英國伯明翰大學經濟學作業參考
10-19, 2014
印度郵政的轉變和與法國的比較
在全球，印度郵政擁有超過155,000郵局和郵局服務，每21平方公里就會有一個服務據點，在農村地區超過13萬，是“最大的郵政網絡之一。但是，盡管印度有著廣泛的分銷網絡，印度郵政長期以來一直虧損。印度郵政也擁有一個龐大的勞動人口，約有共485,000名員工。這些GRAMIN驛站Sewaks負責的郵件產品被壓到最后交付。印度郵政也有一個多元化的產品組合，包括普通郵件服務如明信片，以及金融產品，如郵政儲蓄銀行賬戶，保險，共同基金和匯票。
我們對印度郵政的項目研究涉及研究和深入的分析，通過訪談，印度郵政的高級官員使用輔助數據源，以及主要的研究。這些互動有助于我們更好地了解問題，驗證我們對相同原因的理解。
Turning around India Post and comparisons with france
Executive Summary
India Post is one of the “largest postal networks in the world with more than 155,000 post offices and a post office to serve every 21 sq. km area on average and more than 130,000 of these in the rural areas. But in spite of its wide distribution network, India Post has been making losses consistently over the years. India Post also has a huge work force with about 485,000 employees of whom 275,000 are Gramin Dak Sewaks. These Gramin Dak Sewaks are responsible for the last mile delivery of the mail products. India Post also has a diverse product mix ranging from the regular mail services such as post cards and speed post to financial products such as Post Office Savings Bank accounts, insurance, mutual fund and money orders.
Our project study on India Post involved both research and in-depth analysis using secondary data sources as well as primary research through interviews with senior officials of India Post. These interactions helped us understand the problems better as well as validate our understanding of the causes of the same. We have structured our analysis to broadly cover four major areas, viz. Financials, Operations, IT and Marketing.
We have also arrived at recommendations for all of these areas taking into consideration the key challenges that India Post is currently facing. A detailed study of the French postal service, La Poste, gave us insights on the solutions that India Post can explore for its problems which might help it improve its operations and product mix. La Poste is also considered one of the better managed postal networks in the world and has had strong financial performance over the past few years and has had a strong focus on quality. An analysis of the best practices of La Poste will provide India Post pointers on how it can improve its operations and services. The summary of the interaction with the Post Master Generals and other senior officials of India Post is attached in the Appendix.
LA POSTE – A CASE IN POINT
“La Poste is the second largest employer in France, after the government. They are responsible for postal services in France and its territorial collectivities. La Poste also gives financial services and products in France.
vision
The vision statement of La Poste is as follows:
Each and every individual, company and partner counts for La Poste. We foster trust through our belief that contributing to each individual’s development contributes to society, and by listening to our clients, we provide real solutions to real needs.
La Poste has undergone a severe transformation in the past few years. With the deregulation of mail industry, La Poste had to be competitive to retain revenues. This resulted in several transformations within the company. One of them was the customer centricity of the organization. La Poste understood the customer needs and repositioned their products to meet the customer requirements.
Values
The major pillars of value for La Poste are:
Accessibility: services that are open to everyone
Availability: there wherever and whenever the clients need postal services
Proximity: a close client relationship based upon communication and respect
Equality: the same levels of high service for all
Societal development: at economic, environmental and social levels
As La Poste is the French official Postal department, in addition to economic goals, they also have societal goals of providing services and contribute to the development of society.
Ambition
To become one of Europe’s leading postal operators by 2010, maintaining the position as France’s leading service point and developing original concept in retail banking.
Major Services
La Poste offers a variety of services to people. The services can be categorized into:
Mail
Mail contributes to around 56% [1] of La Poste’s turnover, which is around € 11.6 Bn. This division also caters to providing jobs to more than 100,000 people in France. While the mail services were deregulated in France in 2006, La Poste faced severe challenges to provide competitive services at an attractive cost. What followed was a series of transformations in providing services as well as operations that has helped them to retain competitive advantage in the market. The major features of the mail services are:
1. Modernization of mail system: La Poste has been trying to modernize the mail system. They invest a significant amount in modernizing the mail system. Some of the modernized features include:
Industrial Sorting Machines: These machines enable sorting of mails at a rate of 50,000/ hour.
Remote Home Assistance facility for disadvantaged individuals
E- stamps for individual customers and customized stamps for SMEs
Wise usage of print media to reduce wastage of paper and other products
In addition, La Poste invests a significant amount towards modernization year on year.
2. Direct Marketing tool for SMEs- La Poste has reinvented the corporate mail facility to a promotional media at low cost. They have provided facilities that enable SMEs to prospect customers and sending promotional materials to them. In addition they are also providing personalized services to these SMEs, enabling them to reach their prospective customers.”
3. Centralized Client Data Management Systems: La Poste’s centralized data management system enables SMEs to maintain a database of prospective customers, enabling superior utilization of mail as a marketing media.
Parcels and Express
Parcels and express form another important service for La Poste. There are two types of parcel services, namely ColiPost which caters to B2C sector and GeoPost which caters to customers in B2B sector. The facilities offered by ColiPost are comparable to any world class private player. The major features offered are:
Real-time updates on status of the mails/ parcels
Special offices from where the customers can pick up the consignment in case they miss the home delivery.
Colipost is also a major partner of the e-commerce sector
The revenues of Colipost in 2008 were € 1.4 Bn. They also have followed stringent delivery standards with around 93% of the consignment delivered in 2 days.
Geo post is number 2 in sales and volumes in Europe, and has been one of the most successful products from La Poste. Geo Post had sales of € 3.29 Bn in 2008, and has around 800 hubs worldwide delivering 550 million consignments [2] . In addition, Geopost also has tieups with international agencies, thus delivering the products in around 230 countries in the world.
La Banque Postale
This is the financial services arm of La Poste. This provides service and support to the citizens in France through various financial products and services. They currently provide various services such as online products description, multimedia alert, customized account management and many more features. They also plan to provide major products such as consumer credit, general and health insurance in 2010.
The revenues from various sources for La Poste can be summarized in the following chart:
Major Features of La Poste
The major features of La Poste are:
Customer Focus
The focus for catering to customer needs is evident in all the products and measures by La Poste. They have realized that customer focus alone can bring them business growth ever since mail services were deregulated. For instance, the features such as online tracking and remote home assistance terminals are aimed at focused at improving the customer experience as a whole. La Poste also has products aimed at SMEs, either for transfer of their consignments/ parcels or for direct marketing campaigns. Furthermore, the amount of customization provided by La Poste for SMEs is the best indicator of their customer focus.
Drive for modernization
La Poste has always had a drive to modernize the facilities provided to the customers. They are also willing to invest funds in adopting new technologies and processes within La Poste Group. As a result, we can see many facilities such as online monitoring of parcels, automatic sorting, availability of e-stamps etc. from La Poste. While many of these facilities are aimed at increasing customer satisfaction, many others such as automatic sorting are aimed at improving the operational efficiency. As explained before, they have consistently allocated funds for modernization, bringing in competitive advantage.
Strong Financial Performance
La Poste has been consistently posting profits in the last 2 years. Even though they spend a considerable amount in workforce management, they are still able to draw profits in the years. This shows the efforts by the company to keep the bottom line under control. The following table depicts the strong financial performance of the company:Gap between stated objective and implementation
Even though India Post wants to expand the network of post offices and connectivity as an objective, the implementation seems to suggest major rationalization measures. Over the last 5 years, only about 240 post offices have been added. Considering the fact that only half of India is covered by India Post, this slow expansion seems to show a major gap between stated objective and implementation. In addition, there are proximity constraints depending on whether the area is considered rural or urban, as per the stated objective. On the other hand, while deciding a new post office, revenue potential seems to be the prime focus than connectivity. As a result of this, permissible loss limit forms a major parameter for evaluating the potential of a new office. The current norms for permissible loss limits are:
New Post Offices are allowed to incur a loss in the first year of their operations
Cost-recovery (converse of PLL) requirements from the second year onwards are as follows:
100% in urban areas
33% in rural areas
15% in tough terrain
Special post offices (sponsored by state governments): 10% by the post office and the other 90% to be reimbursed by State Government
Poor customer focus
Under the current setup of India Post, consumer focus is an issue of concern. With the current target and objective setting, there is no incentive for employees to remain customer focused. Furthermore, there is no concentrated effort to provide services and products that are customer centric and has wider acceptance among customers
inability to achieve profitability
India Post is currently a loss making body. There are a few strategic issues that lead to generation of loss within the company.
Some of them are:
Universal Service Obligations (USO) - Societal Commitment vs. Profitability
As a part of societal commitment, India Post is required to provide postal services to the Indian citizens. Many a times, this obligation results in investment on loss making projects. For instance, the budgetary outlay for expansion of India Post’s activities in the North Eastern region is around Rs. 34 crores. As a part of this, India Post is required to do Wet Leasing of aircrafts for covering tough-terrain areas. Even though these expenses go towards meeting the Universal Service Obligations of India Post, they more often than not result in financial losses. This is more prominent in rural areas which account to 68% of population. In these areas, the products are provided at a reduced cost to meet the affordability of citizens, incurring losses. This could be a pivotal factor that may stand against the objective of being self sustainable in the future.
Impact of 6th Pay Commission
The cost escalations for India Post due to the implementation of the 6th Pay Commission recommendations amount to over 70% of India Post’s current revenues (about Rs. 3,000 crores per annum). It can be observed that the gap between the expenses and the revenues were reasonably stable until 2007-08. The additional burden imposed due to this has been the key driver in the mounting of losses for India Post.
India Post’s Revenue vs. Expenditure Graph [6]
inability to rationalize workforce
One of the major expenses for India Post is Employees’ salaries, pensions and other benefits. The large number of work force has been a perennial issue for the service industry in general, and India Post is no different. Also, the number of employees in rural areas is larger with about 90% of Post Offices and about 275,000 employees (out of 485,000) catering to rural areas. As a result, despite of working on major operational improvements in the past, India Post is unable to really reduce the operation costs, thus failing to improve the profitability. Furthermore, there has been no detailed study or audit developed to evaluate work force productivity and utilization. To overcome this burden, India Post has been trying to minimize recruitment and maintain a constant work force over the past few years. In addition, they have also tried to impart skill among workers and deploy them accordingly, instead of rationalizing the work force. However, these changes have only minimal impact on the bottom line.
Inability to review pricing independently
The pricing of various products by India Post needs to be ratified by the India Parliament. As a result, many of the prices have remained the same for the last decades. For instance, registered newspapers & magazines such as India Today, The Week etc. are still given a massive discount by India Post. This was a practice that had its roots several decades back to promote literacy under the Indian Post Office Act. The main revenue stream for such magazines is advertising and not the subscription fee and so in today’s context, these products should be revenue sources for India Post than loss contributors.
Intense competition for various substitutes and competitors:
Another issue faced by India Post is related to the intense competition faced. India Post is competing directly against various other players and substitutes in all the markets except rural area. The rural area is catered to by India Post as a part of USO than anything else; hence this competition has put severe stress on the profitability and revenues of the company. Some of the major competitors are:
Urban Areas: Competition from Private Courier Companies
With the increasing purchasing power of individuals, value and service provided have become crucial factors in Urban India. This is more prevalent in the premium sector that accounts for about 10% of India Post’s revenues. Many of the major courier companies are competing against India Post in this segment, and are making head way due to the superior service proposition offered by these players.
Mobile Phones and emails instead of letters
Mobile phones & emails have emerged as a disruptive technological change that serves as an alternative to India Post’s services. The lower lead time and low prices offered by these media for communication and the growing focus on mobile money transfer makes them an important alternative that India Post needs to factor in.
Competition in Financial Products
Post Office Savings Bank accounts offer about 3.5% interest on deposits and they lend at 9.5-10% (which is 1.5% more than market rates). Banks are strong competitors for Post Office in this segment. Given that interest-rates for deposits are on the rise while loan rates are on the decline in India, India Post needs to review the rates in order to remain competitive. Also, the cost of servicing loans is currently about 6-6.5% for India Post. Even though there has been an increase in number of accounts, the high cost of servicing has led to a negative cash flow of the order of INR 3,089 crores.
INDIA POST – OPERATIONS ANALYSIS
The major operational objective of India Post is cost rationalization. A rationalized cost will not only enable them to fulfill the USO at a competitive expenditure, but also gain a substantial profit from value added services that are provided by them. Since India Post aims to be self sustaining in the next five years, they need to focus on value added services as a major source of revenues. At the same time, they cannot neglect USO, since they have societal obligation, which they need to primarily satisfy.
Operational Issues
It is important to identify the various operational issues faced by India Post, in order to devise a turnaround strategy. Some of these issues are:
Uniform Subsidy for all the products
In order to conform to USO, India Post had devised various subsidies for the products. The subsidy levels of various products are given in the table below:INACCURATE TRANSMISSION AND DISTRIBUTION COSTING
Accurate costing information is a must in order to commence a cost rationalization exercise. Presently average unit costs are arrived at by dividing the total cost by total volume, which is grossly inefficient for managing set of diverse activities and services as is the case with India Post. The current postal delivery model at India Post can be modeled as follows:
Level I: Hub to Hub i.e. inter-city transfer of mails.
Level II: City Hub to Post Offices.
Level III: Post Offices to door delivery.
Poor usage of technology
In the modern era, technology is one factor that has enabled various service oriented industries to gain operational efficiency and superior customer care. India Post spends a significant amount of time and energy due to usage of older technology and IT systems. For instance, sorting is one area where the employees spend a considerable amount of their time. In addition, the various IT systems used by India Post are decentralized, leading to difficulty in coordinating between various systems.
NO commitment on time and quality of delivery
India post currently provides no commitment on time and quality of delivery of consignments. This has resulted in poor customer service and response at times, leading to customer dissatisfaction. Furthermore, customers who have some time commitment or quality requirement are resorting to local couriers instead of India Post.
MAJOR recommendations
After reviewing the major strategic and operational issues faced by India Post and a comparative study with La Poste, we have arrived at the following recommendations:
VAS and USO as dIfferent organizations- restructuring
The following table shows the major expenses as a % of revenue for India Post.
India Post’s Expenditure Pattern [8]
From the table, it is evident that a significant amount of expenditure in providing services is towards staff costs and fixed costs. In today’s scenario, both VAS and USO are provided under the same service level. As the objectives for these services and the level of service are different, it is important to separate VAS and USO to separate business units and provide appropriate service levels.
It is also important to note that providing more service in VAS doesn’t in any way mean providing inferior service to USO. It just means that in order to meet the competition in the market, it is important to provide higher value for the price charged, and hence the service level expectation could be higher than USO.
Unbundling of THE Transmission and Delivery Model
India Post needs to review the current model of calculating the cost for transmission. The following method can be used for review
Postal Distribution Network
Level I: Hub to Hub i.e. inter-city transfer of mails.
In the above figure, this is represented as the transfer between City 1 Head post office to City 2 Head post office. At this level, India Post can own the operations itself as there are significant benefits from economies of scale in this tier.
Level II: City Hub to Post Offices.
This is the tier where India Post needs to identify the different expenditure heads and look at outsourcing some activities which it is currently unable to perform efficiently. In particular, the mail motor service has been operating inefficiently.
Level III: Post Offices to door delivery.
This is the last mile physical delivery. Presently India Post has a huge workforce which is unionized. We feel that the activity in this level should be done by India Post itself to retain the goodwill that the postman enjoys in the Indian households, since this goodwill can also be tapped for other means of revenue generation such as for direct marketing efforts.
With regards to systems and processes, India Post is currently considering the implementation of a new postal code – the Postal Address Locator (PAL). Currently only about 50% of all mails in India are pin-coded. This will be a major challenge in the implementation of the PAL code as well. Additionally, the huge fall out costs of this new code would also need to be factored in while deciding on its implementation.
Rationalize Man Power to reduce cost
The following steps can be attempted at the post office level for rationalizing costs:
Introduce Voluntary Retirement Scheme (VRS) to reduce extra manpower
Provide training to employees so that they can work on different roles
Usage of technology for non value added activities such as sorting
Modernization of India Post- Learnings from la poste
Information Technology has revolutionized most of the service oriented business organizations in the last decade. As IT services has enabled service industry to provide superior service at a lower cost, it is important for India post to adopt cutting edge solutions aimed at improving their profitability. Keeping this view, India Post also has allocated a fund of $ 1 billion to revamp the IT systems over the next 5 years.
The revamp is also aimed at business process reengineering within India Post. Around INR 2000 crores have been allocated under 11th five year plan, for IT investments. In addition to upgrading from the existing systems such as “Meghdoot”, they also are planning to standardize the IT operations across all the post offices. As a part of this, they are reviewing the possibility of using ERP (Enterprise Resource Planning) softwares across various offices, enabling them to standardize the operations and procedures followed across the nation. In this regard, they have signed a deal with Accenture consulting, with the objective of modernizing the post offices across the nation. They also plan to incorporate more features that will help them with superior connectivity and services based on internet platform [9] .
IT system installation will also enable India Post to provide various other value added features such as real time monitoring of the mail transit. In addition, they also can provide other services such as bill payments, e-posts, life insurance and other banking facilities. On the whole, they will be able to compete with leading private players in the market, providing competitive and customer centric products and services.
IT OBJECTIVES
With the installation of IT Systems, India Post aims at improving the process efficiently and also building in customer focus within e team. While the process improvements will reduce the bottom line, the features that bring in customer focus are expected to improve the top line of the firm.
Recommendation: In the table, key IT requirements which are necessary for achieving the objectives as stated by India Post is enunciated.
External Customer focus
Internal Organizational Focus
targeting poor customers through Bottom of the Pyramid (BOP) Analysis [10]
According to C K Prahlad, there is a significant population in the bottom of the pyramid in India. The main modes of communication of different tiers are given in the table below:
Railway parcel/ self carriage
As we can see, a large amount of population in the rural area is still dependent on India Post as a medium of communication. As India post also has a societal commitment, they are required to meet the need of this community.
One of the major issues in targeting the rural sector is the actual cost vis-à-vis the price charged for the services. The affordability of the poor is an issue while providing these services. As pricing in not in the hands of India Post, and they cannot increase from the current price of the products considering affordability, the things to review are how to provide services at a reduced cost. Three possible ways of overcoming this issue are detailed below:
PROVIDE CHEAP ALTERNATIVES FOR LOSS making services
India Post needs to identify the major loss making services and provide alternatives that can reduce the cost of service. One such service that can be targeted is Post card. One of the largest contributors of cost to post cards is the transportation. To reduce the same, e-cards can be an effective media. Instead of physically sending the card, India Post can scan/ type and e-mail the information, and the same can be accessed at the destination post office. Low cost paper can be used for printing the matter. In this way, the cost of transportation, sorting and storage is minimized. Moreover, the information is transmitted faster, allowing better service. One of the disadvantages of this suggestion is the subjectivity of internet connectivity at both source and destination locations.
Alternate Source of revenue:
Another way of improving profitability is identifying alternate source of revenue within the existing setup. Some suggestions are:
utilizing unused spaces in rural post office to act as distribution channel for strategic companies on a lease or auction basis.
India Post has one of the widest distribution networks in rural India. In most of the villages, they are located at prominent location and have reasonable accessibility from all parts of the village. Furthermore, most of the villagers pay visit to Post office some point of time, either to send/ receive mails/ money orders/ post cards etc. These post offices could play a pivotal role as distribution channels for many companies aiming to improve their network in rural India. The unused space in rural post office can be leased/ rented out to these companies for distribution of goods in rural India. In addition, they also can start information kiosks inside post office, which can be accessed by the villagers.
Use rural network as communication channel for sales promotions or category expansion
As stated before, the high penetration of post offices could be a potential network channel for sales promotion. Many villages lack facilities such as TV and have low literacy. Under such a scenario, it is difficult to communicate information regarding products or brand. This is where post offices can play an important role. They can use post offices to communicate value of products by setting up a stall in the vicinity of the office and campaigning to people visiting the office.
Providing value added services such as information kiosks in rural areas
When the post offices are networked, they can be sources of information for the villagers. Similar to e-choupal by ITC, post offices can provide information kiosks providing information to farmers on various matters such as climate, market prices etc. A nominal amount can be charged from the village panchayat funds for providing these services to the villagers.
utilize the accessibility of postman for various value added services
In the Indian societal scenario, post man is one person who has access to any house hold without any suspicion. This access needs to be utilized in a better way to provide various other value added services. Some of these services could be mobile recharge, bill payments, financial and insurance services to name a few. In addition to this, post man could also be a good source to understand the consumer behavior, preferences and choices, which can be later on used to market products and services within the community.
provide new bop services such as microfinance
Here again, Post man could be a useful source in providing services such as microfinance. With postman, a door step collection scheme can be implemented, which is essential for micro finance. Furthermore, postman can also do some due diligence before providing finance to customers, which may help Post Office in distinguishing risky and non risky borrowers.
Enhance customer focus in product planning and services- learning from La Poste
In the new era, customer focus is essential in attracting more revenue and customers. The customer focus is not only essential in services provided, but also in the product design stage. It is very important for India Post to understand various consumer behavior and demands, and design products and services based on the same. Some of such services include real time update of consignment status, remote terminals for various services, home delivery and reminder if the delivery is missed etc.
Utilize the lock-in customer opportunities to the fullest
India Post enjoys the privilege of lock-in customers in many government institutions. There are many offices where only India Post enjoys access. Such lock-in opportunities should be utilized fully by India Post and they need to up-sell/ cross-sell more products and get into long term contract for various services, in order to maximize the share of wallet from those customers. This is one of the most attractive markets due to the sheer lack of competition from other players.
Quality and time of delivery as a target
In order to attract the high and premium customers, India Post needs to make commitments on quality and time of delivery of consignments. Once this is set as a target, the customer satisfaction is bound to increase, leading to better business for India Post.
Provide other value added services- learning from La Poste
La Poste has been very successful in providing a variety of value added services for the customers. India Post also needs to think about providing services in a similar fashion. Some of them are:
Enhance finance divison with services such as Pan-India money transfer
India Post can bring in many financial services to rural areas through tie-ups. For instance, they can tie up with various insurance companies, NREGA, RBI etc. for providing policies, wage schemes and banking penetration in rural areas respectively [11] . While this can be another source of revenue for India Post, this provides the agencies with maximum reach in rural India.
Provide customized services to SME’s
Another service that can be provided by India post is customized services. They can get into long term agreement with SME’s for providing parcel/ courier service with some levels of customization. For instance, they can provide services such as exclusive cover/ stamp with advertisement of the firm and thus enable them to publicize the brand name better.
Utilize the reach for providing marketing solutions and consumer research
India post needs to leverage the high connectivity and reach it enjoys, in providing marketing and consumer research solutions to SMEs. For instance, India Post can not only be utilized as a marketing channel to reach the customers, but also can be analyzed later for customer behavior. This will help SMEs in targeting the customers in a better fashion. In addition, India Post can also enter into contracts with agencies such as flipkart to be their distribution partner, and can provide their services to these companies.
Leverage the global tie-ups to provide superior services
Similar to La Poste, India Post also needs to enter into tie ups with other Post providers across the world. This tie up will be mutually beneficial considering the fact that the reach of India Post can be made into global level, at the same time, the global players are granted access to maximum areas in India.
Scale up ad space
The post offices and post cards, covers, letters etc. can be used as ad space for publicity. This is a very attractive proposition for the players owing to the huge reach this can provide to the advertiser. They can also tie up with various government schemes such as Pulse Polio, TB awareness program etc. and provide publicity support for the same.
在全球，印度郵政擁有超過155,000郵局和郵局服務，每21平方公里就會有一個服務據點，在農村地區超過13萬，是“最大的郵政網絡之一。但是，盡管印度有著廣泛的分銷網絡，印度郵政長期以來一直虧損。印度郵政也擁有一個龐大的勞動人口，約有共485,000名員工。這些GRAMIN驛站Sewaks負責的郵件產品被壓到最后交付。印度郵政也有一個多元化的產品組合，包括普通郵件服務如明信片，以及金融產品，如郵政儲蓄銀行賬戶，保險，共同基金和匯票。
我們對印度郵政的項目研究涉及研究和深入的分析，通過訪談，印度郵政的高級官員使用輔助數據源，以及主要的研究。這些互動有助于我們更好地了解問題，驗證我們對相同原因的理解。
Turning around India Post and comparisons with france
Executive Summary
India Post is one of the “largest postal networks in the world with more than 155,000 post offices and a post office to serve every 21 sq. km area on average and more than 130,000 of these in the rural areas. But in spite of its wide distribution network, India Post has been making losses consistently over the years. India Post also has a huge work force with about 485,000 employees of whom 275,000 are Gramin Dak Sewaks. These Gramin Dak Sewaks are responsible for the last mile delivery of the mail products. India Post also has a diverse product mix ranging from the regular mail services such as post cards and speed post to financial products such as Post Office Savings Bank accounts, insurance, mutual fund and money orders.
Our project study on India Post involved both research and in-depth analysis using secondary data sources as well as primary research through interviews with senior officials of India Post. These interactions helped us understand the problems better as well as validate our understanding of the causes of the same. We have structured our analysis to broadly cover four major areas, viz. Financials, Operations, IT and Marketing.
We have also arrived at recommendations for all of these areas taking into consideration the key challenges that India Post is currently facing. A detailed study of the French postal service, La Poste, gave us insights on the solutions that India Post can explore for its problems which might help it improve its operations and product mix. La Poste is also considered one of the better managed postal networks in the world and has had strong financial performance over the past few years and has had a strong focus on quality. An analysis of the best practices of La Poste will provide India Post pointers on how it can improve its operations and services. The summary of the interaction with the Post Master Generals and other senior officials of India Post is attached in the Appendix.
LA POSTE – A CASE IN POINT
“La Poste is the second largest employer in France, after the government. They are responsible for postal services in France and its territorial collectivities. La Poste also gives financial services and products in France.
vision
The vision statement of La Poste is as follows:
Each and every individual, company and partner counts for La Poste. We foster trust through our belief that contributing to each individual’s development contributes to society, and by listening to our clients, we provide real solutions to real needs.
La Poste has undergone a severe transformation in the past few years. With the deregulation of mail industry, La Poste had to be competitive to retain revenues. This resulted in several transformations within the company. One of them was the customer centricity of the organization. La Poste understood the customer needs and repositioned their products to meet the customer requirements.
Values
The major pillars of value for La Poste are:
Accessibility: services that are open to everyone
Availability: there wherever and whenever the clients need postal services
Proximity: a close client relationship based upon communication and respect
Equality: the same levels of high service for all
Societal development: at economic, environmental and social levels
As La Poste is the French official Postal department, in addition to economic goals, they also have societal goals of providing services and contribute to the development of society.
Ambition
To become one of Europe’s leading postal operators by 2010, maintaining the position as France’s leading service point and developing original concept in retail banking.
Major Services
La Poste offers a variety of services to people. The services can be categorized into:
Mail contributes to around 56% [1] of La Poste’s turnover, which is around € 11.6 Bn. This division also caters to providing jobs to more than 100,000 people in France. While the mail services were deregulated in France in 2006, La Poste faced severe challenges to provide competitive services at an attractive cost. What followed was a series of transformations in providing services as well as operations that has helped them to retain competitive advantage in the market. The major features of the mail services are:
1. Modernization of mail system: La Poste has been trying to modernize the mail system. They invest a significant amount in modernizing the mail system. Some of the modernized features include:
Industrial Sorting Machines: These machines enable sorting of mails at a rate of 50,000/ hour.
Remote Home Assistance facility for disadvantaged individuals
E- stamps for individual customers and customized stamps for SMEs
Wise usage of print media to reduce wastage of paper and other products
In addition, La Poste invests a significant amount towards modernization year on year.
2. Direct Marketing tool for SMEs- La Poste has reinvented the corporate mail facility to a promotional media at low cost. They have provided facilities that enable SMEs to prospect customers and sending promotional materials to them. In addition they are also providing personalized services to these SMEs, enabling them to reach their prospective customers.”
3. Centralized Client Data Management Systems: La Poste’s centralized data management system enables SMEs to maintain a database of prospective customers, enabling superior utilization of mail as a marketing media.
Parcels and Express
Parcels and express form another important service for La Poste. There are two types of parcel services, namely ColiPost which caters to B2C sector and GeoPost which caters to customers in B2B sector. The facilities offered by ColiPost are comparable to any world class private player. The major features offered are:
Real-time updates on status of the mails/ parcels
Special offices from where the customers can pick up the consignment in case they miss the home delivery.
Colipost is also a major partner of the e-commerce sector
The revenues of Colipost in 2008 were € 1.4 Bn. They also have followed stringent delivery standards with around 93% of the consignment delivered in 2 days.
Geo post is number 2 in sales and volumes in Europe, and has been one of the most successful products from La Poste. Geo Post had sales of € 3.29 Bn in 2008, and has around 800 hubs worldwide delivering 550 million consignments [2] . In addition, Geopost also has tieups with international agencies, thus delivering the products in around 230 countries in the world.
La Banque Postale
This is the financial services arm of La Poste. This provides service and support to the citizens in France through various financial products and services. They currently provide various services such as online products description, multimedia alert, customized account management and many more features. They also plan to provide major products such as consumer credit, general and health insurance in 2010.
The revenues from various sources for La Poste can be summarized in the following chart:
Major Features of La Poste
The major features of La Poste are:
Customer Focus
The focus for catering to customer needs is evident in all the products and measures by La Poste. They have realized that customer focus alone can bring them business growth ever since mail services were deregulated. For instance, the features such as online tracking and remote home assistance terminals are aimed at focused at improving the customer experience as a whole. La Poste also has products aimed at SMEs, either for transfer of their consignments/ parcels or for direct marketing campaigns. Furthermore, the amount of customization provided by La Poste for SMEs is the best indicator of their customer focus.
Drive for modernization
La Poste has always had a drive to modernize the facilities provided to the customers. They are also willing to invest funds in adopting new technologies and processes within La Poste Group. As a result, we can see many facilities such as online monitoring of parcels, automatic sorting, availability of e-stamps etc. from La Poste. While many of these facilities are aimed at increasing customer satisfaction, many others such as automatic sorting are aimed at improving the operational efficiency. As explained before, they have consistently allocated funds for modernization, bringing in competitive advantage.
Strong Financial Performance
La Poste has been consistently posting profits in the last 2 years. Even though they spend a considerable amount in workforce management, they are still able to draw profits in the years. This shows the efforts by the company to keep the bottom line under control. The following table depicts the strong financial performance of the company:Gap between stated objective and implementation
Even though India Post wants to expand the network of post offices and connectivity as an objective, the implementation seems to suggest major rationalization measures. Over the last 5 years, only about 240 post offices have been added. Considering the fact that only half of India is covered by India Post, this slow expansion seems to show a major gap between stated objective and implementation. In addition, there are proximity constraints depending on whether the area is considered rural or urban, as per the stated objective. On the other hand, while deciding a new post office, revenue potential seems to be the prime focus than connectivity. As a result of this, permissible loss limit forms a major parameter for evaluating the potential of a new office. The current norms for permissible loss limits are:
New Post Offices are allowed to incur a loss in the first year of their operations
Cost-recovery (converse of PLL) requirements from the second year onwards are as follows:
100% in urban areas
33% in rural areas
15% in tough terrain
Special post offices (sponsored by state governments): 10% by the post office and the other 90% to be reimbursed by State Government
Poor customer focus
Under the current setup of India Post, consumer focus is an issue of concern. With the current target and objective setting, there is no incentive for employees to remain customer focused. Furthermore, there is no concentrated effort to provide services and products that are customer centric and has wider acceptance among customers
inability to achieve profitability
India Post is currently a loss making body. There are a few strategic issues that lead to generation of loss within the company.
Some of them are:
Universal Service Obligations (USO) - Societal Commitment vs. Profitability
As a part of societal commitment, India Post is required to provide postal services to the Indian citizens. Many a times, this obligation results in investment on loss making projects. For instance, the budgetary outlay for expansion of India Post’s activities in the North Eastern region is around Rs. 34 crores. As a part of this, India Post is required to do Wet Leasing of aircrafts for covering tough-terrain areas. Even though these expenses go towards meeting the Universal Service Obligations of India Post, they more often than not result in financial losses. This is more prominent in rural areas which account to 68% of population. In these areas, the products are provided at a reduced cost to meet the affordability of citizens, incurring losses. This could be a pivotal factor that may stand against the objective of being self sustainable in the future.
Impact of 6th Pay Commission
The cost escalations for India Post due to the implementation of the 6th Pay Commission recommendations amount to over 70% of India Post’s current revenues (about Rs. 3,000 crores per annum). It can be observed that the gap between the expenses and the revenues were reasonably stable until 2007-08. The additional burden imposed due to this has been the key driver in the mounting of losses for India Post.
India Post’s Revenue vs. Expenditure Graph [6]
inability to rationalize workforce
One of the major expenses for India Post is Employees’ salaries, pensions and other benefits. The large number of work force has been a perennial issue for the service industry in general, and India Post is no different. Also, the number of employees in rural areas is larger with about 90% of Post Offices and about 275,000 employees (out of 485,000) catering to rural areas. As a result, despite of working on major operational improvements in the past, India Post is unable to really reduce the operation costs, thus failing to improve the profitability. Furthermore, there has been no detailed study or audit developed to evaluate work force productivity and utilization. To overcome this burden, India Post has been trying to minimize recruitment and maintain a constant work force over the past few years. In addition, they have also tried to impart skill among workers and deploy them accordingly, instead of rationalizing the work force. However, these changes have only minimal impact on the bottom line.
Inability to review pricing independently
The pricing of various products by India Post needs to be ratified by the India Parliament. As a result, many of the prices have remained the same for the last decades. For instance, registered newspapers & magazines such as India Today, The Week etc. are still given a massive discount by India Post. This was a practice that had its roots several decades back to promote literacy under the Indian Post Office Act. The main revenue stream for such magazines is advertising and not the subscription fee and so in today’s context, these products should be revenue sources for India Post than loss contributors.
Intense competition for various substitutes and competitors:
Another issue faced by India Post is related to the intense competition faced. India Post is competing directly against various other players and substitutes in all the markets except rural area. The rural area is catered to by India Post as a part of USO than anything else; hence this competition has put severe stress on the profitability and revenues of the company. Some of the major competitors are:
Urban Areas: Competition from Private Courier Companies
With the increasing purchasing power of individuals, value and service provided have become crucial factors in Urban India. This is more prevalent in the premium sector that accounts for about 10% of India Post’s revenues. Many of the major courier companies are competing against India Post in this segment, and are making head way due to the superior service proposition offered by these players.
Mobile Phones and emails instead of letters
Mobile phones & emails have emerged as a disruptive technological change that serves as an alternative to India Post’s services. The lower lead time and low prices offered by these media for communication and the growing focus on mobile money transfer makes them an important alternative that India Post needs to factor in.
Competition in Financial Products
Post Office Savings Bank accounts offer about 3.5% interest on deposits and they lend at 9.5-10% (which is 1.5% more than market rates). Banks are strong competitors for Post Office in this segment. Given that interest-rates for deposits are on the rise while loan rates are on the decline in India, India Post needs to review the rates in order to remain competitive. Also, the cost of servicing loans is currently about 6-6.5% for India Post. Even though there has been an increase in number of accounts, the high cost of servicing has led to a negative cash flow of the order of INR 3,089 crores.
INDIA POST – OPERATIONS ANALYSIS
The major operational objective of India Post is cost rationalization. A rationalized cost will not only enable them to fulfill the USO at a competitive expenditure, but also gain a substantial profit from value added services that are provided by them. Since India Post aims to be self sustaining in the next five years, they need to focus on value added services as a major source of revenues. At the same time, they cannot neglect USO, since they have societal obligation, which they need to primarily satisfy.
Operational Issues
It is important to identify the various operational issues faced by India Post, in order to devise a turnaround strategy. Some of these issues are:
Uniform Subsidy for all the products
In order to conform to USO, India Post had devised various subsidies for the products. The subsidy levels of various products are given in the table below:INACCURATE TRANSMISSION AND DISTRIBUTION COSTING
Accurate costing information is a must in order to commence a cost rationalization exercise. Presently average unit costs are arrived at by dividing the total cost by total volume, which is grossly inefficient for managing set of diverse activities and services as is the case with India Post. The current postal delivery model at India Post can be modeled as follows:
Level I: Hub to Hub i.e. inter-city transfer of mails.
Level II: City Hub to Post Offices.
Level III: Post Offices to door delivery.
Poor usage of technology
In the modern era, technology is one factor that has enabled various service oriented industries to gain operational efficiency and superior customer care. India Post spends a significant amount of time and energy due to usage of older technology and IT systems. For instance, sorting is one area where the employees spend a considerable amount of their time. In addition, the various IT systems used by India Post are decentralized, leading to difficulty in coordinating between various systems.
NO commitment on time and quality of delivery
India post currently provides no commitment on time and quality of delivery of consignments. This has resulted in poor customer service and response at times, leading to customer dissatisfaction. Furthermore, customers who have some time commitment or quality requirement are resorting to local couriers instead of India Post.
MAJOR recommendations
After reviewing the major strategic and operational issues faced by India Post and a comparative study with La Poste, we have arrived at the following recommendations:
VAS and USO as dIfferent organizations- restructuring
The following table shows the major expenses as a % of revenue for India Post.
India Post’s Expenditure Pattern [8]
From the table, it is evident that a significant amount of expenditure in providing services is towards staff costs and fixed costs. In today’s scenario, both VAS and USO are provided under the same service level. As the objectives for these services and the level of service are different, it is important to separate VAS and USO to separate business units and provide appropriate service levels.
It is also important to note that providing more service in VAS doesn’t in any way mean providing inferior service to USO. It just means that in order to meet the competition in the market, it is important to provide higher value for the price charged, and hence the service level expectation could be higher than USO.
Unbundling of THE Transmission and Delivery Model
India Post needs to review the current model of calculating the cost for transmission. The following method can be used for review
Postal Distribution Network
Level I: Hub to Hub i.e. inter-city transfer of mails.
In the above figure, this is represented as the transfer between City 1 Head post office to City 2 Head post office. At this level, India Post can own the operations itself as there are significant benefits from economies of scale in this tier.
Level II: City Hub to Post Offices.
This is the tier where India Post needs to identify the different expenditure heads and look at outsourcing some activities which it is currently unable to perform efficiently. In particular, the mail motor service has been operating inefficiently.
Level III: Post Offices to door delivery.
This is the last mile physical delivery. Presently India Post has a huge workforce which is unionized. We feel that the activity in this level should be done by India Post itself to retain the goodwill that the postman enjoys in the Indian households, since this goodwill can also be tapped for other means of revenue generation such as for direct marketing efforts.
With regards to systems and processes, India Post is currently considering the implementation of a new postal code – the Postal Address Locator (PAL). Currently only about 50% of all mails in India are pin-coded. This will be a major challenge in the implementation of the PAL code as well. Additionally, the huge fall out costs of this new code would also need to be factored in while deciding on its implementation.
Rationalize Man Power to reduce cost
The following steps can be attempted at the post office level for rationalizing costs:
Introduce Voluntary Retirement Scheme (VRS) to reduce extra manpower
Provide training to employees so that they can work on different roles
Usage of technology for non value added activities such as sorting
Modernization of India Post- Learnings from la poste
Information Technology has revolutionized most of the service oriented business organizations in the last decade. As IT services has enabled service industry to provide superior service at a lower cost, it is important for India post to adopt cutting edge solutions aimed at improving their profitability. Keeping this view, India Post also has allocated a fund of $ 1 billion to revamp the IT systems over the next 5 years.
The revamp is also aimed at business process reengineering within India Post. Around INR 2000 crores have been allocated under 11th five year plan, for IT investments. In addition to upgrading from the existing systems such as “Meghdoot”, they also are planning to standardize the IT operations across all the post offices. As a part of this, they are reviewing the possibility of using ERP (Enterprise Resource Planning) softwares across various offices, enabling them to standardize the operations and procedures followed across the nation. In this regard, they have signed a deal with Accenture consulting, with the objective of modernizing the post offices across the nation. They also plan to incorporate more features that will help them with superior connectivity and services based on internet platform [9] .
IT system installation will also enable India Post to provide various other value added features such as real time monitoring of the mail transit. In addition, they also can provide other services such as bill payments, e-posts, life insurance and other banking facilities. On the whole, they will be able to compete with leading private players in the market, providing competitive and customer centric products and services.
IT OBJECTIVES
With the installation of IT Systems, India Post aims at improving the process efficiently and also building in customer focus within e team. While the process improvements will reduce the bottom line, the features that bring in customer focus are expected to improve the top line of the firm.
Recommendation: In the table, key IT requirements which are necessary for achieving the objectives as stated by India Post is enunciated.
External Customer focus
Internal Organizational Focus
targeting poor customers through Bottom of the Pyramid (BOP) Analysis [10]
According to C K Prahlad, there is a significant population in the bottom of the pyramid in India. The main modes of communication of different tiers are given in the table below:
Railway parcel/ self carriage
As we can see, a large amount of population in the rural area is still dependent on India Post as a medium of communication. As India post also has a societal commitment, they are required to meet the need of this community.
One of the major issues in targeting the rural sector is the actual cost vis-à-vis the price charged for the services. The affordability of the poor is an issue while providing these services. As pricing in not in the hands of India Post, and they cannot increase from the current price of the products considering affordability, the things to review are how to provide services at a reduced cost. Three possible ways of overcoming this issue are detailed below:
PROVIDE CHEAP ALTERNATIVES FOR LOSS making services
India Post needs to identify the major loss making services and provide alternatives that can reduce the cost of service. One such service that can be targeted is Post card. One of the largest contributors of cost to post cards is the transportation. To reduce the same, e-cards can be an effective media. Instead of physically sending the card, India Post can scan/ type and e-mail the information, and the same can be accessed at the destination post office. Low cost paper can be used for printing the matter. In this way, the cost of transportation, sorting and storage is minimized. Moreover, the information is transmitted faster, allowing better service. One of the disadvantages of this suggestion is the subjectivity of internet connectivity at both source and destination locations.
Alternate Source of revenue:
Another way of improving profitability is identifying alternate source of revenue within the existing setup. Some suggestions are:
utilizing unused spaces in rural post office to act as distribution channel for strategic companies on a lease or auction basis.
India Post has one of the widest distribution networks in rural India. In most of the villages, they are located at prominent location and have reasonable accessibility from all parts of the village. Furthermore, most of the villagers pay visit to Post office some point of time, either to send/ receive mails/ money orders/ post cards etc. These post offices could play a pivotal role as distribution channels for many companies aiming to improve their network in rural India. The unused space in rural post office can be leased/ rented out to these companies for distribution of goods in rural India. In addition, they also can start information kiosks inside post office, which can be accessed by the villagers.
Use rural network as communication channel for sales promotions or category expansion
As stated before, the high penetration of post offices could be a potential network channel for sales promotion. Many villages lack facilities such as TV and have low literacy. Under such a scenario, it is difficult to communicate information regarding products or brand. This is where post offices can play an important role. They can use post offices to communicate value of products by setting up a stall in the vicinity of the office and campaigning to people visiting the office.
Providing value added services such as information kiosks in rural areas
When the post offices are networked, they can be sources of information for the villagers. Similar to e-choupal by ITC, post offices can provide information kiosks providing information to farmers on various matters such as climate, market prices etc. A nominal amount can be charged from the village panchayat funds for providing these services to the villagers.
utilize the accessibility of postman for various value added services
In the Indian societal scenario, post man is one person who has access to any house hold without any suspicion. This access needs to be utilized in a better way to provide various other value added services. Some of these services could be mobile recharge, bill payments, financial and insurance services to name a few. In addition to this, post man could also be a good source to understand the consumer behavior, preferences and choices, which can be later on used to market products and services within the community.
provide new bop services such as microfinance
Here again, Post man could be a useful source in providing services such as microfinance. With postman, a door step collection scheme can be implemented, which is essential for micro finance. Furthermore, postman can also do some due diligence before providing finance to customers, which may help Post Office in distinguishing risky and non risky borrowers.
Enhance customer focus in product planning and services- learning from La Poste
In the new era, customer focus is essential in attracting more revenue and customers. The customer focus is not only essential in services provided, but also in the product design stage. It is very important for India Post to understand various consumer behavior and demands, and design products and services based on the same. Some of such services include real time update of consignment status, remote terminals for various services, home delivery and reminder if the delivery is missed etc.
Utilize the lock-in customer opportunities to the fullest
India Post enjoys the privilege of lock-in customers in many government institutions. There are many offices where only India Post enjoys access. Such lock-in opportunities should be utilized fully by India Post and they need to up-sell/ cross-sell more products and get into long term contract for various services, in order to maximize the share of wallet from those customers. This is one of the most attractive markets due to the sheer lack of competition from other players.
Quality and time of delivery as a target
In order to attract the high and premium customers, India Post needs to make commitments on quality and time of delivery of consignments. Once this is set as a target, the customer satisfaction is bound to increase, leading to better business for India Post.
Provide other value added services- learning from La Poste
La Poste has been very successful in providing a variety of value added services for the customers. India Post also needs to think about providing services in a similar fashion. Some of them are:
Enhance finance divison with services such as Pan-India money transfer
India Post can bring in many financial services to rural areas through tie-ups. For instance, they can tie up with various insurance companies, NREGA, RBI etc. for providing policies, wage schemes and banking penetration in rural areas respectively [11] . While this can be another source of revenue for India Post, this provides the agencies with maximum reach in rural India.
Provide customized services to SME’s
Another service that can be provided by India post is customized services. They can get into long term agreement with SME’s for providing parcel/ courier service with some levels of customization. For instance, they can provide services such as exclusive cover/ stamp with advertisement of the firm and thus enable them to publicize the brand name better.
Utilize the reach for providing marketing solutions and consumer research
India post needs to leverage the high connectivity and reach it enjoys, in providing marketing and consumer research solutions to SMEs. For instance, India Post can not only be utilized as a marketing channel to reach the customers, but also can be analyzed later for customer behavior. This will help SMEs in targeting the customers in a better fashion. In addition, India Post can also enter into contracts with agencies such as flipkart to be their distribution partner, and can provide their services to these companies.
Leverage the global tie-ups to provide superior services
Similar to La Poste, India Post also needs to enter into tie ups with other Post providers across the world. This tie up will be mutually beneficial considering the fact that the reach of India Post can be made into global level, at the same time, the global players are granted access to maximum areas in India.
Scale up ad space
The post offices and post cards, covers, letters etc. can be used as ad space for publicity. This is a very attractive proposition for the players owing to the huge reach this can provide to the advertiser. They can also tie up with various government schemes such as Pulse Polio, TB awareness program etc. and provide publicity support for the same.
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