FEATURE 

The future of mailing services

Depending on the timing of your Christmas bash, you may have missed all the excitement surrounding the Hooper report. Ian Phillips gives his views on the report and also highlights some services he would like to see introduced by postal suppliers.

By Ian Phillips

It will come as no surprise to learn that the Royal Mail is in severe trouble. So much so that in early 2008, the government commissioned a guy called Richard Hooper to write a report on the company and make recommendations as to what to do with it. His report was published just before Christmas and his findings make interesting reading for all major mail users. Most worryingly of all, he goes so far as to say that the Universal Service (USO) is under severe threat, and the thought of losing that is not worth contemplating. A summary of the main issues are as follows:

1. Post Office Counters are unsustainable in their current guise.
2. Competition has had and will continue to have a negative effect on revenues.
3. The impact of alternative media is having a far greater effect on mail volumes, and therefore revenues, than was previously anticipated and, unsurprisingly, is far more damaging than competition.
4. The network and equipment is antiquated and in dire need of modernisation.
5. Relations with the workforce and unions are described as poor.
6. It has a huge pension deficit of £3.4bn to pay back.
7. Royal Mail is still lacking in commercial awareness and freedom.
8. Doing nothing is not an option. Without investment, the EU would be forced to intervene and that would be costly and a poor outcome for the tax payer, mail users, Royal Mail and its employees.

But there are some positives in the report too! Royal Mail is still the only company capable of delivering the USO. Whilst mail volumes in a large number of streams are declining, volumes in others are growing and publishing and home shopping were highlighted as classic examples. The end is not upon us and if action is taken sooner rather than later, there is still time to turn things around. The public still regard the mail as an indispensable public service and confidence in Royal Mail is still relatively high.

But what to do? The main recommendation Mr Hooper makes is to form a strategic partnership with a third party such as TNT Post or DHL whilst retaining the ‘Post Office’ network wholly in public ownership. In other words, break the group up into letters and post offices, allow another organisation to buy their way into the letters side of the business and use the money and management experience they’ve just gained to modernise and restructure Royal Mail into an organisation able to compete and grow in the 21st century. Whatever they do, we all know they have to cut costs and the only way to do that is to modernise. Not exactly mind blowing stuff is it? The report also recommends that the regulatory framework by which all postal organisations are bound, be relaxed particularly in regards to Royal Mail’s licence. As things stand, Royal Mail do not enjoy the same commercial freedoms as their competitors but, given the state of the group, the question is rightly being asked if they should. As they are still the dominant supplier in the UK with a poor history where competitors in their market are concerned, I have my reservations about such a move. But, as long as customers are protected from monopolistic and / or predatory pricing, I’m in agreement that they do need more freedom to be able to compete on an equal footing.

But what does this mean for publishing? Who knows? I think it’s realistic to expect prices to continue their above inflationary course for some time to come and we shouldn’t expect too much change to services in the next two years or so either. After that, I would expect and hope that enough time will have passed for Royal Mail and their competitors to have got their houses in order sufficiently enough to actually start giving us customers services that meet our needs at a fair, sustainable and reasonable price. I’m sure there are going to be a few downsides too. It’s almost certain that aspects of the current service offering will be open to change and it would be foolish to expect to agree with all of the changes.

"What could we do for you that we don’t do already?" is a question I’m regularly asked by various postal organisations and one I’ve had plenty of time to think about. Until now, whatever my answers were, the suppliers were largely unable or unwilling to do it, but the Hooper report makes me think that attitude could be about to change. Similarly, "What do we do that you don’t like?" is another one I’m regularly asked...

What follows over the next few paragraphs, and running into the next issue, are a few of the answers I’ve given the suppliers together with a few changes to services we are unlikely to want, but which Royal Mail and their competitors may be considering. However, please don’t expect anything that follows to become a reality. Where postal suppliers and services are concerned, I’ve learned to expect nothing other than higher prices.

Mail merging / co-mingling

They’ve been doing this in the US for years and there’s absolutely no reason why it can’t be done here, albeit on a much smaller scale. In fact, to some degree it can be done here already and I know because I do it on a quarterly basis. Co-mingling is the merging of two or more separate mailings into one, large mailing. Merging individual mailings into one has the affect of maximising the number of directs and minimising the residues which obviously saves you money. This can be achieved today through Royal Mail’s mixed weight option, but it involves a huge amount of manual labour which pretty much makes the process uneconomical. However, the increasing availability and sophistication of selective insertion technology is starting to make this process possible via mechanical means.

As I mentioned, we merge two individual mailings on a quarterly basis. We’re lucky enough to have access to one weekly, one quarterly and a bi-annual supplement which, give or take a few thousand copies, are sent to roughly the same people. What we do is attach a marker to the address file for each recipient which denotes which magazines each recipient is due to receive. Eg. 1 = Weekly only, 2 = Weekly + Quarterly, 3 = Quarterly only. As the magazines are wrapped, the mailing line knows which magazines to drop on the line and when. It then monitors each pack as it goes down and then addresses the finished pack accordingly.

In addition to the money we saved on postage, we also found that we significantly reduced wrapping and production costs. All in all, the money we save annually converting what was three individual mailings into one, four times a year is about £100,000.

RFID

This is something close to my heart and there is absolutely no reason why most of the UK’s mail suppliers could not introduce this service. We’ve all got customers who, for some unknown reason, regularly experience problems receiving their copies. We know with 100% certainty that we’re mailing the copies, yet why do the same customers call issue after issue to report it’s either late or not arrived at all. RFID technology (radio frequency identification) could allow us to track individual items of mail through the supply chain right up to the point where it goes out for delivery. How it works is very simple too. A small radio transmitter is inserted into the mail piece to be tracked. The transmitter emits a unique signal which is picked up each time it passes underneath a receiver. Receivers installed over the goods-in and goods-out gates would enable items to be tracked through the supply chain.

This isn’t fiction either. About six years ago, I had a large number of customers in Paris who never received their copies. We were blaming La Poste and La Poste were blaming us, as were the customers, who in my experience usually blame us rather than the post. If we were to stand any chance of rectifying the problem, it was up to us to prove La Poste were at fault and if need be, kick them into action.

To be sure the items were reaching France, we firstly tracked the items up to the point they were loaded onto the plane at Heathrow. But that’s as far as we were able to track them. Sadly La Poste wouldn’t accept this as proof that they had received the mail so, for a period of four weeks we inserted an RFID transmitter in the customers’ copies. We informed the customers what we were doing and what we hoped it would achieve and they all agreed to send the transmitters back to us, if the mail arrived. Six weeks later we had indisputable evidence of exactly which mail centres the items had been through, what date and what time. Sadly we lost most of the transmitters but it gave us enough evidence to stir La Poste into accepting responsibility.

I believe it is now possible to monitor mail through the network, right up to the point Pat and his mates hit the street with it. So far, the suppliers have refused requests to use this technology for our benefit, blaming the cost of the transmitters and the man power required to run such a service. However, the transmitters are relatively cheap (under £20) and a web based tracking solution would be the answer to the issue of cost. I for one would gladly buy my own transmitters and I’d happily track my own items if such a solution were available.

Unwrapped mailings

This is another idea I’ve kind of pinched from our US cousins. It’s common practice there for magazines to be mailed without any packaging whatsoever. Instead of wrapping and addressing the outer packaging, the PPI and address details are printed via inkjet into a little white box on the back cover. Copies are then bundled and mailed as usual. Yes we do it here but because we insert our magazines heavily, the practice is largely restricted to items such as catalogues. However, ever increasing production costs and shrinking revenues are making publishers consider alternative solutions, and unwrapped mailings is just one method of removing cost and time from the supply chain.

Unbagged mailings and on-site MV

There are no postage savings to be had from unbagged mailings or on-site mail verification, but there are production efficiencies to be realised. In my experience, there are usually at least two people at the end of each wrapping line. Their sole job is to bag the mail as it comes off the line. Were mail suppliers prepared to accept bundles stacked in cages, at least one of the people bagging would be surplus to requirements therefore reducing our production costs. In addition, on-site mail verification, where the mail is checked by Royal Mail at the mailing house, as opposed to the mail centre, ensures the mail passes through the supply chain as quickly and efficiently as possible.

Both practices exist today but Royal Mail don’t exactly shout about it. However, if you run a mailing house and are now thinking that sounds like a good idea, you need to know that as things stand, you can’t have one without the other. Worse still, last time I checked, to have on-site MV, you must pay the wages of the person employed to check the mail. This makes the practice largely unattainable for all but the largest mailing houses. Having said that, because the practice makes it easier for Royal Mail to process the mail, there’s every chance they’ll see sense and make one or both services available to more suppliers.

To be continued in our March / April issue ...