Tour of UK Operations Sue Whalley Chief Operations Officer
28 June 2016
This presentation is being provided for informational purposes only and is not intended to, nor does it, constitute investment advice or any solicitation to buy, hold or sell securities or other financial instruments. None of Royal Mail, its affiliates or their respective directors, officers and employees shall accept any liability whatsoever for the consequences of any reliance upon or actions taken based on any of the information in this summary.
Our core network handles c.16 billion letters and c.1 billion parcels a year, delivering to more than 29 million addresses, 6 days a week
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Delivery Inward Processing National Logistics Outward Processing Collections
Cross dock at RDCs
Delivery Offices c.1,400
Collection Hubs
c.1,000
International Hub
Regional Distribution
Centres (RDCs) 6
International Hub
Inward Mail Centres
38²
Outward Mail Centres
38²
Direct journeys
Work Bundling Centres
(Unaddressed Mail)
Post Offices c.11,500¹
Post boxes c.115,000
Delivery Points >29m
Upstream
Downstream Access Operators Direct Access
Customers
Local Distribution
Downstream
Businesses c.76,000
HCT and Foot
Shared Van
Rural Delivery
Dedicated Business Delivery
¹ There are c.11,500 Post Offices in the UK, however c.1,000 are mobile Post Offices that transfer their mail to static offices for collection ² Excludes Portsmouth mail centre closed April 2016. All 38 Mail Centres perform inward operations, however, 1 of the Mail Centres does not perform outward processing functions for the majority of the year. This site, (Ipswich), only performs outward processing during the Christmas peak. We are planning the closure of Ipswich in 2016-17.
The majority of our UKPIL operating costs are incurred at the collections and delivery ends of the core network…
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Almost 70% of Core Network Costs Relate to Collection and Delivery
Upstream Downstream
% of Core Network
Costs¹ c.10% c.13% c.6% c.10% c.57% c.4%
Royal Mail Pipeline Collections Outward
Processing² National Logistics
Inward Processing Delivery Local
Distribution
¹ Represents core network costs, excluding GLS, Other business unit costs and international conveyance and delivery charges. Also excludes all other UKPIL costs including Parcelforce Worldwide and central overheads and is pre transformation costs. ² Includes international export and import processing costs.
Combined Sortation: c.23%
0
20
40
60
80
100
120
140
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Workload
Workload is increasing due to the changing mix of mail volumes…
¹ Collections, processing & delivery in UKPIL core network 3
• Increasing parcel sizes and tracked volumes • Target 2.0-3.0% productivity¹ improvements p.a.
− 2.4% improvement in productivity¹ in 2015-16
Volumes and Workload¹ (Indexed to 2008-09) Productivity Trends (Indexed to 100)
70
80
90
100
110
120
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Productivity Gross Hours Workload
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Key Elements
We are several years into our journey of operational transformation, with much achieved along the way…
¹ Excludes Portsmouth mail centre closed April 2016 4
Optimisation
Technology
Parcels Transformation
Mail Centre Rationalisation
Logistics Network
Collections Best Practice
New Delivery Methods
• Introduced 2D barcodes • Rolled out finger scanners • Installed and testing parcel sorting machine
• Completed enhancement to management reporting systems
• Introduced Service-Point-System in c.460 Enquiry Offices
• Optimised Route Planning • Introduced ‘Collections on Delivery’
• Commenced roll out of new PDAs • Rolled out new methods to handle more parcels
• Implemented annual network optimisation reviews • Reduced RDCs from 11 to 6 • Installed telemetry in vehicles
• Introduced sequencing machines • Upgraded assets and improved material handling Letters Automation
• Reduced Mail Centre estate from 69 to 38¹
• Upgraded 175 Enquiry Offices to Customer Service Points
• Opened c.100 Enquiry Offices on Sundays Customer Service
Today
Our transformation journey is ongoing…
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2016-17 2017-18 2018-19
Roll out doorstep scanning
Improve data on traffic and hours
Optimise collection hubs
Processing
Logistics
Delivery
Collections Implement further ‘Collections on Delivery’
Data
Working with our people and our unions
to deliver culture change and continue our transformation
Improve efficient job rosters across all elements of the operation pipeline
Roll out parcels transformation including optimising parcels processing
Develop third-party maintenance business
Continue to optimise logistics costs
Introduce further services in Customer Service Points
Collections: the first step of the pipeline when items of mail are transferred from our customers to the Royal Mail operation…
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• c.76,000 business collections • c.115,000 post boxes • c.10,500 Post Offices collections • c.1,000 collection hubs • c.16,000 collection routes with c.8,700 peak collection routes between 16:00hrs – 18:00hrs
Progress since IPO Going forward • Implemented collections from c.42,000 pillar boxes as part of
‘Collections on Delivery’ • Added an additional c.750 pillar boxes to collect from • Optimised route planning and associated resourcing through
Collections Best Practice programme • Introduced acceptance of prepaid and stamped letters and
parcels at all Enquiry Offices • Launched ‘Click & Drop’ online tool for consumers, SMEs and
marketplace traders • Launched doorstep collections trial for SMEs/eBay sellers in
NW England
• Adding a further c.8,000 pillar boxes to ‘Collections on Delivery’
• Consolidating mail receipt and initial prep in primary collection hubs
• Extending ability to accept returns at Enquiry Offices
¹ Excludes Portsmouth mail centre closed April 2016 7
• 38¹ Mail Centres • 6 Regional Distribution Centres • c.850 machines across UK operations to sort letters and parcels
Progress since IPO Going forward Parcels • Introduced 2D barcode on c.50% of UKPIL parcels enabling
tracking of parcels at Mail Centres • Invested in further mechanisation and volumetric scanners to
handle larger parcels • Extended Latest Acceptance Times (LATs); weekend processing
introduced Letters • Upgraded large letter sorting machines and Optical Character
Reading technology • Achieved c.50% penetration level of Mailmark® barcode • Increased automation levels - 96% of letters are outward
automated, 82% of letters are delivery point sequenced
• Transferring outward volume to distribution centres to provide
increased capacity in Mail Centres Parcels • Realigning processing capacity to support parcels volumetric
growth • Automating where economically viable • Working through solutions for larger parcels Letters • Continuing to optimise letter handling machinery • Targeting 90% of relevant mail to bear a Mailmark® by 2016-17 • Introducing automatic hours data capture to improve cost
allocation and efficiency
Processing: letters and parcels are sorted to their local delivery offices, enabled by various automation equipment…
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• The largest vehicle fleet in the UK • c.47,000 vehicles (including c.2,500 trailers)
• Fuel costs of £172m in 2015-16 with expected costs of c.£155m in 2016-17
• Focused on getting the right size of vehicles for parcels • Expanded fleet size - 850 double deck trailers now in the fleet
including 89 extra long trailers • Deployed telemetry on all trucks and c.13,000 small vans • Optimised inland air, rail and road network with route
reduction • Centralised network route planning to reduce mileage • Introduced new scheduling tool to further optimise road
operation • Moved to central procurement, management and
maintenance of vehicles, optimising replacement cycle and servicing network
• Trialled third-party fleet maintenance services
• Expanding vehicle maintenance services to third parties • Optimising further national and local fleet movement • Reviewing additional air network • Leveraging the benefits of recent investment in vehicle
telemetry
Logistics: covering the length and breadth of the UK to connect processing and delivery sites…
Progress since IPO Going forward
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• We deliver to all urban, rural and business addresses in the UK • Supported by varied delivery methods to manage the changing mail mix of letters and parcels • All delivery routes equipped with a hand held Postal Digital Assistant (PDA)
Progress since IPO • Increased First Time Delivery rates • Rolled out new delivery methods, including shared vans and
trolleys, to facilitate combined delivery of letters and parcels • Implemented structural revisions to optimise jobs in all delivery
offices to include improved indoor work flow and methods • Optimised delivery routes and to c.61,000 • Deployed ‘Customer and You’ programme: c.4,000 employees
trained • Rolled out c.74,000 PDAs nationally • Introduced ‘Click and Collect’ to Enquiry offices • Opened c.100 Enquiry Offices on Sunday • Introduced ability to drop off pre paid parcels in Enquiry offices
• Expanding doorstep collections • Extending Sunday opening to further Enquiry Offices • Rolling out doorstep scanning nationally • Rolling out 76,000 new Postal Digital Assistants with better
technology nationally • Optimising further job rosters in line with changing workload
Delivery: the final mile of the operation, delivering to c.29 million addresses across the UK…
Going forward
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Summary
Changing mail mix: becoming a parcels business that delivers letters
Multifaceted transformation: delivering change initiatives in parallel
Striking a balance between efficiency and quality of service
Putting the customer at the heart of everything we do
Working together with our people and unions