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Driving Strategic Cost Reduction in Post & Parcel

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Postal oganizations can compete with start-ups and disruptors capturing market share by becoming more value focused. 

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Driving Strategic Cost Reduction in Post & Parcel

  1. 1. DRIVINGSTRATEGICCOST REDUCTION Accenture Post and Parcel Industry Research 2019
  2. 2. Copyright © 2019 Accenture. All rights reserved. 2 THE REVENUE MIX IS SHIFTING AND MARGINS ARE DECLINING 67%of players saw a decline in EBIT(1) margins between the last two reported financial years Posts and Integrators 60% Integrators Absolute EBIT margins decline range (0.5%) – (2.2%) Shifting Revenue Mix Mail to parcels has declined(2) 28:1 2014 15:1 2018 (1) EBIT = Earnings Before Interest and Tax; (2) For 10 players considered as part of the analysis Increasing Cost Pressure Employee Costs Transportation Costs Rental Costs 68% Absolute EBIT margins decline range (0.5%) – (5.7%) Posts
  3. 3. Copyright © 2019 Accenture. All rights reserved. 3 COST DRIVERS ARE AFFECTING MARGINS (1) Analysis done for the last two reported Financial Years; (2) Range expressed for top to bottom performers; (3) Property, facilities and maintenance costs; *Considered only those companies as part of the analysis which are reporting respective expenses separately i.e. 11 for transportation expenses, 17 for rental expenses and 24 for employee wage rate 100%Companies* saw increased transportation expenses Change as a percentage of revenue(2) +0.1% Austrian Post bpost +5.6% 59%Companies* saw increased rental(3) expenses % Growth in rental expenses(2) -25% Posti bpost +42% 71%Companies* saw increased average employee wage % Growth in average employee wage(2) -6% Posten Norge PostNord +17%
  4. 4. Copyright © 2019 Accenture. All rights reserved. 4 INTEGRATORS NEARLY 3X MORE PROFITABLE 9.7%Median margin for parcels(4) Integrators have made parcels three times more profitable Postal players bear the brunt of the decline despite having mail delivery synergies(1) Median margin for mail(2) Median margin for parcel(3) 10.7% 3.7% (1) Analysis done for the last two reported Financial Years; (2) Postal companies for mail includes Austria Post, PostNL, CTT, Posten Norge, Swiss Post; (3) Postal companies for parcel includes Royal Mail, Austria Post, SingPost, PostNL, CTT, La Poste, Canada Post, Posten Norge, Swiss Post; (4) Integrators includes UPS, FedEx, DPDHL and Aramex.
  5. 5. Copyright © 2019 Accenture. All rights reserved. 5 INTEGRATORS HAVE HIGHER CONTRIBUTION PER UNIT 13.8 9.9 13.7 11.2 6.5 5.4 7.4 6.1 4.1 1.2 1.2 1.2 1.1 0.5 0.4 0.3 0.2 0.1 15.1 11.1 14.9 12.3 7.0 5.8 7.7 6.3 4.3 La Poste Fedex DPDHL UPS Swiss Post PostNL Austria Post Canada Post Royal Mail Parcel EBIT per unit [FY 2018] Parcel Revenue per unit [FY 2018] Parcel Cost per unit [FY 2018] Posts Integrators Median parcel EBIT margin 8.2% Median parcel EBIT margin 5.6% Cost per stop Parcels per stop Cost per parcel First time delivery rate B2B B2C $5.00(1) $5.50(1) ~3(2) ~1.05(2) $1.67 $5.23 97% 85% (1) Cost per stop based on industry averages for parcel delivery (excludes mail) for integrators and postal players with organized labor; (2) Parcels per stop based on industry average for parcel delivery (excludes mail) for integrators and postal players.
  6. 6. Copyright © 2019 Accenture. All rights reserved. 6 WHAT CAN POST AND PARCEL PLAYERS DO TO REDUCE COSTS?
  7. 7. Analyzed 24 post and parcel organizations Copyright © 2019 Accenture. All rights reserved. 7 Developed a representative organization from existing financial statements Pinpointed examples of successful cost take out from other industries that apply to post and parcel organizations Applied findings to representative organization Identified 29 Digital & Non-Digital initiatives across post and parcel value chain Quantified FTE and Non-FTE financial impact across post and parcel value chain Created a customizable Strategic Cost Reduction Model Found $500 million cost takeout opportunity UNDERSTANDING THE OPPORTUNITY TO IDENTIFY POTENTIAL COST SAVINGS, ACCENTURE HAS:
  8. 8. Copyright © 2019 Accenture. All rights reserved. 8 LABOR SAVINGS (FTE) VS. OTHER SAVINGS (NON-FTE) (1) In a base case scenario. *Full time employee % Contribution to Total Cost Reduction ($500 million total)*(1) ~$350 million in FTE cost reduction Transportation FTE Warehousing & Sortation FTE Support Functions FTE Post Offices & Other FTE Transportation Non-FTE Support Functions Non-FTE Warehousing & Sortation Non-FTE Post Offices Non-FTE 65% 13% 13% 9% 54%31% 10% 6% ~$150 million in non-FTE cost reduction
  9. 9. Core Operations Copyright © 2019 Accenture. All rights reserved. 9 Workforce Organization Customer Touchpoints Support Functions PERSPECTIVE VALUE CHAIN POST AND PARCEL ORGANIZATIONS CAN MAKE SAVINGS IN:
  10. 10. Copyright © 2019 Accenture. All rights reserved. 10 VALUE CHAIN PERSPECTIVE: CORE OPERATIONS 1) In a base case scenario. Does not fully account combinatorial impact across initiatives. Does not include the impact of CRM Support Solutions and Procurement Optimization; *These initiatives have EBITDA impact due to revenue increase and/or cost reduction, however, here only cost reduction impact of such initiative has been taken into consideration. In case of only revenue impact, cost reduction contribution will be zero. 78 47 33 31 16 14 11 28 22 21 2 Self-Service Kiosks or Smart Collection Boxes on Retail Points Connected Vehicles with loT and Telematics Routing Algorithms Alternate Delivery Day Robotics & AGV in Warehouse & Sortation Consumer Control & Seamless Parcel Delivery Experience* Sorting Automation & Efficiency Improvement Electric Vehicles for Last Mile Delivery Robotic or drone delivery Predictive Analytics for Maintenance in Warehouse& Sortation Distribution & Logistics Network Rationalization [~$210-394 million] [$million impact] Conservative Scenario Base Scenario Optimistic Scenario
  11. 11. Copyright © 2019 Accenture. All rights reserved. 11 VALUE CHAIN PERSPECTIVE: WORKFORCE ORGANIZATION [~$35-121 million] [$million impact] 1) In a base case scenario. Does not fully account combinatorial impact across initiatives. Does not include the impact of CRM Support Solutions and Procurement Optimization; *These initiatives have EBITDA impact due to revenue increase and/or cost reduction, however, here only cost reduction impact of such initiative has been taken into consideration. In case of only revenue impact, cost reduction contribution will be zero. Right FTE Mix or Flexible Workforce Workforce Augmentation Through Wearables & Handhelds Workforce Analytics Outsourced & Contracted Delivery* Conservative Scenario Base Scenario Optimistic Scenario 40 11 23 1
  12. 12. Copyright © 2019 Accenture. All rights reserved. 12 VALUE CHAIN PERSPECTIVE: CUSTOMER TOUCHPOINTS 1) In a base case scenario. Does not fully account combinatorial impact across initiatives. Does not include the impact of CRM Support Solutions and Procurement Optimization; *These initiatives have EBITDA impact due to revenue increase and/or cost reduction, however, here only cost reduction impact of such initiative has been taken into consideration. In case of only revenue impact, cost reduction contribution will be zero. AI Powered Care/Chatbot* Parcel Specific Pick & Drop Parcel Lockers* 11 23 1 35 9 [~$32-55 million] [$million impact] Conservative Scenario Base Scenario Optimistic Scenario
  13. 13. Copyright © 2019 Accenture. All rights reserved. 13 VALUE CHAIN PERSPECTIVE: SUPPORT FUNCTIONS 1) In a base case scenario. Does not fully account combinatorial impact across initiatives. Does not include the impact of CRM Support Solutions and Procurement Optimization; *These initiatives have EBITDA impact due to revenue increase and/or cost reduction, however, here only cost reduction impact of such initiative has been taken into consideration. In case of only revenue impact, cost reduction contribution will be zero. Marketing Performance Analytics RPA in Support Functions Sales Force Enablement or Effectiveness Digitized HR Employee Self Service HVAC Analytics Finance Analytics Zero Based Budgeting - ZBS 1 11 5 1 28 18 5 [~$39-100 million] [$million impact] Conservative Scenario Base Scenario Optimistic Scenario
  14. 14. Copyright © 2019 Accenture. All rights reserved. 14 WHERE TO NEXT
  15. 15. Copyright © 2019 Accenture. All rights reserved. 15 FIVE ACTIONS FOR THE FUTURE BECOME VALUE FOCUSED 02 LEARN FROM OTHERS Successful implementations and strategies employed both within and outside the industry can provide a roadmap to unlock value 01 Create cost visibility that accurately captures granular cost data to incorporate into cost take out initiatives DEVELOP COST VISIBILITY 03 Technologies such as artificial intelligence, robotics and cloud make it possible to unlock an entirely new set of cost savings TAKE ADVANTAGE OF NEW, PROVEN TECHNOLOGIES 04 Successful cost take out programs include the right focus, the right structure and governance and the right data and reporting IMPLEMENT A RIGOROUS COST TAKE OUT PROGRAM
  16. 16. FOR MORE INFORMATION /in/brodybuhler BRODY BUHLER Global Managing Director, Accenture Post & Parcel Industry @brodybuhler robert.b.buhler@accenture.com www.accenture.com/postal /in/andre-pharand ANDRE PHARAND Global Management Consulting Lead Accenture Post & Parcel Industry @andre_pharand andre.pharand@accenture.com ABOUT ACCENTURE Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With 482,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com. Copyright © 2019 Accenture. All rights reserved. Accenture and its logo are trademarks of Accenture.

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