Accenture Postal Cost Reduction Slideshare

Home , La Poste (France), Posten Norge, PostNL, Swiss Post

DRIVING STRATEGIC COST REDUCTION

Accenture Post and Parcel Industry Research 2019 THE REVENUE MIX IS SHIFTING AND MARGINS ARE DECLINING

Shifting Revenue Mix Posts Mail to parcels has declined(2) Posts and Integrators 68% 2014 2018 (0.5%) – (5.7%) 28:1 15:1 67% Absolute EBIT margins decline range of players saw a decline Increasing Cost Pressure in EBIT(1) margins between the last two Integrators Employee Costs reported financial years 60% Transportation Costs (0.5%) – (2.2%) Rental Costs Absolute EBIT margins decline range

100% 59% 71% Companies* saw increased Companies* saw increased Companies* saw increased transportation expenses rental(3) expenses average employee wage

Austrian Post bpost Posti bpost Posten Norge PostNord +0.1% +5.6% -25% +42% -6% +17%

Change as a percentage of revenue(2) % Growth in rental expenses(2) % Growth in average employee wage(2)

(1) Analysis done for the last two reported Financial Years; (2) Range expressed for top to bottom performers; (3) Property, facilities and maintenance costs; *Considered only those companies as part of the analysis which are reporting respective Copyright © 2019 Accenture. All rights reserved. expenses separately i.e. 11 for transportation expenses, 17 for rental expenses and 24 for employee wage rate 3 INTEGRATORS NEARLY 3X MORE PROFITABLE

Postal players bear the brunt of the decline Integrators have made parcels despite having mail delivery synergies(1) three times more profitable 10.7% 3.7% 9.7% Median margin for mail(2) Median margin for parcel(3) Median margin for parcels(4)

(1) Analysis done for the last two reported Financial Years; (2) Postal companies for mail includes Austria Post, PostNL, CTT, Posten Norge, Swiss Post; (3) Postal companies for parcel includes Royal Mail, Austria Post, SingPost, PostNL, CTT, La Poste, Copyright © 2019 Accenture. All rights reserved. Canada Post, Posten Norge, Swiss Post; (4) Integrators includes UPS, FedEx, DPDHL and Aramex. 4 INTEGRATORS HAVE HIGHER CONTRIBUTION PER UNIT

Parcel EBIT Parcel Revenue Parcel Cost per unit per unit per unit [FY 2018] [FY 2018] [FY 2018]

Fedex 1.2 15.1 13.8 Median parcel Posts 1.2 UPS EBIT margin 11.1 9.9 Integrators 8.2% DPDHL 1.2 14.9 13.7

Swiss Post 1.1 12.3 11.2

PostNL 0.5 7.0 6.5 B2B B2C Median parcel (1) (1) Austria Post 0.4 EBIT margin 5.8 5.4 Cost per stop $5.00 $5.50 5.6% Parcels per stop ~3(2) ~1.05(2) Canada Post 0.3 7.7 7.4 Cost per parcel $1.67 $5.23 La Poste 0.2 6.3 6.1 First time delivery rate 97% 85% Royal Mail 0.1 4.3 4.1

(1) Cost per stop based on industry averages for parcel delivery (excludes mail) for integrators and postal players with organized Copyright © 2019 Accenture. All rights reserved. labor; (2) Parcels per stop based on industry average for parcel delivery (excludes mail) for integrators and postal players. 5 WHAT CAN POST AND PARCEL PLAYERS DO TO REDUCE COSTS?

Analyzed 24 post and parcel organizations Identified 29 Digital & Non-Digital initiatives across post and parcel value chain

Developed a representative organization from Quantified FTE and Non-FTE financial existing financial statements impact across post and parcel value chain

Pinpointed examples of successful cost take Created a customizable Strategic Cost out from other industries that apply to post Reduction Model and parcel organizations

Applied findings to representative Found $500 million cost takeout opportunity organization

% Contribution to Total Cost Reduction ($500 million total)*(1)

~$350 million in FTE cost reduction ~$150 million in non-FTE cost reduction

9% 6% Transportation Non-FTE Transportation FTE 10% 13% Warehousing & Support Functions Non-FTE Sortation FTE Warehousing & 13% 31% 54% 65% Support Functions FTE Sortation Non-FTE Post Offices & Other FTE Post Offices Non-FTE

Core Workforce Customer Support Operations Organization Touchpoints Functions

Distribution & Logistics Network Rationalization 78

Routing Algorithms 47

Alternate Delivery Day 33 [~$210-394 million] Robotics & AGV in Warehouse & Sortation 31 [$million impact] Connected Vehicles with loT and Telematics 28 Consumer Control & Seamless Parcel Delivery Experience* 22 Conservative Scenario Sorting Automation & Efficiency Improvement 21 Base Scenario Self-Service Kiosks or Smart Collection Optimistic Scenario Boxes on Retail Points 16

Electric Vehicles for Last Mile Delivery 14

Robotic or drone delivery 11 Predictive Analytics for Maintenance in Warehouse& Sortation 2

1) In a base case scenario. Does not fully account combinatorial impact across initiatives. Does not include the impact of CRM Support Solutions and Procurement Optimization; *These initiatives have EBITDA impact due to revenue increase and/or cost reduction, however, here only cost reduction impact of such initiative has been taken into consideration. In case of only revenue Copyright © 2019 Accenture. All rights reserved. impact, cost reduction contribution will be zero. 10 VALUE CHAIN PERSPECTIVE: WORKFORCE ORGANIZATION

[~$35-121 million] Outsourced & Contracted Delivery* 40 [$million impact] Right FTE Mix or Flexible Workforce 23

Workforce Augmentation Through 11 Conservative Scenario Wearables & Handhelds Base Scenario Workforce Analytics 1 Optimistic Scenario

[~$32-55 million] 23 Parcel Specific Pick & Drop Parcel Lockers* 35 [$million impact] 11 AI Powered Care/Chatbot* 9 Conservative Scenario 1 Base Scenario Optimistic Scenario

Zero Based Budgeting - ZBS 28

RPA in Support Functions 18 [~$39-100 million]

Sales Force Enablement or Effectiveness 11 [$million impact]

Digitized HR Employee Self Service 5 Conservative Scenario Base Scenario Marketing Performance Analytics 5 Optimistic Scenario HVAC Analytics 1

Finance Analytics 1

DEVELOP LEARN 01 COST VISIBILITY 02 FROM OTHERS Create cost visibility that Successful implementations accurately captures granular and strategies employed both cost data to incorporate into within and outside the industry cost take out initiatives can provide a roadmap to unlock value BECOME VALUE FOCUSED TAKE ADVANTAGE IMPLEMENT A 03 OF NEW, PROVEN 04 RIGOROUS COST TECHNOLOGIES TAKE OUT PROGRAM Technologies such as artificial Successful cost take out intelligence, robotics and programs include the right cloud make it possible to focus, the right structure and unlock an entirely new set of governance and the right data cost savings and reporting

BRODY BUHLER Accenture is a leading global professional Global Managing Director, services company, providing a broad range of Accenture Post & Parcel Industry services and solutions in strategy, consulting, digital, technology and operations. Combining [email protected] unmatched experience and specialized skills /in/brodybuhler across more than 40 industries and all business functions—underpinned by the @brodybuhler world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their ANDRE PHARAND performance and create sustainable value Global Management Consulting Lead for their stakeholders. With 482,000 people Accenture Post & Parcel Industry serving clients in more than 120 countries, Accenture drives innovation to improve the [email protected] way the world works and lives. Visit us /in/andre-pharand at www.accenture.com. @andre_pharand