transformation of india post for vision 2020 · 2016. 7. 11. · overview of india post and...

Seminar on

Transformation of India Post

for Vision 2020

Delivering Efficient, Postal, Financial tmd Information Technology Services lvithin the Context of a

Commercially TcTiab/e Postal Institution

June 15-16, 2005

New Delhi

Organized by

the Department of Posts, "Ministry of Communication and Information Technology,

in collaboration with

the World Bank

with the support of the

Swiss Agency for Development and Cooperation

Volume 2

Presentations

October 2005

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wb350881Typewritten Text35927 v2

© 2006 The International Bank for Reconstruction and Development/The World Bank 1818 H Street N\X! Washington DC 20433 Telephone: 202-473-1000 Internet: uTv,rw:worldbank.org E-mail: [email protected]

All rights reserved.

pUIJtlJm:a, 2006

Published for the World Bank l\Iacmillan India Ltd., this book is not for sale through its commercial channels.

MACMILLAN INDIA LTD. Delhi Chennai Jaipur Mumbai Patna Bangalore Bhopal Chandigarh Coimbatore Cuttack Guwahati Hubli Hyderabad Lucknow Madurai Nagpur Pune Raipur Thiruvananthapuram Visakhapatnam

ISBN 1403 92874 6

Published by Rajiv Beri for .'.facmillan India Ltd. 2/10 Ansari Road, Daryaganj, New Delhi 110 002

Printed at Sanat Printers 312 EPI?, Kundli 131 028

The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Executive Directors of the International Bank lor Reconstruction and Development/The World Bank or the governments they represent.

The World Bank does not guarantee the accuracy of the data included 10 this work. The boundaries, colors, denominations, and other information shown on any map 111 this work do not any judgement on the parr of The World Bank concerning [he status of any territory or the endorsement or acceptance of such boundaries.

Rights and Permissions

The material in this publication is copYrighted. Copying and/or transmitting portions or all of rhis work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly.

For permission to photocopy or reprint any pan of this work, send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750~8400; fax: 978~750-4470; Internet: w'W'W.copyright.com.

All other queries on and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street N\X~ Washington, DC 20433, USA; fax: 202~522-2422; e-mail: [email protected].

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Contents

Acronyms and Abbreviations v

INTRODUCTION 1

I. Brief Overview of India Post - Status, Services, Strengths and Weaknesses 2

1. Welcome Address 2

2. Output from the last seminar and objectives of this semmar 3

3. Overview of India Post and perspective on challenges ahead 5

4. Opening Address 8

5. Key Note Address: Vision 2020 and India Post 10

II. India Post: Restructuring and Modernisation (International Experiences) 14

6. The Changing World of Postal Services 14

7 Modernization of a postal network, example of Deutsche Post \Vorld Net 19

8. Role of technology for postal systems and challenges for India 25

9. Open Discussions and Questions 30

10. Modernising Postal Communications Services and Logistics:

The Operations of Deutsche Post World Net 31

11. Experiences from La. Poste 38

12. Summing up 45

13. Transformation of Indian Bank into profit making customer focused business 47

14. Discussion 52

15. Breakout Session: Postal Sector Restructuring and New Business Opportunities,

Scope of dSO, '\farket Liberalisation, New Business Opportunities and J"'","')U,-" 53

III. India Post: Delivery of Services and Key Enablers 55

16. Postal Financial Services for Anywhere Anytime Banking 55

17. Financial Services for Postal Operators-international experiences and relevance to India 69

18. Financial and Retail Network Solutions 70

19. Summing up 76

20. Opportunities for India Post providing E- Government Services to Rural Populations 80

21. Using the Indian Post Office Network for Micro Finance Services 84

22. Break out Session: Financial Services and Technology, Application to India

Platform Requirements, Extent and Cost Benefits of Counter Automation 87

IV. India Post: Strategic Action Plan 90

23. Applying lessons from international and domestic experiences 90

V. Conclusion 91

24. Closing Address 91

VI. List of Participants 93

CII

Acronyms and Abbrevia'tions

ADSL

ALM

ARCEP

ATMs

BPO

BSNL

CBI

CD

CEE

CEO

CMD

CDMA

DPAG

DPWN

ED

EMS

EU

GE

GM

GSM

HDFC

HR

HRM

ICRA

IDA

IDBI

IP

ISP

IT

MBA

MFls

MIS

MoU

NABARD

NGO

NPAs

NRI

PCO

PCs

PO

PURA

Asymmetric Digital Subscriber Line

Asset Liability Management

The French Telecommunication and Posts Regulator (Autorite de Regulation des Communications

Electroniques et des Postes)

Automated Teller Machines

Business Process Outsourcing

Bharat Sanchar Nigam Limited

Central Bureau of Investigation

Credit Deposit

Central and Eastern Europe

Chief Executive Officer

Confederation of Indian Industry

Chairman cum Managing Director

Code Division Multiple Access

Deutsche Post AG

Deutsche Post World Net

Executive Director

Express Mail Service

European Union

General Electric

General Manager

Global System for Mobile Communication

Housing Development Finance Corporation

Human Resource

Human Resource Management

Investment Information & Credit Rating Agency

International Development Agency

Infrastructure Development Bank of India

India Post

Internet Service Provider

Information Technology

Master of Business Administration

Micro Finance Institutions

Management Information System

Memorandum of Understanding

National Bank for Agriculture and Rural Development

N on Governmental Organization

N on Performing Assets

Non-resident Indian

Public Calling Office

Personal Computers

Post Office

Providing Urban Amenities in Rural Areas

vi Acronyms and Abbreviations

RBI

RNBC

RRBs

SHG

SME

SMS

STD

TV

UPU

usa USPS

UTI

VRS

V-SAT

XML

Reserve Bank of India

Residuary Non-Bank Finance Company

Regional Rural Banks

Self Help Group

Small and Medium Enterprise

Short Service

State Trunk Dialing

Television

Universal Postal Union

Universal Service Obligation

United States Postal Service

Unit Trust of India

Voluntary retirement scheme

Very Small Aperture Terminal

Extensible Markup Language

INTRODUCTION

India Post, with its extensive network of 155,000 post offices and physical presence in both rural and urban areas, is one of the departments in the country. The Department of Posts provides connectivity in terms of mails, money order remittances, pension distribution and is India's largest savings bank, particularly focused on lower income groups with low access to banks and savings institutions. India Post is also an important life insurance provider in rural markets.

India Post plays the role of operator and regulator. However, lack of management autonomy, lack of customer focus, poor marketing, the burden of the usa leading to subventions from Government, low levels of investment, inefficient operations and growing competition all affect the functioning of India Post as an operator. Its role of regulator results in a lack of independence in regulation of competition, tariffs and quality of service targets.

A particular issue faced by the Government and India Post is the conflict between providing universal service and being a commercial organisation. India Post has launched a number of commercial products to compete with courier providers, one of which, Speed Post, captured 23% market share within a year of introduction. Despite such successes India Post is facing increasing challenges from competition that has led to significant erosion in traditional mail volumes. One of the key reasons for this is a continued focus on provISIon of universal service, which hampers India Post's ability to focus on the needs of key customers.

To deal with these issues, the department strongly feels that it needs a clear action plan charting out a precise strategy, balancing short and long term needs, while focussing on the overall growth and development of the organisation. The action plan will also need to take into account the dual role of India Post as a Universal Service Provider and a commercial organisation.

The World Bank has been engaged in discussions with India Post and has organised seminars together with the Department of Posts in the last few years. The previous seminar organised by the World Bank was held in November 2002 and the aim of this two-day seminar held in June 2005 is to help further the reform process of India Post.

This document contains our summary of the excellent presentations made by various speakers and the deliberations and discussions held.

2 Transformation of India Post for Vision 2020

I BRIEF OVERVIEW OF INDIA POST - STATUS, SERVICES,

STRENGTHS AND WEAKNESSES

1. WELCOME AnDRESS

Michael Carter, Counto' Director, World Bank

Michael Carter, Country Director, World Bank welcomed ali members of the Department of Posts and IJarious other participants from the government, the private sector, Micro Finance InstitutionJ~ etc. His speech is pm'en/ed below.

1 am very delighted to have the opportunity to say just a few words to open the proceedings today in the seminar on "Transformation of India Post for Vision 2020" which has been organized jointly by the World Bank and the Department of Posts with support from the Swiss Agency for Development and Cooperation. We are delighted that the seminar is place and is bringing together participants from very diverse areas including not just the Department of Posts and other arms of the Government of India but also from postal administrations of other countries, private sector firms including banks and financial companies, insurance companies, consultancies, academics, ~GOs, micro finance institutions and other institutions all of which see, quite rightly, the opportunity of working with the postal system. I am also

that the seminar is taking place at the time of the 150th anniversary of the India Post which is a wonderful occasion.

I think sometimes, that it is easy for somebody like me as who is a layman to take the postal service for (rt'",nrf'r1 and I was astonished when I was told that the India postal system has 155,000 branches around the country. It has an enormous network and everyone in India lives within 3-5 miles of a post office. In other words, India Post has quite a remarkable outreach. I think those couple of statistics alone bring out

the enormous potential of India Post not just in terms of its own core function but also as a potential vehicle for all sorts of financial services which are quite important and needed for broader economic development in India. The potential to leverage is quite enormous but of course there are challenges in doing so as well. I think it will be fair to say that the potential cannot be reaEzed unless the India Post's core business is healthy and so addressing this issue is central to the idea of outreach through the vehicle of India Post.

it is dear that we are not talking of new lines of business to India Post as a direct player in terms of banking or insurance services. Rather, the challenge is how to use the vehicle of India Post to allow other players to provide such services, and let them take the business risk for providing those services.

Thirdly, the challenge is how that level of outreach is achieved, and that is very much the of today. I hope that the seminar will be helpful by international and domestic experiences and that it will help define a long term vision for India Post. I very much look forward to the discussions. The World Bank is deEghted to' be .::ssociated with this seminar. I think we are very keen to support the process but it is a process that has to be led domestically.


2. OUTPUT FROM THE LAST SEMINAR AND OBJECTIVES OF THIS SEMINAR

Simon Bei~ Sector Managerj South Asia Finance and Private Sector, World Bank

Simon Bell, Sector Manager, World Bank introduced the session on a very positive note and stressed on the fact that the seminar should result in a very concrete Action Plan. The views expressed by him in the seminar are presented below.

The potential developmental impact of India Post is huge. Its outreach is Its capacity to "touch the lives" of over a billion people is unsurpassed. India Post needs to transform and through the seminar move towards an operational agenda.

The time for TALKING is past - the time for DOING is NOW!

2.1 Introduction

In November 2002 a conference on India Post provided a VISION. A vision of what India Post could become. That vision was an exciting one with India Post, in public-private arrangements, providing a wide range of important goods and services to the Indian public particularly to rural India - in a win-win scenario for all. However, realizing that vision, was recognized as the difficult part. How was it possible to "operationalize that vision"? As several commentators said back in 2002 "strategizing is easy but implementing is hard". The main message that I took away from the 2002 proceedings was that the three most important things for India Post are, "Implementation, implementation and implementation".

India Post had made significant progress prior to 2002 and it is noted that progress continues to be made. At that conference we were informed of business arrangements with MasterCard, Western Union and IDBI, for electronic money transfers and the sale of mutual fund instruments among other things. But it was also recognized that India Post needed to change its business modeL It was determined that the existing system of the Post Office working as a department of the Ministry of Communication would not work in achieving the exciting partnerships that had been discussed.

There was a need to consider different business models of corporatization, privatization, restructuring and 'l'-u,,-,-uU.I'-' • 4he one thing that was clear was that the status quo was no longer acceptable.

Many new prospective deals in public-private partnerships with India Post were discussed as new business possibilities over the course of that conference. They included the following:

(i) Provident Fund for distribution of provident fund benefits

(Ii) PRIME Praxis Consulting for Data :Mining possibilities

(iii) Smart Card pilots with the Ministry of IT

(iv) E-Government Supporting rural connectivity in Andhra Pradesh for e-government

Ogilvy Outreach for outreach to rural markets

(vi) BASIX, Hyderabad for micro finance applications.

During that conference we were provided with excellent examples of reform by New Zealand Post, Deutsche Post, Royal Mail, and Dutch Post ranging from corporatization to privatization. All of these experiences provided alterative business models for India Post's consideration,

2.2 Main Themes from 2002 Conference

Another point which came out of the 2002 conference was that most post offices have at least two very distinct types of business activities.

(1) Core postal activities


(ii) Non-core activities - generally built around financial serVlCes (post office network could also provide e-government, e-business, micro finance, data mining, etc - built upon ICT capabilities).

The Post Office Savings Bank is a large holder of savings deposits in the country and had over US$60 billion in deposits; and financial services contribute around 45% of the revenue stream of India Post. Indeed the largest financial institution in the world, with US$3.6 trillion in assets, is Japan Post.

While that conference indicated that the non-core activities tend to assume increasingly greater prominence over time, the main message was that all activities must be developed in tandem.

Several main themes emerged from the 2002 conference:

(i) India Post is a great vehicle for public-private partnerships.

(ii) India Post can help deliver development that last mile.

(iii) Do not devalue the Brand Trust of India Post by selling products poorly.

(iv) Do what you do well. Do not become a second rate pension company. Do not become a third rate IT company.

(v) India Post can become the ultimate touch point for the Indian Public.

(vi) The Owner, Operator, Regulator functions of India Post must be unbundled.

Another important theme that came through during the conference was that the rural economy in India is a very important market for goods, services and financial products. This is a market which does not want subsidies but it does want immediate access. India Post could provide the appropriate interface for this potentially huge profitable market.

However, something more must be done if this vision is to become more than a mere dream. While in 2002 a four point plan summarized below had emerged from those proceedings, the need is to move towards implementation.

(i) Immediately commence a Business Plan which, among other things, provides guidance on alternative business/restructuring plans for India Post.

(ii) Commence the process of separating the Owner, Operator and Regulator functions of India Post.

(iii) Actively pursue the various business opportunities which emerged within the context of that conference.

(iv) Initiate pilot projects in five different regions - in five Post Office circles - which provide a wide range of new products (postal and non-postal - financial and non-financial) in conjunction with private sector partners.

2.3 Conclusion

In the 2002 conference, India Post was described as having "many suitors" - many companies and government agencies which would like to combine with India Post to take advantage of its huge distribution network. However, it was further indicated that these "marriages" required India Post to be efficient, effective and cost competitive. The World Bank has always extended its helping hand in supporting India Post achieve these lofty goals. The offer remains valid today.

In conclusion, two quotes from Sam Pitroda, a principal architect of the telecommunications revolution in India in the 1990s are pertinent.

'The policieJ of development agencieJ too often limit 'appropriate technology' to the two dimemional, two penny Jolutiom that bring the poor to the doonJJa) of the modern world but not actuallj acrOJJ the threJhold".

"In Jhort, high technology can put unequal human beingJ on an equalfooting, and that makeJ it the mOJtpotent democratizing tool ever deviJed".

Transformation of India Post for Vision 2020 5

Together, in the postal system of the 2000s, India Post can achieve a similar revolution to what telecom reform provided India in the 19905, to the overall benefit of this nation. The threshold can be crossed by partnering with right agencies and suitable thinkers.

3. OVERVIEW OF INDIA POST AND PERSPECTIVE ON CHALLENGES AHEAD

U. Srinivasa Raghavan, Member Operations, Depart111ent of Posts

The Member Operations introduced the above topic, mentioning that transformation was essential to the Deparlment. He stated that the nature of most of the postal officials and officers is such that th~y are in a mode to learn, think and implement in an efficient manner and hence, with concerled ef/orlS, the challenges can be addressed.

There are various factors that have put the Department of Posts in a path to prepare itself for the aim of transformation. The Department of Posts is in a position as mentioned by Spencer Johnson

"Old beliefs don't lead]ou to new cheese" and

'There should be constant supply of cheese"

In short, India Post should be reinvented. It is safer to search in a maze than remain in a cheese-less situation. The Department of Posts is not in the sick hed hut it has certain problems and challenges to face. It is not a turnaround situation but it has to learn to live with certain realities, anticipate developments and move forward. The Department will have to stress on both strengths and weaknesses. Also Universal Service Obligation (USO) needs to be defined.

The discussion revolved around the following topics which are discussed in detaiL

(i) Existing situation

(ii) Challenges

(iii) Turn around strategy for growth and sustainability.

3.1 Existing Situation

The positive aspects of India Post include:

(1) Vast network of 155,000 post offices - ability to meet full USO.

(li) Rural coverage and ability to serve all sections of people.

(iii) Variety of products to meet all postal needs for all sections of people rural/urban, individual/ business.

(iv) Nation's number one savings bank, thereby also serving development needs.

(v) Second largest Life Insurance provider - meeting the social security needs of urbani rural people.

(vi) The largest retail network to carry multiple products and services alliances.

(vii) The largest pension distributor.

(viii) Capacity to successfully work in tandem with private sector, for example the Western Union alliance.

(ix) Ability to offer a host of premium products capacity to meet competition.

(x) Dedicated· trusted and versatile workforce of 5.5 lakh employees working in the most difficult terrains such as Kashmir and the North Eastern regions.

India Post has a large number of alliances including with UTI, IDBI-Principal and Western Union. It is the


fastest growing partner of \'Vestern Union. When players like DHL and Blue Dart were targeting the express business sector, India Post launched Speed Post. Within one year Speed Post had captured 23% market share.

The U\.-lea,L" .... aspects of India Post include:

(0 The recurring deficit and the subsidy - despite the consistent growth in revenue. (ii) Limited capital expenditure (only 1% of total expenditure).

(Ui) Preponderance of staff costs - salary, wages and pensions.

(iv) Lack of adequate compensation for agency functions.

(v) Adverse net operating ratio (expenditure coverage ratio) lagging circles.

(vi) Urgent need for capacity building.

(vii) Unsuitable costing methods.

Non-economic pricing, due to historical and social causes.

(ix) Slow growth of mail volume and cream skimming by private couriers.

(x) Communication gaps within and between the administration, unions and staff.

TIle adverse net operating ratio of 1.3% is one area of concern. However, the overall picture should improve once all operational failings have been resolved.

In order to transform, the department will have to build new capabilities and come up with new products and senrices. This would require capacity building, training and knowledge transfer in the areas of technology, banking, insurance, securities market and logistics.

One also has to appreciate that the department is a organization with both social and commercial characteristics. The commercial area calls for more autonomy and the need for absorption and marginal costing. Non-economic pricing due to socia-economic reasons and political pressures are some of the difficulties that India Post faces. Slow growth of mail volumes and skimming by the private players is anOther challenge.

3.2 Challenges

McKinsey had published a paper in which they have made an observation regarding three challenges for the postal administration.

(i) Emergence of electronic alternatives

(it) More demanding customers

(iii) Deregulation.

Whilst the postal department has moved away from its monopolistic tendencies it has still to come to grips with the emergence of electronic alternatives and growing and changing demand of its customer base. Deregulation has led to increasing numbers of competitors since 1980 and this has made a marked difference in recent years, as competitors provided ever more sophisticated solutions aimed at ever more demanding business customers.

The postal market faces a number of opportunities and threats:

(i) Communication lVlarket Electronic alternatives, organised and ad hoc couriers are both into the market share of India Post.

(n) Logistit:r Market - National and international players are entering the logistics and express markets to offer ever more sophisticated solutions aimed at large business customers.


(ill) Mass Media lvlarket - Opportunities exist to develop direct mail and target the growing middle class community with targeted marketing.

(iv) Retazl and Financial Market - With its extensive network India Post is well placed to partner with banks, insurance companies, and financial services providers as well as providing a greater scope of retail products.

What India Post must do is to develop in all areas to ensure that it can minimise the cost of the universal service and move towards financial viability.

Further to the development of the postal market in India, external factors are also changing the dynamics of the market including:

(i) Challenge of Globalisation - Companies such as Deutsche Post and TPG (Dutch Post Office) have already developed into global companies with the acquisition of DHL and TNT respectively. Such global companies are a direct threat to India Post in the domestic and international express markets and India Post must consider how to best deal with such a threat.

(11) Challenge of Corporatisation - Is the current structure of India Post a benefit or a hindrance to its future development and viability? The Government must give serious consideration to the most appropriate structure for India Post to face its commercial and environmental challenges.

(iii) Challenge ofLiberalization - The worldwide trend is to liberalise postal markets to provide customers with greater choice. De facto liberalisation is happening in India with a number of competitors emerging for India Post. The Government must consider the impact of de facto liberalisation and also how to best regulate the postal sector.

3.3 Turnaround Strategy for India Post

In turning around India Post into a viable customer focused business, the following will need to be resolved:

(i) Measures for financial self-sufficiency

(ii) Leverage financial services/alliances

(iii) Network rationalisation

(iv) Technology strategy

(v) Rationalizing the postal organisational structure

(vi) Products and services - review

(vii) Accounting and internal audit mechanism - review and rationalisation

(v-iii) Accounting/Pricing/Costing strategy

(ix) Quality strategy

(x) Accountability creation

(xi) HR strategy that focuses on capacity building.

Financial self-sufficiency is dependent on defining a suitable mechanism for financing the universal service obligation. Whether this is through a USO fund or explicit subsidy, defining the cost of the USO is a prerequisite, which would require the implementation of a cost accounting system. Such a system would also enable India Post to be more accountable for specific activities.

Despite being the largest savings bank in the country, India Post is not able to leverage the savings for its own development. Instead those savings go to the Central Government from where it is transferred to State Governments by way of loans to their capital budgets. Why can India Post not manage those deposits for the development of the department itself?


India Post should also its network to become an active life insurance player in rural markets, which are largely inaccessible to private players due to lack of network and high costs per customer.

Network rationalization through franchising and introduction of technology are important tools in reaching financial viability. By the Tenth Plan, significant computerization will be completed and by the Eleventh Plan all departmental post office villages are targeted to be computerised. This will enable each post office to become a knowledge centre through technology networking.

u. S. Raghavan concluded by looking forward to the technical assistance of the World Bank and to the development of a clear action plan based on the two-day seminar.

4. OPENING ADDRESS

R Ganesan, Secretary Posts, Government if India

I have been asked to give the speech but after hearing Raghavan, I must say that after the storm we have the calm. It was a stormy presentation indicating what the current status of India Post is and where it has to go. Let me at the outset also thank the World Bank for facilitating this seminar which is of vital importance to India Post at this juncture.

As I mentioned, Raghavan has given a bird's eye view of the functioning of the department and expectations from the seminar. I also thank the World Bank for projecting the basic objectives of this seminar in clear terms. Before we proceed with the main activities of the seminar, I consider it my responsibility to apprise you of the efforts that are being made internally to face up to the challenges in keeping with the scene that the future is made now. However, these measures are through introspection within the organization and as such may have utility only in a limited way.

Any market driven organization, according to Philip Kotler, should always be looking out of the window and not be looking in the mirror to be really successful. This seminar is essentially an effort in this direction, namely to look into our future needs from the vision of our stakeholders in the country and also to review the feedback on international experiences where Posts have been successful in providing quality service while also maintaining profitability. It is for this reason I mentioned in the beginning that the seminar is quite timely and appropriate for our concerns.

Honourable Minister for Communications and IT, has been giving directions to the department for its future on several counts. Some of these being improved quality of mail to bring reliability to its operations. As mentioned by Simon Bell, we seem to be doing many activities but the core activity of mail cannot be given up by the department or cannot be given a go-by or given a second treatment. The very root of the department lays on mail.

We should manage usa in a cost effective manner. We seem to be very often, pointing to usa as the reason that we cannot make profit. I agree that there are limitations but there are also opportunities for us to switch over to cost effective alternatives so that we can really manage our usa economically and reduce deficit in our premium products and services segment by following market savvy practices. This is another area where we find to our dismay that even in premium services we are not able to make revenue in many cases. This is not acceptable and in premium services we should be able to make revenue.

U sing technology for customer benefit and e-governance: there is no point in going on pumping in investments for technology unless this is giving real advantage to the public. These are the issues that the minister has been asking me and I have to give him answers. In short, unfortunately I am really missing him today. He was very keen on being present here. Had he been here, you would have seen the predicament in which I am. In short, he advises the department to think out of the box, evolve their internal strategy that will make the post acceptable to all sections of the community, the common man, as well as the corporate sector fetching us not only goodwill but also revenues. In keeping up with the mandate


given to the Department by Honourable Minister of Communications and IT, efforts are being made to provide a new face to the post. Market structure has been put in place from the Directorate to attain the vision at the state and district level in a formal manner. Two committees have been appointed, one for empowering heads of circles with greater financial and administrative powers and another for restructuring the department in order to design an administrative structure for the post in line with the demands of the public and conscious of the mandate in line with the vision statement of India Post to move away from the bureaucratic mould rooted in red tape. Unless we are able to move away from the bureaucratic approach and are able to inculcate the right business culture, our efforts are not going to bear us fruit. The committees are finalizing the work and it is expected that the empowerment of the circles will be firmed up in July 2005.

We have done restructuring in marketing, technology and are starting a new experiment in Mumbai for providing accountability and mail management. The committee on restructuring is expected to finalize its report shortly so that we will be able to provide a new design in a couple of months. We have sought suggestions from the public and I am happy to inform you that the suggestions came pouring in. \Ve were not able to process it and come up with decisions. This must be processed by the end of this month and some decision should be taken on this.

We have also awarded consultancy to school of planning and architecture for new look post offices for creating the right brand image for India Post across the country.

The efforts made above for the reforms of India Post are the beginning of a move in the right direction.

Knowing the inadequacy in the existing structure of the post as a government department, I approached the Cabinet Secretary and sought his intervention for a new direction in respect of becoming commercial, in respect of the premium segment while keeping our commitment to usa, as a part of our social obligation. I am happy to inform you that the Cabinet Secretary has constituted a committee with a mandate to deliberate on a viable model.

The organization has been moving up in its performance. Premium products add about Rs 200 crore to the revenue. The revenue from postal services and savings bank also keep on increasing marginally. The net revenue flow has been showing a gradual increase which is a healthy sign. However, simultaneously the cost of operations is also showing an upward trend which is a major cause of concern.

We have awarded a consultancy for a study of India Post for the development of a blueprint in terms of policy, structure, practices, internal operations and as well as to manage the market situation by making the best product portfolio and market mix. The consultant is expected to give us the report in three months. It is only in this context the seminar on India Post Transformation for Vision 2020 becomes relevant for laying the roadmap.

We may wonder whether the various efforts by way of the seminar sponsored by the World Bank and the institutions involved would come up with different reports leaving us perplexed. It has to be clarified that these are different measures taken for transforming the post for facing the challenges and there is no conflict in the mandate. The solutions emanating out of these three efforts would shape the new way in terms of formulating the policy and I am confident that the coming three months would be a churning period for the organization.

The process of change has been initiated and with this momentum, the transformation will become visible before the closure of the tenth plan period. In this context, I wish to place before you the following from the latest book "Winning" by Jack Welch, the most successful CEO of GE. I am really quoting this because I really felt involved in that. "Don't be arrogant, don't assume you know it all, always assume you can learn from someone else, from a colleague for example or from a competitor, especially from the competitor." It is precisely what I have been advising. Collect competitor practices, what they are doing, what they are not doing and what we can do. At the heart of this culture is the ability to learn and translate that learning into action for a competitive business advantage.


Very often, I feel when we are having these seminars all the people who are present know what is required for the post. But translating the thought into action, in order to cut the competitor to size, is the issue.

I am really very confident that the seminar will produce an excellent result and I have a suggestion for the World Bank that at the end of the day we should sit together and prepare a blueprint for implementing this. I am very confident that this seminar and the efforts made by Cabinet Secretary and the consultant's study will pave the way for the organization. None of us would be apologetic that the organization is at crossroads.

I fully agree with Raghavan that the organization is fully vibrant. I am sure that every effort is moving in the right direction. With the right direction and approach we will be able to achieve the right result. I once again thank the World Bank in supporting us in our endeavour.

5. KEy NOTE AnDRESS: VISION 2020 AND INDIA POST

Dqyanidhi Maran - Ministefj Ministry of Communication and Information Technology (delivered fry R Ganesan) Secretary Posts) Government of India)

Ladies and Gentlemen,

I am happy to be in your midst on the occasion of the World Bank Seminar on 'TranifOrmation oj India Postfor Virion 2020"which assumes significance in the Sesquicentennial Year of India Post. Where has India Post come from; and where has it to go - are the two issues one has to clearly address at this juncture, when the department has to live up to the challenges of the 21st century. India Post, no doubt, has a tradition of 150 years of expertise and experience in the service of written communications, savings bank and insurance. It has served the purpose of maintenance of communications as well as mobilization of resources through savings bank towards the developmental goal of the country in the post-independent era. However, you must not rejoice on your past successes, as yesterday's solution may not be relevant today, though no doubt India Post must definitely also learn from past experiences.

In order to make itself continue to be relevant in 2020, it is necessary to start thinking today, to build up a momentum for growth so that India Post can catch up with lost time vis-a-vis its counterparts in other parts of the world. India has come a long way since 1947 in economic and technological growth and is a leading player in BPO and softWare development. Technology has evolved from the manual mode of communications to the high end - high-speed electronic mode of communication involving Broadband, GSM, and CDMA technologies. Aristotle had aptly stated that time does not exist except for change. Post also has to become relevant technologically and become competent to handle technological developments. I am happy to note that the Department has been able to bring in computerization and V-SAT utilization to the traditional bastion of the post office and is also proposing to move towards networking of post offices. Starting with the nineties, the Department of Posts moved out of its traditional mould and developed services like business mail and Speed Post for the higher-end customer. At the same time, its reach through 155,000 post offices has not been optimized by high level of technological connectivity, is also to be acknowledged. India Post should reinforce its historical edge through induction of appropriate technology further to become relevant in today's world. The computerization of all departmental post offices and connectivity will give India Post the required extra advantage, which no other organization has. The provision of automated sorting in all metros will provide speed and quality in sorting and ensure the capture of the business mail market. The introduction of At!Jtime-At!Jwhere Banking by the post will launch the plastic card technology to the common man who finds a comfort level in the Post Office

Savings Bank.

While drawing up the plan for 2020, the department has to understand the multiple opportunities and complex threats that the future holds. Scanning the horizon and understanding the possible technologies that may be appropriate to meet these opportunities will be the first step for the Post. You should acquire


the skills, expertise and the technology to meet the challenges of the future. It is not enough to make a choice but it is necessary to implement the choice and move ahead before the initial advantage is lost. This calls for a high level of competence, resolution, and commitment to the cause. Here, I have got my own concerns having interacted with Department of Posts quite closely in the last one year. 1 feel, while the Department is taking steps, it should also take quick decisions to implement those steps. The implementation is sometimes held back by deliberations, well rooted in rules, but not intended to give it the early bird

advantage.

Brian Tracy, the well known management expert says:

'The k~y to success is for]ou to set one great dJallenging goal and then pqy aJ!Y price, 01Jerrome any obstacle and persist through aIry dijfim~f)' until]014 jinally achieve it."

While the Department of Posts should be concentrating on its core business of mails related premium

products, it should also absorb the growing realities of the market place. It has to recognize that it has to become competent in the market and not take refuge under legislative protection. The post office should arrest migration to other communication channels by exhibiting and rendering superior service, thereby

finding a place in the market. The competition posed by couriers, emergence of the express market and the growth of logistics business should make the department realize that it cannot be a static organization but has to move forward with the developments in the market place. Also communicate daily with your

customers. If they are talking to you, they cannot talk to your competitor.

I would like to give you the prescription of Jack Welch, an eminent writer on business managemeBt, for success,

'/let in a boundary less fashion and alllJqys search for and apply the best ideas r~gardless of]our source and see change for the J!,rollJ/h opportunity it brings".

These are the basic requirements to enhance your market share in the face of fierce competition.

Training should also send the message of proactively contributing to business volumes at all levels. Build a market-oriented approach. Re-orient your training process so that personnel can be elevated to a proven way of doing a'1d promoting business. Training should propagate role of staff in delivery of products and services y. ",h deference and a smile.

To '-juote Rabindra Nath Tagore,

"J .dept and dreamed that lije uJas a JOY I lVoke and sallJ that Iiji; llJas JerI)ia I acted and behold, JerIJire lJJaJ}OY"

The Post should combine physical reach and e-technology to offer a range of new products and services separately designed for the urban and rural sectors. The brand image of India Post should be leveraged and used to advantage for promoting business and revenue generation. The network should be consolidated for efficiency; upscale competencies and skills, to strengthen the core services and simultaneously discover

opportunities.

If reliable basic services are offered, customers can be attracted to new, value added services. There is a

need to redesign the product portfolio to suit consumer needs. There can be no single path to postal

reform; it is necessary for the department to evaluate alternative routes. There is a need to think differently

out of the box and adopt a creative approach to discmTr customer needs and build up a sustainable and

durable customer base. Postal reforms ha\T been initiated by countries in the region like Korea, Bhutan

and Japan by building up alliances, joint \"enture cooperation, de\Tloping a postal IT system, automation of operation and sorting centres, building a unified data, statistic and reporting systems, establishing serYice

'-juality standards and creating a new market by business model ren(JYation.


The key drivers in the current scenario are:

(i) Prmriding value for money.

(ii) Transfer tangible benefit to customers and stakeholders.

(iii) Streamline management practices to enhance efficiency and productivity of postal business.

(iv) Attention to customer care and satisfaction by service quality innovation and best business practices.

(v) Optimize the postal network by providing an IT infrastructure to expand and extend services.

(vi) Enter the market with other similar providers in a competitive spirit.

India Post has the potential and the resilience to effect a turn around. In the next five years, India Post should work in a technology driven and commercially competitive environment accompanied by a paradigm shift in mindset to be consumer conscious and render quality service. The Department should think globally while working for the local environment. Post should recognize the growth of the cargo market and promises of advantage in logistics and supply-chain management and use its natural talent, historic skill and knowledge in this segment to bring in enormous revenue for the Department. The swift and reliable movement of money is a gap, which the Department should attempt to fill by introducing a premium money transfer business. Communication and commerce today are inter-related in their growth direction. It is necessary that the Department should leverage its vast network of post offices and computerization to take advantage of the development in the commercial sector, in conjunction \vith its special strength of personalized services.

Financial Services contribute nearly 45% of the department's revenue. With the changes in the taxation and the interest rate regime, India Post should take advantage of the resurgence of mutual funds in a buoyant stock market for selling these tlnancial products using its vast network particularly in the rural and semiurban areas where few others tread. I am happy to take note that the Department is going to offer through its Finance Marts banking, bill payment, life and general insurance, mutual funds, Government Securities, etc., under one roof with a better ambience and in a computerized and networked environment to attract the new generation of upwardly mobile middle-class which is entering the investment market. I understand, during the course of this year, 160 Finance I'vfarts will be established. In the long run, the Department should expand the Finance Mart network to spin off into the Post Bank.

The Government of India under the Fiscal Responsibility and Budget 'Management Act is totally committed towards wiping out subsidies to all departments and institutions. The Post, world over, is not only a socia-development organisation but is also turning into a commercial organisation. A single point direction in which the Department must move in the next few years would be to ensure that the deficit is not only narrowed down but is finally wiped out in the non-USO segn1ents. It is necessary for the Department to specifically identify both through costing and by way of statistical process, the quantum of commitment towards the Universal Service Obligation (USO) so that the Finance Nlinistry can be specifically approached to take care of the deficit arising out of the USa.

The Post owes its existence solely due to people who visit post offices for its services. What can be done to make processes easier and increase the comfort level for the customer is also an area, which the department should take care of.

In the words of Jack Welch,

"Git'e customer a good fair deal. Great customer relationships take time. Don't try to maximize short-term profits at the expelZJe 0/ building those enduring relationships"

The customer can be an individual, or an organisation or a business entity all with different needs, required to be vended from the same outlet. Process re-engineering is an untreated area, which the department has to address seriously.


I appreciate the efforts made by the World Bank in organizing the Seminar and to bring in experts from a wide background from India and abroad. I hope, the World Bank and India Post will continue this engagement in a more sustainable manner. \Vorld Bank's experience in technical assistance for undertaking new initiatives could playa crucial role in making India Post more viable and self-sustaining. The World Bank's unique position of being able to leverage the best practices from around the globe should serve the department in good stead in their endeavours to transform into a provider of quality services.

I wish the Seminar and its deliberations all success and look forward to the timely implementation of the Action Plan proposed to be drawn up at the close of the Seminar.


II INDIA POST: RESTRUCTURING AND MODERNISATION (INTERNATIONAL EXPERIENCES)

6. THE CHANGING WORLD OF POSTAL SERVICES

Current trends in the postal industry, changing customer requirements, liberalization, international relationships, regulation

Graerm Patti Lee, Senior POJ/al Poliq Specialist, Global in/orlliolion and LOJm,1/UI'llC,7tl£l11 Tecbnolqf.Q' Department, rr/orld Bank

Graeme Lee presented a short overview on the status of postal service reform across different countries in the world.

6.1 Introduction

Table 6-1 demonstrates that donor countries with 15% of population have 86% of worldwide mail \'olumes equating to 373 items per capita per annum. They have 24% of the world's post offices each handling an average 6,900 items per day.

Table 6-1: Postal Statistics

Regioll Population Mail volumes I tems/capita Post offices Items/PO/day (",~, ) ('~") elc,)

Donors 15 86 373 24 6,900

IBRD 11 1546 39 540 - -_...... --_......---- .. -

IDA (excluding India) 22 0.6 2.3 13 88

2.4 192India 17 248.5 !

Borrowing countries 46°1.1 of the population but only 11 % of mail ':olumes eL]uating to 15 items per capita. They have 39(1,) of post offices each handling an average 540 items per For IDA countries the figures represent even less mail volumes and less items per post office per

In terms of population and post offices, India is similar to donor countries \,\1th 17(yo and 24% respectively. However, India has only 2.4°;() of total mail \'olumcs at 8.5 items per capita per annum and 192 items per

office per day. This leads to high unit cost of delivery and post oHices that can be ,-iable only if they have diverse product portfolio.

In terms of network density India has one post office for eyery 6,850 people, denser than the USA postal network which handles S(YYo of the \vorld's postal yoiumes. This density and outreach makes India Post an interesting prospect in developmental terms as it has the capacity to reach the heart of even' community of India.

Despite post offices having low level of transactions there is a tendency around the \yorld for them to be owned, rather than as an agent or a franchise, As Table 6-2 shows, Great Britain has the lowest percentage of owned POSt Offices \vith 97'% of them franchise outlets. In fact 73% of post offices are owned bv the postal with 71 members of the UPU O\vning all their outlets.

However, a number of studies show that the majority of rural post offices are not viable. Post offices throughout the \vorld need to look at pri\'ate sector participation in the proviSIOn of rural post offices to extend access and reduce network costs.


Table 6-2: Retail Ownership

Country Post offices % owned 0/0 non owned

Great Britain

Nigeria

Bra~il

China --

17,200

4,600

12,300

76,400

.3

24

44

53

_.

97

76

56

47

-_." -

-_._

Egypt 5,500 59 41

Sri Lanka 4,600 87 -----

13

"\~erbaijan 1,300 94 6

71 Countries

Total ------ -

237,000

650,000

100

73

0

27

6.2 La Poste

Post office yiability is an issue with La Poste in France. About 19% of the post offices in France have less than one hour activity in a day and half less than five hours activity in a day despite having a well developed and diversified product range. Further to this, clients in rural areas face restricted opening hours leading to dissatisfied customers.

La Poste is resolving this issue by prm-iding post offices at bakeries, news agents, supermarkets and at local gm'ernmcnt administration centres, leading to a reduction in administration costs and providing revenue and business to local businesses.

6.3 Royal Mail UK

In the UK, 97% of the post offices are operated through agents but the rural network is still not viable. The government recently commissioned a study to identify the costs and benefits of rural post offices. The study found that only the largest 10% of the post offices generated reyenues greater than their costs and that the lowest 10% actually generated only 6% of the cost. But if other indirect benefits are taken into account then almost all rural post offices are cost effectiye.

The British Goyernment recognises the role of rural post offices and is actually paying Royal Mail subsidy

Table 6-3: Rural Network Viability: Royal Mail

Revenue/Cost Benefit/Cost

Smallest 10%

10-20

0.06

0.18

0.77

0.88

20-30 0.29 1.3 - - ---- --

1.2230AO 0.39

40-50 0.48 1.45

50-60 0.57 1.60

60-70 0.65 1.77

70-80 0.73 1.87

80-90 0.82 1.93

Largest 10% 1.01 2.03


to ensure they are kept open. This can actually be replicated in India; where rather than covering the losses of India Post the government can provide a subsidy to India Post for covering the rural post offices in the country. The subsidy can then be considered as revenue to India Post which may allow the employees of India Post to operate in a profit making rather than loss making environment.

6.4 United States Postal Services (USPS)

One of the key issues in USPS is revenue per drop. As shown in the chart below revenue per drop has dropped from a high of US$450 in 2000 to US$415 in 2004. Static mail volumes and fall in first class mail, steady growth in delivery points of the order of 1.5 million per year \vith increasing staff cost and fuel cost have led to this fall in revenue.

460

440

Y7 420en => c Q) 400 :::l C Q) > 380Q)a:

360

340 1996 1997 1998 1999 2000 2001 2002 2003 2004

Figure 6-1: Revenue per Drop

Falling revenue per drop is an issue not only for USPS but for all post offices and the implications must be assessed. Increasing rates can rectify the problem but will this impact volumes? Cost based pricing or charging for deliveries are also solutions but probably politically unacceptable. Another solution is to review the needs of the market by the concept of daily delivery.

6.5 Tete-centres: Korea

Throughout the world post offices are utilising spare retail to provide additional services. In Korea 2,780 of 2,800 post offices act as telecentres providing free access to computers. This concept was initiated by ivfinistry in Korea to encourage dissemination of information to rural areas and started with 2~5 PCs per office (ADSL or satellite). The service is funded by the Post Office and access is free. In addition there are also 116 Post Office Information Education Centres funded by Government to impart computer lessons in the communities.

Such a use of post offices for the public good could be implemented in India. This could be in the area of telecentres or be focused on the specific needs of local communities. But India Post should be wary not to stray too far from their core competencies.

6.6 Banco Postal/Exporta Fadl: Brazil

Brazil has developed two products to improve the viability of its network. The models are innovative and replicable in India.

6.6.1 Banco Postal

Five years ago Brazil post established a partnership with a private bank to provide banking services through


post offices. Banco Postal now has 3 million accounts from a community of 40 million people that previously did not have access to banks. Of those accounts, 59% have earnings of less than US$100 per month. Brazil Post receives a fee for each transaction and now generates US$2.5 million per month. This has been achieved on an investment of US$80 million and has led to 5,300 post offices being connected with on-line banking.

6.6.2 Exporta Fadl

The second product is a simplified export process to over 200 countries providing an important product for small and medium enterprises. It has shown a 100% growth rate per annum and Brazil Post now has 32% of the "simple" export market. It has also had a direct impact on the Brazilian economy, increasing pvrV\t"rc by as much as 10%, and is valued at US$lO million.

The to the success in Brazil Post is the immense trust that the public has developed in post office services. India Post is also a trusted brand and it is one of the greatest assets that can be utilised in its favour.

6.7 Trinidad and Tobago

In Trinidad and Tobago a five year management contract has reaped significant results. Home delivery has increased from 50% in 1998 to 98% in 2003. Mail volumes, revenues and productivity have all increased considerably during the same period. \'Vhilst the introduction of a management contract in India Post may not be a practical solution, the introduction of commercial practices could yield similar results.

6.8 Commercialisation and Corporatization is a Way Forward

Despite having monopolies in place to protect them from competition, post offices are actually facing competition in all their markets (Table 6-4). Traditional mail is under threat from electronic substitution and for every post office service there is an alternative supplier in most cases. For this reason, post offices are

to diversify into new areas. This is increasingly in partnership with private sector companies that value the reach of postal networks.

Table 6-4: Competition Exists

Service Products Competitors

M.ail Letters, Registered, Philatelic Internal and informal Distribution, electronic transfer

]::v ....rpC< Parcels, Packages Local Couriers, DHL, UPS, FedEx, TNT

Financial Savings, Payments, Loans, Money Orders Banks, Moneygram, Western Union

Government Licences, Taxation, Pensions, Benefits. Information

Local Governu c

I Retail Phones, Phonecards, Stationary, etc. Shops, Kiosks, Newsagents

.Electronic Hybrid Mail, Internet, SMS ISP's, Cybercafes

Rural• Access to people Schools, Community centres, Religious centres

i

Warehousing, Packaging, Picking, Distribution Transportation companies, Freight Forwarders

We will see ftom China Post, Deutsche Post and La Poste (France) that post offices are becoming more commercially focused and are changing their institutional model. Post offices are moving away from public administrations and increasingly moving towards privati sed status, as is the case in Germany. Deutsche Post is no longer just a German post office but a world wide leader in logistics.

I


Commercialisation can take place without corporate reforms but the reality is that postal departments do not have freedom to make commercial decisions.

Table 6-5: Corporate Reform

Government department or public agency

Corporation established under public law company law

PUBLIC LAW PRIVATE LAW

PUBLIC OWNER PRIVATE OWNER

COM1\fERCIALISATION Introduction of commercial objectives and practices

6.9 European Union Reforms

In the Union, Cyprus is the only post that remains a public administration. The majority of countries have already transformed their postal departments into Public Corporations and in three countries Post Offices have become private companies. But eyen in Europe there is a considerable amount

of political opposition towards post offices undergoing reforms.

The Union is also liberalising the market in the belief that competition is good for the sector.

The reserved area is currently 100 gm and this will fall to 50 gm on 1st of January 2006.

Some countries are liberalising prior to the EU directive. Sweden has been fully liberalised since 1993, the UK will fully liberalise its market in 2007, and local mail is already outside the monopoly in But in spite of liberalisation the EU has strict norms for the provision of the USO as shmvn in Box 1.

One question some people ask is whether specifying 5 day delivery service as part of the directive places

too much restriction on universal service providers. But even though people may no longer require daily of mail, it has been provided for so long that it is now written in legislation. On the theme of

uniform pricing the EU has not specified this within although some national regulators do uniform pricing.

Table 6-6: Status of EU Post Offices

I Stage 0 Stage 1 Stage 2 Stage 3 uP hi Ie AdmtnIstrat10n Statutory Corporanon Stateowned company Pnvate ~ompany

Cyprus Belgium Austria Germany France Czech Rep Holland Greece Denmark Malta Hungary Estonia Lithuania Finland Luxembourg Ireland Poland Italy Sk)\"akia Latvia Slovenia Portugal

Spain Sweden UK


Table 6-7: European Union Liberalisation limits

1998 - 2002

Weight Limit

350 gram

Price Limit

5 x stamp

2003 - 2005

2006 2008

100 gram ..............--.......~

50 gram

3 x stamp

2.5 x stamp

Full Iiberalisation?

Box 1: Universal Service Obligations: European Union

• Scope of universal service

All postal items up to 2 Kg Postal parcels up to 10 Kg Incoming parcels up to 20 Kg

• Routing time for cross border mail

- J+3 85%, J+5 97%

• 5 day service (collection and delivery)

• Network access, complaints and redress

6.10 Conclusion

A issue quantified by OSPS is the changing profIle of mail, leading to reduced revenues for each delivery point. First class mail volumes are falling while less time critical direct mail volumes are rising. An issue that the Government of India consider is what this means in relation to defining universal service specif1cations.

To increase revenues, public postal operators are increasingly diversifYing the range of services distributed in post offices and this is an area where India Post too needs to continue pursuing its on-going initiatives.

To counter growing competition Post Offices must be given more commercial freedom through increased autonomy from Government control which has been the experience in the European Union. India Post needs to introduce commercial practices if it is to compete in its markets. India Post also needs to consider the implications of market liberalization. Independent regulation may be introduced to protect customer interests and ensure a level-playing field competition.

There is a need for India Post to build on the strengths of its network and staff to develop a viable and sustainable business model. There are many lessons that have already been applied throughout the world that India can learn from. From targeted subsidies to franchising, from diversification of services to provision of social services, the opportunities for India Post are extensive but they must be targeted in a coordinated manner.

7. MODERNIZATION OF A POSTAL NETWORK, EXAMPLE OF DEUTSCHE POST WORLD NET

New business opportunities, liberalisation, strategy and structure, competition

Amin Jaidoun, Director UPU Af/airs, Deutsche Post IVoridNet

Amin Saidoun presented the process through which Deutsche Post achieved the status of a world leader in logistics and postal communication market. He explained the planning, the drivers, the shaping


factors and the strategic solutions adopted for change management of Deutsche Post from 1990. The three phases of change, the criteria for assessment of success and failure and the future development plans which led to the Deutsche Post World Net (DPWN) were also described.

The fIrst question that must be understood before embarking on a process of change is "what is the need to change or restructure"? One of the main reasons in Europe is that the European Commission has defIned clear guidelines for transformation and liberalisation of the postal sector. Therefore, there is a clear road map to bring about change and liberalise the sector. Natural monopolies are no longer viable with wide-spread competition and it was therefore essential to design a new viable postal model. Change is inevitable, and in order to understand the process involved in change, the key drivers of change need to be understood.

7.1 Key Drivers of Change and Deutsche Post World Net Change Strategy

One of the key drivers of change is Globalisation. Globalisation means signifIcant growth and potential in international trade. This is true for both large and medium sized companies.

Liberalisation is also a key driver. Modern technology and dismantling commercial barriers have led to a situation where growth cannot be stimulated with local commerce alone. Opening of letter mail markets will trigger need for new markets like growth in express/logistics. As the letter mail market is declining in size and profItability, opening of express markets in emerging economies represents more opportunities for growth.

The third key driver of change is digitisation. Digitisation for the postal sector would mean substitution of traditional mails with e-mails and hence new platforms of e-businesses and electronic services.

This would also mean customers who want wide scope of services, including value-added services or increasingly one stop-shopping service. Hence outsourcing becomes important to maintain effIcient cost structures.

This has four key implications for postal operators and the drivers for DPWN strategy:

(i) Increasing pressure on incumbent to grow efflciently

Liberalization Globalization

- Opening of letter mail markets triggers - Significant growth and potential in

need for growth in express!logistics international trade

- Need to follow our customers- Domestic (German) letter market will

decline in size and profitability

- Opening of express markets in

emerging economies

DPWN Strategy

OutsourcingDigitisation - Customers want wide scope of

- Substitution effects upon traditional services, including value-added letter mail services

- New potential in e-business - One stop-shopping increaSingly - New platform for new services demanded by large customers

Figure 7-1: DPWN Strategy


fast growing technologies (especially telecommunications) - Increasing competition in parcel, newspaper and direct mail delivery decided

(ii) "Kew way of thinking

(iii) Restructuring and reshaping the organisation and the business

(iv) "Keed for consolidation of postal business

7.2 Deutsche Bundespost to Deutsche Post World Net

Deutsche Post prior to 1989, like other postal net:\vorks, was facing many problems. Huge deficits, lack of political consensus for change, postal labour union was strong and against radical changes, parcel, newspaper and direct mail delivery threatened to put the post out of business. Therefore, strong need for change was required and a first phase of postal reform was decided in 1989.

History - Crisis since 1960: Yearly deficit of hundreds of millions of EUR

- Several reform proposals failed because

• German politics did not want to relinquish its influence on the Post • the strong postal labour union "Deutsche Postgewerk schatr insisted

.." Strong need for changein 50% representation in the supervisory board increasingly perceived by

- In 1987, Postal deficits of 800 mio. EUR p.a. had to be compensated by German politics. but also the telecommunications branch of the Ministry of Post and hotly disputed with Unions Telecommunications, which limited its investment capability into new and ""1989:PostaIRef~l~

Figure 7-2: "Deutsche Bundespost" in 1989

The two success factors for Deutsche Post liberalisation and growth were:

(i) The whole process was stable and was supported by German legislation.

(ii) The government did not interfere in the activities of the regulator.

It is, therefore, important that the regulator should allow for competition but not stray into competition itself.

7.3 Liberalisation Schedule

In Germany, the liberalisation schedule/agenda for liberalisation is that by the end of 2005 mails below 50 gm will be opened for competition and complete liberalisation will be achieved by 2007. Since 2003, local competition has taken place through special licenses offered to companies that can offer better quality than the incumbent for the same service.

Germany

-120


Therefore the reaction of the Deutsche Post to liberalisation has been:

(i) Introduction of a stable, but flexible regulatory framework.

(ii) Re-defining the postal business through:

(a) strong customer focus (b) management improvement (c) transparency in system data processes and (d) focus on operational excellence.

(iii) Co-operation across corporate divisions to create synergIes and offer required and customised solutions.

7.4 Actual Transformation Process and the Significant Changes

Though this is an example from Deutsche Post experience it can be valid for any postal operator. Deutsche Post adopted a three phase transformation process depicted in Figure 7-4:

Leveraging the potential within the Group

Establishment of new business platforms 2001-2006

1998-2000Turnaround

1990-1991 Value added services ~ " ~

i~ : ,comprehensive ~ -' ..... product range i-

Ii:. E(~~..•.... 1,56 1990~

. .. 2001 Globalisation ~

E .~.-.-.-.-.-.~-~.-~

Figure 7-4: The three phases: On the way of becoming a global logistics company

(i) Turnaround phase

~i) Establishment of new business platforms

(iii) Leveraging the potential within the group.

7.4.1 Btffeat{cratic administration to a competitive, market-oriented company

The first phase in realising the turnaround strategy is very important in laying down the foundation for

-------' Inlegmled appH ..'ilch 01.----_._-,..-- ~ New 1Il1ralltructure

Chang.El 01 ~>O$tal (>JlJe> SySIL'fTl Easl WB'


future development. 'The key process here involves reduction in costs, creating efficient processes and increasing quality in the domestic market. To bring about change it is very important to rethink processes and abandon old ones keeping in mind new market demands.

7.4.2 Listablishlllent of neu) business

The second phase is expanding the product range and offering new services along the value chain. Deutsche Post had to come up with new and innovative solutions to solve the customers' problems and put the business on a broader basis.

,',

lIH1 ' : ... ;

.: .:

• Msil • &pes .~ • FiIt.ac:e

£DBftJes: Ail expres~. frelght ilrwulil'€, fU'II.UICW ser..Jces

Figure 7-6: Establishment of new business platforms for the Group

The two example of value added services used to broaden the business are:

(i) Direct marketing centres: providing more knowledge, information and solutions to communication problems of direct mailers. Customers were told "don't waste time and money on traditional advertisements and IV campaigns but target direct mailing in a more efficient and cost effective way for reaching the customer".

(ii) Deutsche Post Print Com: this is a subsidiary of Deutsche Post that provides high volume print production for mass mailers (such as printing telephone bills) positioning Deutsche Post at the source of the mail production.

These examples are not that innovative but provide customers with valuable solutions to their problems. Another example is of pack stations where Deutsche Post offers high-tech lockers for parcels to be delivered and the customer can pick it up at their convenience after receiving the message via SMS. The pack stations have been very successful and are currently on a nation wide ron out in Germany.

Sometimes innovations do not perform as expected. Deutsche Post ventured into e-business and started a shopping portal called Evita. The portal was badly hit by the crash of the internet bubble and Deutsche Post sold it two years after its establishment. The important lesson is to cut losses and scale back unprofitable businesses.

7.4.3 Reshaping the process and leveraging the full potential 0/ the group Phase 3 involved raising the platform, creating synergies and improving all areas. Programme Star of the Deutsche Post plays a key role as a valued project in improving and enhancing integration process.

0.1 mn

customers

0.4 mn

DPWN

Group

structuring


Cross-selling potential Integrated products and solutions

(!'!~. DAIIlB ..... ~§.. ~

3.3 1.3 mn mn

Business

Use of synergies Further global expansion

DPWN

Figure 7-7: Leveraging the group's potential: Focus on U'"'l',''"'', development of integrated products and globalisation

Deutsche Post has the '\'1.S10n to provide full services along the value chain in the markets. The key success in following a country specific approach is to adapt to a part of the strategy rather than implementing the entire strategy. For example, a water glass company in Europe found out that its water glasses which were very popular in Europe became shelf warmers in USA, as customers mistook the water glasses for flower

Collb:att···.s~ MaragementLoptics

--Sl

• Transportation of • Warehousing • Catalogue shipments • Parcel shipments • Order management goods ofAsia to using • InvoicingGermany • Fulfilment • Distribution -InfoposttooutJets

• Consignment - Postwurf Spezial • Call centres handling for • Full truck loads for - Postwurf SpeZial Germany. Ausltia. deliveries of Plus the Netherlands & wholesalers and - Unaddressed mail SwiUerland retailers

• Direct Marketing

Figure 7-8: Future of development


vases as they were perceived to be too smalL This reflects an attitudinal difference in the concept of water glasses between Eutope and USA.

Deutsche Post offers one stop shopping in parcel area including parcel logistics, transportation from Asia to Germany, logistics services through warehouses and storage facilities, transportation of goods according to quality and services levels. Due to its subsidiaries in marketing, sales and distribution Deutsche Post is now a specialist in catalogues, shipments and express management.

7.5 Conclusion

For reform to be successful, the reform process has to be backed by government legislation, which was the case for Deutsche Post that prevented interference in the actual reform.

The first phase (1990-1997) focused on reduction of costs, creation of efficient processes and increasing quality of service in the domestic market. The second phase (1998-2000) focused on expanding the product range and offering new services along the value chain. The third phase (2001-2006) consisted of consolidating cross selling potential, using all possible synergies and developing integrated products and solutions.

Learning from the German Post experience, the Government and India Post in the short term can aim for reducing costs of operation, defining the scope of usa services, accelerating the reform process by setting up a regulatory authority (separating owner, operator and regulator function) and providing high guality customer driven services with increased revenue and profit potential. India Post then needs to diversify its product base and strive towards inventing products to compete with courier service providers. The German experience suggests that India Post, in the long run, might compete and cooperate with other service providers.

A final message from the Deutsche Post transformation is that the reform took a considerable amount of time and was underpinned by strong and consistent Government support.

8. ROLE OF TECHNOLOGY FOR POSTAL SYSTEMS AND CHALLENGES FOR INDIA

5aJ!jq)! Mirchandam; Regional Vice President, lvlicrosoft Asia

Sar!fqy Afirchandani presented on n'CiYs to properlY manage the business and bring-in more customer orientation through use of tecfmology soltttions.

Customer Interaction, IT and the IT department playa more pivotal role to step up, be more strategic and more aligned to the long term goal of the organisation and be a part of the overall growth of the organisation. Every organisation is measured by its performance in the following areas:

(i) Growth in revenue

(li) Growth in profits

(iii) Customer satisfaction

(iv) Effective administration.

The organisation will not only have to do all this but also manage and continue to provide universal service. IT is a key enabler to improve profits and meet challenges for growth in business.

8.1 Postal Services: Key Challenges Today

(i) Improving the postal delit'ery !lstem (collectioll, sorting and delivery): post offices, circles, etc are facing threats to traditional door to door mail delivery, globalisation, liberalisation and modern faster mechanism are making it easier for non-traditional operators to compete.


(ii) New electronic communication channels: from a technology perspective internet is the largest threat that this business faces, but is also an opportunity for individuals, small businesses, and large businesses to communicate and conduct business. Though e-mail has reduced the physical pieces of mail that go across our desk, business in both old and new economy are increasing the volume of packages and direct mail advertising.

(iii) Customer satiifaction and retention (especially for premium and financial services): to continue to meet public service, financial and performance goals in a competitive economy, postal services have to become agile and ready to brace new opportunities in the marketplace. They need to make smart decisions and act on them quickly. Agility becomes the key and technology becomes the key enabler. Postal services with a clear view of their resources, open-lines of information exchange, adaptable integrated systems are the ones that can change to their advantage.

(iv) Competition from private courier companies and logistics companies, commercial banks and

companies in banking services. IT is an enabler to plan for such competition.

(v) Expanding into other value added services and IT can be helpful in this.

8.2 Postal Strategy & Technology

The four pillars of strategic change and development are - empower, broaden, measure and improve. Technology can empower customers, senior managers, and the employees by automating of the complete delivery chain. Broadening is about having a broader set of services that allows the post offices to use their physical location as a multi-channel service stop. Measuring is a part of any governance today. Today business has to give their employees the best tools to make them more effective.

Technology is used to provide these services and forms a basis for the next generation of strategy. All of this has to be run simultaneously as a world class organisation and cannot be run in pockets of technology applications that have mushroomed with time. This business is not different from other businesses that have grown and evolved as the market dynamics change. 1be intelligent thing to do here is to think through an IT infrastructure that can enable future growth.

Table 8-1: Postal Strategy and Technology

Postal Strategy Pillars IT Objectives

Empower - custoIIlers, eIIlployees and partners with great service, guidance and solutions

Run World Class Managed Solutions & IT

Broaden Use of POs for Providing Value Added Services

Easy to Use Interface for Employees

Measure operational costs, productivity, customer value

Protect & Secure Digital Assets

IIIlprove - Productivity of service delivery and employees

Deliver value to Postal Workers from technology

There are four scenarios that explain the use of IT as a key enabler for growth and management.

8.2.1 EmpouJer: Logistics Alanagement

IT in logistics management would mean automating the entire value chain. This will allow the postal department to emerge as a serious player in not only providing logistics but also as a quality service provider. It also gives the predictability, efficiency, and cost management that are vital for any business today. Providing services - Tracking Management, Sorting Centre Management, Transportation Management, etc., separately will be a sin. It has to be built on a hub and integrated with each other.


But the different applications have to be snapped to fit as the business and the strategy evolves. However, these applications whether it is IVR or web based can not be developed in isolation. Integrating with other departments or two way flow of data, or XivIL based or any other kind of electronic data exchange has to be through a gateway/hub that allows data in and out, whether it is internal or external with customers.

8.2.2 Empower: Enabli~g the Common Man s Bank of Choice Second scenario can be banking, where being the largest provider of banking in the country, it is important that technology enables this function and makes it more efficient. Automating the banking is one step, but what is more important is the need for a centralized banking with a distributed database. For example:

(D Application replicated to the local post offices but having a customer data base.

(it) Offline connectivity for better customer service.

(ill) Data integration on a daily basis for reporting and single view to the customer.

(iv) Centralized database.

IT not only increases efficiency but also ability to bring in new products.

8.2.3 Broaden; GateJJ/qJ for Added Serl/ices

The magnitude of post office services and the assets that have been created, can be used to integrate government based services or private services. This can be done by linking through IT. The linking can be through a gateway which provides a centralised way of pushing growth. It can help in bringing new products at lower costs; it is like building sockets in a house which has wires running through its walls. This actually provides a backbone and ability to add new services to the business. For example:

(i) Anytime, Anywhere, Any-kind Service.

(ii) Postal Gateway & Portal, enabling a single \'\rindow service centre at each Post Office.

(iii) Transaction-fee based service model.

(iv) Smart Client/Web Based Single Window

(v) E-government/Citizen Services Channel (physical and Online).

(vi) Backend integration with different service providers including:

a. Central, State, Local Governments b. Telecom providers c. Money Transfer Agents d. Banks & Mutual Fund Operators.

(vii) Automated accounting and settlement system.


8.2.4 ImprOl)e: Enabling Internal Operation.r

The last scenario is about enabling internal operations. This is talked about in most organisations but is seldom implemented. It is about making employees more efficient, making them knowledge workers, and auromating the core of the business supply chain, delivery chain, customer relationship management and resource planning. For example:

(i) Implementing a Human Capital Management application:

a. Human Resource Management b. Payroll.

(ii) Automating inventory and materials management.

Automating procurement.

(iv) Auromating File Tracking & Movement.

(v) Providing access to IT:

a. Self Service Portal b. E~Learning for Capacity Building & Retraining c. E~mail

d. Instant Messaging.

8.3 Extensible Mark-up Language (XML)

One of the sugges

transformation of india post for vision 2020 · 2016. 7. 11. · overview of india post and...

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