

P M

Measures of profitability

� Improve revenue per piece - Shift product mix

� Measures:

� Ratio of high yield products (heavier weight segments)

� Ratio of letters to parcels

� Improve revenue per piece - Shift customer mix

� Measures:

� Ratio of business to residential deliveries

� Improve revenue per piece – Defer delivery

� Measures:

� Shift from air to ground; use multimodal

� Promote low-cost non-urgent deliveries to increase density

� Measures:

� Consolidated shipments and asset utilization

� Urban vs. rural deliveries

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M E

M

R E

M

Tradeoffs of costs and service

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60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

95.0%

100.0%

500 465 430 400 365 330 300 280 250

Service

Revenue

Number of Plants in the Network

Studies show that reducing network (operating costs) will affect service, and may reduce revenues

Leverage the potential of your network

� Intelligent network configuration and

management for optimum performance

� Connectivity� Measures:

o Multiple paths between nodes

o Alternate processing nodes

� Capacity� Measures:

o Network-wide capacity vs. node-level capacity

� Adaptability� Measures

o Adaptive sort and distribution

� Resiliency� Measures

o Contingency plans

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Managing information to monitor and improve performance

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Static Operating Environment

Dynamic Operating Environment

• Managing according to historic demand averages

• Spikes in demand met with additional infrastructure

• Fixed operating schedule

• Resource commitment is pre-planned and pre-allocated

• Plans based on mid to long-terms projections

• Managing deviations from the norms

• Spikes in demand are anticipated and are “business as usual”

• Variable operating schedule

• Resource commitment is dynamically allocated

• Near real time visibility, and rapid planning capability

Low HighHigh Performance Business

Infrastructure-BasedMore (Under-utilized) Resources

More Stability

Information-BasedFewer (Better utilized) Resources

More Frequent Planning

Leveraging your enterprise’s information to monitor and improve operational performance (service, efficiency, profitability, costs)

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