A Question of Survival: How Postal & CEP Companies are transforming their business models

White PaperA Question of Survival: How Postal &Courier Express Parcel Companiesare Transforming their BusinessModels • Challenges of Postal & CEP Companies • A Selection of Innovative Solutions to meet these ChallengesMarch 2012

White Paper Postal & Courier Express Parcel Companies March 2012Table of Contents1. Introduction........................................................................................................................ 42. Executive Summary .......................................................................................................... 43. State of the Postal & CEP Industry.................................................................................. 54. Major Common Challenges and Trends in the Postal and CEP Industry .................... 6 4.1. Market Liberalization .................................................................................................................6 4.2. Technological Change...............................................................................................................7 4.3. Changing Consumer Behavior ..................................................................................................7 4.4. Compliance With Regulations ...................................................................................................8 4.5. IT Challenges ............................................................................................................................95. Responses to Challenges: Diversification and Innovation......................................... 10 5.1. Business Diversification ..........................................................................................................10 5.2. Save Costs – Raise Efficiency.................................................................................................14 5.3. Reorganization of Business Processes ...................................................................................14 5.4. Sustainability ...........................................................................................................................15 5.5. Diversification vs. Core Business ............................................................................................166. DPD – Success Story ...................................................................................................... 177. Conclusion ....................................................................................................................... 198. About SAP........................................................................................................................ 20© PAC 2012 www.pac-online.com

White Paper Postal & Courier Express Parcel Companies March 2012Table of FiguresFig. 1: Major business challenges for postal and CEP companies impacting the business model.......................................................................................................................... 6Fig. 2: Contribution of postal services, parcel services and banking to the overall revenue of La Poste in 2003 (inner circle) and 2010.................................................................... 7Fig. 3: Highly secured end-to-end shipping process ............................................................. 9Fig. 4: Classification of selected postal and CEP suppliers ................................................ 10Fig. 5: How strongly are these challenges influencing your current business? (answers from interviews conducted with big postal and CEP companies) ..................................... 15© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 1. INTRODUCTION 4 The purpose of this white paper is to point out the main challenges of postal and CEP suppliers and what kind of capabilities companies require to stay competitive in this rapidly changing market. PAC conducted a number of interviews with business decision makers from Strategy & Innovation, Marketing, Pricing and Financial departments as well as IT managers in order to obtain the whole spectrum of the changing requirements and market drivers influencing the organization, processes, and finally IT systems. Numerous examples will provide you with insights into how diversified the market and its services already are and what impact this has on the internal processes of companies in this sector. The graphs presented in this white paper provide you with the most important trends. However, they do not fulfill statistical investigation rules, they rather provide a deep insight into the challenges and resulting business models/ services. 2. EXECUTIVE SUMMARY The challenge which the postal sector is facing is that competition is increasing through market liberalization. At the same time markets and competitors are becoming more international and long-standing business models have come under pressure from new digital opportunities. Postal service providers are therefore obliged to actively adapt to change, as their traditional mail business has been declining for many years. The CEP market is a rather fast growing sector, profiting from the ongoing increase in international trade. In addition, the online retailers gaining ground are generating further growth in the national and international parcel segment. Competition is intensifying and thus there is a need to enhance and change business models, by creating new services. This shift is pushed and enabled by the use of modern technology. In this white paper you will find a number of examples describing the diversification process in this rapidly changing industry and some recommendations on how to expand the business portfolio. The paper is complemented by a case study of DPD GeoPost (Deutschland) GmbH, a company that managed to streamline its applications for changing business needs.© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 3. STATE OF THE POSTAL & CEP INDUSTRY 5 Postal institutions are part of a regionʼs capital infrastructure and transportation networks. The companies have an intermediary role and effect the exchange of goods, information and money between consumers and companies as well as social communication. Courier Express Parcel (CEP) services mostly operate distinctly from traditional postal services, providing a higher level of speed and reliability. The main tasks of courier services are the seamless and efficient coordination of collection, transportation and delivery of all kinds of items. They have explored and developed a niche for urgent exchange of physical communications, making it into a billion-dollar global business. Postal and CEP services are part of the fabric of peopleʼs daily lives. Even in the digital and electronic age, postal and CEP remain the most accessible means of communication, parcel and message delivery available. Since the mid-1990s, a wide variety of influencing factors have caused postal services to re-think their role in the communications market. Impacts such as direct and indirect competition, the privatization of postal services, especially in industrialized countries combined with the separation of operator and regulator roles, customer demand for better and more reliable products, as well as the emergence of new communication technologies, have forced postal services to change their operational and financial strategies in order to remain competitive. In an increasingly liberalized market, postal and CEP services have become more vulnerable. At the same time, opportunities have arisen to exploit new markets by taking advantage of technological advances.© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 4. MAJOR COMMON CHALLENGES AND TRENDS IN THE POSTAL AND CEP INDUSTRY 6 4.1. Market Liberalization The European Union, for instance, will have completely deregulated the postal sector by 2013. In this liberalized market, the main challenge for the legislator and postal companies is to create the preconditions that will make it possible to continuously guarantee high-quality, self-financing basic postal and logistics services. In recent years postal companies worldwide have been forced into reforms by the emergence of the private sector as a dominant force in the transportation and communications sector. In addition, lobbying groups composed of private couriers claimed that a level playing field was needed, and thus actively pushed the reduction of the postal monopoly. The most important point confirmed by all interviewees is that an open postal and CEP market leads to more players in the market and cut-throat competition, and thus forces the players to meet the rapidly changing buying behavior of their customers, reduce costs and drive innovation at the same time. The increase in HR costs, which is the case in many countries, can hardly be offset by pricing measures. Lower Margins! Market Cost Cutting Liberalization! Issues! Technological Business Compliance Change! Model Regulations! Innovation! Changing Globalized Customer Markets! Expectations! Sustainability! © PAC 2012! Fig. 1: Major business challenges for postal and CEP companies impacting the business model© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 4.2. Technological Change 7 Rapid technological change has enabled a huge variety of new services through all kinds of channels. Some harbingers have created new services, which forces the whole industry to be innovative as well and make use of these new solutions. Mobile technology has made it possible to handle any kind of service from mobile devices. The creation of digital signatures makes it possible to handle and authorize all kinds of mail online. With the USPS (United States Postal Service) for example, the customer can personalize and buy stamps online and via mobile devices. Not least of all, consumer habits have forced postal and CEP companies to change their business models and diversify their offers. 4.3. Changing Consumer Behavior“We cannot just sell Customer demand for simple solutions is further increasing. There is also astamps.” growing focus on traditional values, such as quality, reliability and security, not least through compliance regulations. The “digital natives” are increasingly“Lawmakers should influencing business models, communication channels and the service levelgrant this agency agreements of postal and CEP services offerings. For some time now, changinggreater flexibility to customer needs have increasingly challenged many postal services. This istarget new revenuestreams and also particularly evident in the decline in over-the-counter business. From 2006 tocontrol operating 2010, USPSʼ overall mail volume dropped by 20 percent, from 213 billion piecescosts” of mail to 170 billion1. The following graph shows the change in the business of Jack Potter, United States La Poste Group in France from 2003 to 2010. Postmaster General Revenue 2010:! €20.9bn! 23.0%! 52.1%! 24.9%! Revenue 2003:! Postal Services! €18bn! Parcel Services! 18.1%! 58.9%! Bank! 23.0%! Source: La Poste Fig. 2: Contribution of postal services, parcel services and banking to the overall revenue of La Poste in 2003 (inner circle) and 2010 1 Source: USPS © PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 Traditional physical postal and payment transaction services in many areas are subject to pressure from new electronic alternatives, such as email, text messaging, e-banking/mobile banking and social media. The digitalization of our 8 everyday lives is being driven by the exponential development of technology, such as processor and memory capacity, bandwidth, wireless communications and mobile devices. This is leading to increased efficiency and a steady reduction in the threshold for replacing physical data media. The diversification of the market and new technologies enable new services to be offered to customers. In order to stay competitive, it is necessary to integrate services in bundles, which is a further move to diversification. The bundling of services results in a requirement to optimize the pricing and rating of services; pricing must be as flexible as possible to meet customer expectations and business goals. Some services also include partners that deliver content or services; sophisticated revenue sharing models are necessary to ensure payment of partner commissions and royalties. In addition, billing and invoicing processes must be optimized to manage the transaction volume resulting from the introduction of new services and bundles. Enterprise customers need an immediate response within 24 hours to requests for quotes, and expect highly personalized services. 4.4. Compliance With Regulations Another challenge is the interplay between competition and the basic service, i.e. the need to fulfill not only the requirement of the legislator and the government to provide a basic nationwide service, but also international compliance standards. After 9/11, postal and CEP providers are no longer allowed to deliver items to all countries in the world. Moreover, every item sent must be traceable. A parcel is initially checked by cross-checking with terrorist lists. Then the freight will be picked up at the supplierʼs site (only indoor) and every single step is checked and documented via scan. Track and trace requires modern technology solutions and, in the best case, scanning of various different items from different suppliers can be done from only one device. The billing of the service takes place after parcel delivery.© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 Security check of the parcel! 9 Send to the receiver! scanning! scanning! Sender: Hub! Company / Private Shipments! Receiver! Customer! Send to the hub! scanning! scanning! Only in-house pick- Only after the ﬁnal up and scanning delivery and last at customerʼs site! scanning the bill will be processed.! Fig. 3: Highly secured end-to-end shipping process 4.5. IT Challenges Many postal and CEP suppliers have a highly heterogeneous IT landscape, with multiple solutions from different IT suppliers, combined with homegrown IT solutions. In addition, many companies have decentralized IT systems or are in the process of centralizing the solutions. Compliance to regulations needs to be reflected in business applications. With the rapid evolution of products and services, IT needs to support their introduction to the market and most importantly support all kinds of customer-oriented processes. A customer-centric approach implies the use of CRM solutions, which especially in the postal and CEP industry need to integrate all marketing/sales channels. CRM solutions can be leveraged to help offer the most appropriate quotes and pricing for each customer. Finally, effective billing/charging and revenue and expense management solutions as well as partner financial management need to be in place and integrated into the ERP systems. In order to be able to perform seamless billing, an integrated end-to-end solution is required including pre-paid and post-paid charging models. Many billing applications have been built in-house so far and require modifications or even replacement in order to support new business models and help maintain competitive advantage in the long term.© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 5. RESPONSES TO CHALLENGES: DIVERSIFICATION AND INNOVATION 10 5.1. Business Diversification Postal operators are diversifying in two ways – by products and services or geographically. Many players add new services to their core business or even innovate their core business services by using new technologies. Postal operators can be classified according to their chosen mix of diversified services (financial, CEP, government services, mobile services, direct marketing, etc). Deutsche Poste Austrian Swiss Classiﬁcation Post /DHL Italiane La Poste Post Post TNT DPD Mail 27% 18% 52% 59% 32% 56% 8% Parcels 21% 5% 23% 24% 7% 41% 75% Logistics & Freight 27% - - 10% 5% - 10% Telecommunication - 1% - - - - - Postal Financial * 74% 25% - 27% - - Services Online Services < 1% 1% - - - - - Others 25% 1% < 1% 7% 29% 3% 7% International Business 68% n.a. n.a. 31% 14% 32% 24% * Deutsche Postbank generated about 15% Deutsche Posts revenue before it was sold to Deutsche Bank © PAC 2012 Fig. 4: Classification of selected postal and CEP suppliers CEP Competition is becoming more intense in the national and international CEP market, leading to growing pressure on prices. Business customers are especially sensitive to prices, but continue to expect a high level of quality. The parcel sector continues to evolve in a very competitive environment. Posts in many countries have seen their domestic and international parcel volumes grow for over a decade, in particular thanks to quality-of-service improvements and eCommerce developments. In the European Union (25 states) the number of domestically sent parcels increased by 43% from 2000 to 2010. Private operators own a large share of this market. Standardization of parcel sizes and weights has resulted in higher volumes. The CEP market as a whole has huge growth potential, which will be enhanced by the increase in cross-border commerce. AT Kearney, for instance, expects an© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 annual increase of the CEP market in Europe by 4%2. Other industry analysts forecast a CEP CAGR (compound annual growth rate) from 2005 to 2015 in Asia of 15%. The challenge for CEP companies is to convert customersʼ global 11 procurement requirements into new, profitable value-added business models. TNT, a global express, logistics and mail services company, was able to respond to the need for flexibility by diversifying and proposing new services, such as the transport and exchange of hard disks. The company also provides an on-site repair service for computers with the delivery of spare parts at the same time. The partner engineer is instructed by TNT and goes to the customerʼs site, repairs the computer and returns e.g. the hard disk. Another example is the pick- up of a flat-screen television, its transportation to the company where it is repaired and the subsequent redelivery to the customer. The partnerʼs share of service revenue needs to be calculated in the pricing/charging of the service and finally payment needs to be made to the partner. Depending on the customerʼs requirements and priorities, the pricing model is different. Some customers want prices to be calculated by total time, some want to have travel costs calculated by distance, other services are charged at a flat rate including any hardware parts. These highly complex processes require a flexible pricing/rating and charging model, in order to fulfill a multiplicity of pricing models. TNT has developed a further value-added service in order to create another revenue stream, which is called the “Clinical Express” service for doctors and laboratories: For instance, blood samples must be shipped nationally and internationally at a certain temperature level in a strict and highly secure timeframe. This service is of high value and can thus help finance other service developments. The service can be booked online, via e-mail or SMS, is traceable at any time and guarantees delivery on time. Included is the parcel kit, which guarantees the stable conditions required by blood. This service represents an add-on business, in a high-value segment and needs to be integrated in the whole pricing/billing structure. Financial Services Many postal companies have set up financial services in the last two decades, in order to diversify their business models. The French Banque Postale for example generated revenues of about 5 billion Euros in 2010 and contributed over 25% to the revenue of La Poste Group. The bank has approximately 10,000 branch outlets in France. However, the financial crisis has had a marked impact on the financial sector in recent years. The continuing high level of customer demand for financial 2 Belgium, Germany, France, UK, Ireland, Italy, Netherlands, Poland, Russia, Spain, Sweden, Switzerland, and Turkey© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 services provided by postal companies in spite of the crisis is a clear sign of the considerable trust that postal financial institutions enjoy. 12 In Switzerland, PostFinance is doing everything it can to retain this trust. The company plans to exploit the market and cost potential on both sides of the balance sheet in order to further strengthen Swiss Postʼs most profitable pillar of income. Swiss Post intends to continue focusing on fundamental customer needs in retail finance and specifically aims to expand its business activities within the specified framework. The Swiss PostFinance offers a (pre-paid) method of payment. With a PostFinance account, the retailersʼ customers pay for their purchases directly from their computer or mobile phone. In addition, the company offers customers an e-bill. This solution allows the customer to send invoices electronically to private and business customers, without any media discontinuity and without incurring printing and postage costs. These are only two examples of diversified service offerings of postal financial services. Existing IT solutions have frequently been homegrown so far and the implementation of processes to reflect new pricing and billing models have resulted in high maintenance costs. Communications market Private as well as business customers are increasingly using electronic media to communicate. This has resulted in a long-term drop in traditional mail volumes, particularly letters, and declining demand for conventional post office services. For instance, La Poste has estimated a decline in revenue from traditional mail of 30% by the year 20153. The industry is experiencing growing pressure on margins and a need for pricing flexibility, and must thus develop new services to retain customers. In order to compensate for the declining volumes in traditional mail, German Post offers the E-Postbrief, which is an online postal service where everyone can send secured letters via e-mail. The customer needs to register online and afterwards identify himself at a Deutsche Post retail outlet with a passport or identity card. After successful registration the user can send letters online, but these can also be transferred to the recipient in a printed version in case the recipient has not yet signed for the E-Postbrief. This service is also offered for registered letters. The launch of this new service has required changes to the pricing model, especially for the bigger B2B customers. Volume discounts must be calculated differently, a different price is applied if letters are sent online or offline. Through a gateway connection large customers can negotiate loyalty discounts for high volumes. 3 Source: Le Monde, 24/05/11© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 Another example is Poste Italiane. The company has become a mobile virtual network operator (MVNO) through its PosteMobile solution and has enriched its service portfolio by providing a new access channel to its services, such as bill 13 payments, telegrams or micropayments. The services include pre-paid and post- paid voice, Internet, M-banking (mobile banking) or gaming and M-commerce (mobile commerce) solutions. The new sales channels will increase the volume of transactions handled in the pricing, billing and financial management systems.“Like all postal La Poste has also created a new revenue stream in the telecom business lately.services, we are The company has decided to develop its La Poste Mobile offering (as the 10thseeking to leverage MVNO on the SFR network). To this end, a joint venture majority-owned by Lathe potential value of Poste was created in 2011. The companyʼs differentiator is to create simple pre-the postal network.” paid and post-paid rate plans in the mobile business. Instead of developing its Jean-Paul Bailly, CEO of the La Poste group own service delivery platform, the group created a joint venture with Debitel. Media services / content services Media services complete the portfolio of some postal suppliers, such as the Swiss Post. With a holistic approach to media management, Swiss Post helps its customers implement communications across all channels efficiently, consistently and on time. The advantage is consequent cost savings across all communication channels with media management. Swiss Post analyzes the customersʼ processes and communications in order to develop new media concepts for production management and purchasing processes of physical and electronic marketing materials. This means in detail: § Identification of potential cost savings based on cost, process and product analysis, § Optimization of processes and products throughout the customer communication, § Pre-press and pre-media services, such as typesetting and layout design, § Professional purchasing and vendor management for the adoption of holistic procurement of promotional material, § Coordination of communications campaigns across multiple channels, § Permanent supplier evaluation and performance monitoring. The media management offering enables visibility and security with individually agreed service level agreements. Swiss Post needs to integrate this offer into the overall pricing and billing process to the customers. The La Poste group offers direct marketing and electronic archiving services to small and medium-sized businesses with its Maileva offering. © PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 5.2. Save Costs – Raise Efficiency 14 As mentioned above, driving out operational costs is a necessity, due to market liberalization and to the number of new market entrants. Customers demand lower costs while expecting improved quality of service. This leads to further investments in services and communication platforms like the “Post Manager” of Austrian Post. This investment has enabled Austrian Post “Enhancing our service to compensate the declining revenues in traditional mail business. Austrian Post offering and including collects all the invoice data of a customer, be it from telephone, television or partners is as important Internet providers, on one platform and thus makes it easier for the customer to as delivering highly secure services to our pay bills from a single platform and compare prices with other suppliers. customers.” Customers can archive their sensitive documents on the Austrian Post platform, Mag. Mirjam Teicht, accessible via official legal digital signature. This makes the whole process less Austrian Post cost-intensive and thus Austrian Post can remain competitive in the long term. Especially when it comes to higher volumes, the pricing structure of such services needs to meet customer expectations and enable offers to be personalized for each customer. 5.3. Reorganization of Business Processes New services, sales channels or partner networks require new business and logistics processes that need to be permanently streamlined in order to work as efficiently as possible. Poste Italiane for instance has implemented a new logistics platform and also integrated its partner UPS into the supply chain. This way the company has been able to ensure real-time monitoring of every single“Poste Italiane has item/service within its logistics chain from order entry, processing, sorting to last-tremendously changedtowards a multi-services mile delivery. The company is now able to provide full reporting to endcompany during the last customers and finally initiate the billing process as the services are fulfilled.decade. Our ICT Especially when it comes to handling all customer interactions from pricing,systems had to copewith this rapid change.” delivery, billing to customer care, an integrated approach is necessary to ensure Stephano Sappinos, a 360° view of the customer within the organization. Systems and processes are Poste Italiane required which can easily streamline complex pricing, rating, charging and billing processes. Organizations need to be prepared to process high volumes of micro-transactions associated with payment for these diversified services. © PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 New Business Models/ Partner Networks Compliance Regulations 15 Reorganization New Territories Cost-Saving Issues Technological Innovation Declining Prices and Margins Changing Buying Behavior Market Liberalization New Competitors 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% very strong strong weak very weak © PAC 2012 Fig. 5: How strongly are these challenges influencing your current business? (answers from interviews conducted with big postal and CEP companies) 5.4. Sustainability Postal companies also need to identify opportunities to continue their efforts to promote sustainability by acting in an environmentally friendly and socially responsible manner. Many postal and CEP organizations are convinced that, in the future, successful companies will increasingly be those that are tangibly and quantifiably committed to society and the environment. GoGreen, DHLʼs program for environmental protection is part of Deutsche Post DHLʼs corporate strategy. The company committed to improving the CO2 efficiency of its own operations and those of its transportation subcontractors by 30% by 2020, compared to a 2007 baseline. In 2010, DHL started piloting 86 electric vehicles to set logistics standards and reduce their dependency on fossil fuels. The main goals are to achieve transparency of the environmental impact, with a focus on the carbon footprint. Furthermore, the company aims to generate value by offering green solutions to customers. DHL wants to demonstrate leadership in fostering green technologies by mobilizing employees in strengthening their environmental knowledge and helping them engage in environmental protection. Swiss Post also reduced emissions in 2010 and 2011 through the rail transport of mail and the use of hybrid postal cars as part of its sustainability initiative. DPDʼs “Total Zero” program for instance is a carbon neutrality commitment that will be made available to its customers in its five major markets from July 2012.© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 This way, DPD will ensure that every parcel sent via its network will be carbon neutral with no extra costs to its customers. 16 5.5. Diversification vs. Core Business Especially in the postal and CEP industries, which are still in the process of liberalization, one of the main questions is whether a company should diversify or stick to its core business. Diversification can take the form of new services and new markets or geographic expansion. For a purely public postal company facing weakening traditional mail services, the choice seems to be clear, yet the question remains which way to go. And for an already diversified company there is still the question of consolidation or further expansion. Generally there are four dimensions that need to be considered when thinking about expanding the business: § Market size: How large is the market for value-added services such as the pick-up of a TV, its transportation to the repair service and its delivery back to the customer? § Market growth: What are the expected growth rates in this market in the next 5 to 10 years? Reflecting market risks, such as further regulations, market shift (print à online). Customer buying behavior. § Market penetration: How many other players are already active in this market? Is it rather a niche market or a highly competitive area, with declining prices and low margins? § Capability: Does the company have the capacity, such as market knowledge, personnel, technological know-how and, finally, the financial stability to enter a new market? Is there a (stable/potential) partnership in order to make this kind of investment? For each new market segment the whole picture needs to be drawn before taking a decision. If, for instance, a company intends to enter the German CEP market it needs to be aware of the following parameters. The market is comparatively mature, shows growth rates above GDP. But market penetration is very high and thus the company would need massive capacity or very good partnerships in order to enter this market.© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 6. DPD – SUCCESS STORY 17 About DPD With the shipment of 2.5 million parcels a day DPD is a leading international provider of parcel and express services. The company has the most efficient road network in Europe and delivers to 230 countries worldwide. Customers can choose services from an extensive product range of national and international parcel and express services for business and home deliveries. A workforce of 24,000 and 18,000 vehicles operate at more than 800 locations. The majority shareholder in DPD with 83.32% shareholding is the GeoPost Group, a wholly- owned subsidiary of French Groupe La Poste. With a consolidated turnover of 3,440 billion Euros in the year 2010, GeoPost is currently Europes second- largest provider of express parcel services. DPDʼs business and IT challenges In order to stay competitive, the company has had to deal with some challenges: First of all, the German business unit DPD GeoPost (Deutschland) GmbH has about 45 subsidiaries, many of them handling their own IT, as well as pricing/charging and billing systems. This led to inefficient and cost-intensive business processes besides a largely decentralized and thus cost-intensive IT landscape. Moreover, it was difficult to set up and maintain common compliance regulations with all subsidiaries. Customer data were redundant or inconsistent and resulting in inefficient, partly manual handling of the order-to-cash process. At the same time DPD was (and still is) launching innovative new services to fulfill the needs of the dynamic online markets. These services and their revenue stream need to be integrated in the existing pricing, billing and finally accounting systems. DPDʼs solution In order to obtain maximum ROI from the investment, DPD created a comprehensive project plan for implementation, testing, and roll-out. The new system was rolled out to a few subsidiaries at a time to keep the risk of business disruption to a minimum. As the centralization of the processes caused a restructuring of staff, efficient change management was needed. In order to achieve potential savings and efficiency increase, DPD replaced its homegrown billing application by standard software. Through the integration and adaptation of SAP software, DPD has standardized and automated its order-to- cash processes. Using the SAP ERP application as its integrated solution base, DPD centralized 45 software instances and databases into a single software solution. Replacing© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 DPDʼs proprietary billing application with the SAP for Telecommunications solution was quite unusual but effective. Telecommunication companies use the same services-oriented basis for billing as DPD. So, the solution was perfect, 18 with SAP Consulting customizing and enhancing the industrial solution portfolio to the specific shipping needs of DPD. DPD now relies on process integration within its finance and accounting activities as well as on integration with other areas, such as marketing & sales, as well as on pricing and billing. The sophisticated authorization concept allows the accounting team to execute any task from any subsidiary and the company has gained new flexibility in process reengineering. Operational benefits“Integrated and The increase of revenue generated through improved processes and new ITstandardized business systems was estimated at approximately 0.25%-0.5% as a result of centralizingprocesses generate data management and improving data quality. The new systems providegreater value whilelowering costs at the significantly higher data quality and transparency by introducing fully automatedsame time.” data flows. In addition, the improved business analytics enable reporting across Martin Bäcker, subsidiaries and finally the possibility to detect further possibilities for DPD GeoPost (Deutschland) GmbH improvement. There are indeed positive effects of more satisfied customers using the e-billing services. Benefits actually concern many parts of the DPD organization and finally lead to better service to customers. Cost reduction A flexible IT foundation has been created, which supports future business challenges and organizational and logistical changes. Harmonized data, a reduced number of applications and automated processes also lead to lower IT costs, among others gained through centralizing several software instances and databases into one integrated solution. DPD managed to save about 0.2% in terms of total revenue by automating the billing process and reducing the IT infrastructure costs. Manual corrections of data inconsistencies are no longer necessary. © PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 7. CONCLUSION 19 As demonstrated above, the postal and CEP industries are among the fastest changing sectors in the world. Market drivers lead to diversification, fundamental changes in service offerings and pricing, which require new models to ensure survival. Successful postal and CEP companies are diversifying their business and adopting customer-centric strategies that enable their organizations to have a 360° view of the customer across all channels. As they change their business models and introduce diversified services including online and on-demand services, their existing legacy applications are frequently too inflexible to support the rapid introduction of innovative services. As they streamline their operations and roll out new service offerings, postal and CEP companies should consider adopting flexible pricing, billing and revenue management solutions which can easily be integrated into their existing applications portfolio. Further technological change and the increase in the use of Internet technology will further push this transition phase in the postal and CEP industries. New investments in innovative solutions supporting these changes are a key success factor of companies in order to stay competitive and survive.© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 8. ABOUT SAP 20 Optimize resources and logistics for streamlined operations with SAP for Transportation and Logistics solutions SAP can help postal services organizations provide comprehensive customer service and tightly coupled logistical processes – resulting in reduced costs, increased productivity, and streamlined operations. Our software can help you tighten and fine-tune processes across various lines of business so you can deliver a higher level of customer service. Next-generation billing solutions from SAP provide a centralized rating platform for mail, and Courier, Parcels and Express Services (CEP). The platform, which consists of applications for convergent charging, convergent invoicing, and customer financial management, enables you to streamline your consume-to- cash process. Combined, these applications form a sophisticated next- generation billing platform, enabling mail and CEP companies to efficiently manage payments, collections and accounting – optimizing financial care for large volumes of customers and transactions and scale with their business. Complex revenue sharing with both up- and downstream partners can be easily managed while deploying elements within existing IT software landscapes – adding value where it is needed most and providing companies with the reliability and efficiency they need to manage billing and real-time payments across a diverse matrix scenario. The IT department is empowered to react faster and to fully support marketing requirements taking new services to market faster due to its integrated support of the complete customer financial lifecycle, out-of-the-box integration, support for third-party invoicing and automated receivables management processes. SAP offers an integrated, end-to-end rating, charging and billing platform from customer enrolment with multi-channel CRM, pricing and offer management to service delivery and payment of services delivered. On the logistics side, SAP Transportation Management (SAP TM) can help reduce transportation costs, and improve flexibility and efficiency. SAP TM supports integrated storage, fulfillment, and transportation processes with no data redundancy and reduced integration risk. The traceability and visibility of orders, shipments, items, and CEP processes are in the same environment. Especially diversified postal organizations can take advantage of SAPʼs experience and solutions across 25 industries ranging from Banking, Insurance, and Telecommunications to Retail. As market leader in enterprise application software, SAP (NYSE: SAP) helps companies of all sizes and industries run better. From back office to boardroom,© PAC 2012 www.pac-online.com

White Paper Postal & CEP Sector March 2012 warehouse to storefront, desktop to mobile device – SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services 21 enable more than 176,000 customers (includes customers from the acquisition of Sybase) to operate profitably, adapt continuously, and grow sustainably. For more information, visit http://www1.sap.com/software/next-generation- billing.epx Twitter: @SAP_NextGenBill© PAC 2012 www.pac-online.com

OUR LOCATIONS22 PARIS Pierre Audoin Consultants (PAC) 92, Avenue de Wagram, 75017 Paris, France Tel: +33(0) 1 56 56 63 33 Fax: +33(0) 1 48 28 41 06 info-france@pac-online.com CONTACT MUNICH Pierre Audoin Consultants (PAC) Author: Holzstrasse 26, Martin Barnreiter 80469 Munich, Germany Principal Consultant Tel: +49(0) 89 23 23 68 0 +49 (0)89 23 23 68-19 Fax: +49(0) 89 719 62 65 Email: m.barnreiter@pac-online.com info-germany@pac-online.com BERLIN Published by: Pierre Audoin Consultants (PAC) Pierre Audoin Consultants (PAC) GmbH Am Kupfergraben 6A, Holzstrasse 26 10117 Berlin, Germany 80469 Munich, Germany Tel: +49(0) 30 28 52 96 0 Fax: +49(0) 30 28 52 96 29 Tel: +49 (0) 89 232 368-0 info-germany@pac-online.com Fax: +49 (0) 89 719 62-65 Email: info-germany@pac-online.com LONDON Pierre Audoin Consultants (PAC) 2nd Floor, 15 Bowling Green Lane, London EC1R 0BD, UK Tel: +44 (0) 207 251 2810 Fax: +44 (0) 207 490 7335 info-uk@pac-online.com ABOUT PIERRE AUDOIN CONSULTANTS BUCHAREST Pierre Audoin Consultants (PAC) From strategy to execution, PAC delivers focused Louis Pasteur 40, and objective responses to the growth challenges of 050536 Bucharest-5, Romania Tel: +40 (0) 21 410 75 80 Information and Communication Technology (ICT) Fax: +40 (0) 21 410 75 81 players. info-romania@pac-online.com Founded in 1976, PAC is a privately held research & NEW YORK consulting firm for the software and ICT services Pierre Audoin Consultants (PAC) market. 192 Lexington Avenue - Suite 1101, New York, NY 10016, USA PAC helps ICT vendors to optimize their strategies by Tel: +1(646) 277 7255 providing quantitative and qualitative market analysis Fax: +1(646) 607 1716 info-us@pac-online.com as well as operational and strategic consulting. We advise CIOs and financial investors in evaluating ICT SAO PAULO vendors and solutions and support their investment Pierre Audoin Consultants (PAC) decisions. Public institutions and organizations also Rua Pedro de Toledo, 130, Office 61, rely on our key analyses to develop and shape their Vila Clementino, ICT policies. Sao Paulo, 04039-030 Brazil Tel.: +55 (11) 5539 0280 For more information, please visit Fax: +55 (11) 5539 0280 www.pac-online.com. info-latam@pac-online.com

A Question of Survival: How Postal & CEP Companies are transforming their business models

by Catherine Lynch

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