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Measuring Postal PerformanceMay 16, 2013

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Balanced Scorecard Framework

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The Importance of a Strategic VisionMeasurableObjectives:“Marching Orders"StrategyFormulation:What is the firm inthe businessof doing?• Digitising Australia Post• Connecting your business• Connecting your community• Digital access• New marketplace initiatives• Brand reputabilityAustralia Post

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Cascading Measures of PerformanceStrategicTacticalOperationalGrow logistics revenueDevelop 3 logisticsalliancesOpen 10 logisticsdistribution centers

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What Makes PostalPerformance Different?Universal Service Obligation & Public Service / Public GoodQuality postal service within their territories at affordable prices (EU)At least 85/97 percent delivered next/three working day(s) (Sweden)Dual identity: Public service / Business that must pay its own way.Those who stand to lose the most are the most isolated and vulnerableNetwork EffectsHow well is it configured?How well am I using my network?Connectivity – Capacity - Adaptability – Resiliency5

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CustomerPerformance6

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Traditional Measures ofCustomer PerformanceTraditional measures of performanceProduct or product line IRR/ROI, ROICRevenue goals, Market share, Market position“profitable-product death spiral.” - profitability by product = index of benefit toboth the company and the customer.ConsequencesProduct overlaps/competition within product lineProduct line thinningDHL: Portfolio of time-definite products simplified and strengthened7

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Product Portfolio ApproachDoing products right, and doing the right productsPortfolio approachConsumers desire assortments of products rather than individual itemsIdentify products that optimize the entire portfolio.Incorporate attributes specifically identified as attractive by consumersWhat is the right portfolio of products for postal operators?How do we know we are doing the right products?8

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Customer Performanceand Product MixConcept ofCustomer lifetime value (CLV)Customer equity (CE) = discounted value of future sales for all customers“Selling more products to the same customers.”Performance StrategyCreate close connections or emotional ties with the consumer.Positioning In Relation to the CompetitorMeasuring:“Knowing your customer”Customer value and satisfactionCustomer loyalty and retentionCustomer equity, turnover, margins, profit, etc.9

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Japan PostWe are dedicated to assisting people all over Japanlead more enjoyable lives.We sincerely provide services that people can trust and rely on.We will constantly redefine “Atarashii-Futsu” by evolving to meet thechanging needs of our customers, serving people nationwide, one by one.10postal,banking, andinsurance services

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Product Mix andProduct Co-dependenceProduct co-dependence in the product portfolioLevel of interaction between products in the portfolio“Leather Case Compatible with Apple iPhone 5”High versus low co-dependence?Swiss Post: My NewspaperBpost: Home delivery of mealsUPS: Broadens B2C platform with acquisition of Kiala11

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Meeting Customer Needs &Leveraging Assets12Customers• Individuals/ Households• Businesses• MailersInternal Assets• Retail Network• Delivery Network• Distribution Network• DataHigh Satisfaction + High Margins

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Meeting needs andLeveraging Networks(distribution – retail – delivery – data)13LeveragesNetworkLeverages Customer RelationshipCustomNewspaperHome ServicesFreightSIM CardsFulfillmentLowLowHighHighLogistics

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OperationsPerformance14

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Measuring performance – an integralprocess to managing operations15ManageOperationsPlan operationsExecuteoperationsMeasure operationalperformanceAdapt operations

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Operational performance is measuredacross four performance indicators16Operational PerformanceIndicators1. Service2. Costs3. Efficiency4. ProfitabilityPlan operationsExecuteoperationsMeasure operationalperformanceAdapt operations

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The performance indicators arereflected at various levels of a(networked) enterprise17CostsServiceEfficiencyProfitability

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Specific effects of network layer onperformance indicators18REPSMNetwork Layer ElementsPrimary PerformanceIndicator InfluencedReal Estate Plants, FacilitiesCostsServiceEquipment,FleetSorting & material handling systems,trucks, planesCostsServicePeople, Skills Clerks, drivers, planners, managers.CostsEfficiencyProfitabilityServiceSort Plans &SchedulesSort & operating plans,transportation & other schedules.EfficiencyProfitabilityMeasurementMgt & PlanningEvaluation, planning & forecasting.EfficiencyProfitability

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Measures of service performanceAdapt network infrastructure to match volume levelsMeasures:% on timeNetwork capacity utilizationWork in process and staged inventoriesReduce time in transitMeasures:Speed of lanes – ground and airEliminate manual processingMeasures:Machinability factorAddress readability/interpretation% damage shipmentsEliminate wrong addressingMeasures% undeliverable as addressed (UAA)19R EPSME

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Measures of cost performanceIntegrate networks (e.g., express and deferred, or air and ground)Measures:Duplication of services between networksValue of network assets (e.g., vs. revenues)Transportation costs and fuel consumptionReduce labor costsMeasuresFixed to variable laborWorkload planning and schedulingReduce equipment/fleet operating costs:MeasuresFuel efficiency of fleetMean time between maintenanceMean time to repairReduce handlingsMeasuresTotal pieces handled (vs. first handling pieces)20R ES MPES E

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Measures of efficiencyAdapt the networks to meet traffic flows and levelsMeasure:Asset utilizationDistributed capacityWork in process and staged inventoriesIncrease sorting efficiency through technologyMeasure:Machine throughput / machine jamsRead ratesMis-sorts (e.g., out-of-sequenced DPS mail)Machinability/reworkImprove delivery efficiencyMeasure:Density of deliveryIn-office vs. street timeContinuous improvement / six-sigmaMeasure:Process deviations/ Trending21MSESP M

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Measures of profitabilityImprove revenue per piece - Shift product mixMeasures:Ratio of high yield products (heavier weight segments)Ratio of letters to parcelsImprove revenue per piece - Shift customer mixMeasures:Ratio of business to residential deliveriesImprove revenue per piece – Defer deliveryMeasures:Shift from air to ground; use multimodalPromote low-cost non-urgent deliveries to increase densityMeasures:Consolidated shipments and asset utilizationUrban vs. rural deliveries22M EMR EM

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Tradeoffs of costs and service2360.0%65.0%70.0%75.0%80.0%85.0%90.0%95.0%100.0%500 465 430 400 365 330 300 280 250ServiceRevenueNumber of Plants in the NetworkStudies show that reducing network (operating costs) will affect service,and may reduce revenues

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Leverage the potential of yournetworkIntelligent network configuration andmanagement for optimum performanceConnectivityMeasures:o Multiple paths between nodeso Alternate processing nodesCapacityMeasures:o Network-wide capacity vs. node-level capacityAdaptabilityMeasureso Adaptive sort and distributionResiliencyMeasureso Contingency plans24

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Managing information to monitor andimprove performance25Static OperatingEnvironmentDynamic OperatingEnvironment• Managing according to historic demand averages• Spikes in demand met with additional infrastructure• Fixed operating schedule• Resource commitment is pre-planned and pre-allocated• Plans based on mid to long-terms projections• Managing deviations from the norms• Spikes in demand are anticipated and are “business as usual”• Variable operating schedule• Resource commitment is dynamically allocated• Near real time visibility, and rapid planning capabilityLow HighHigh Performance BusinessInfrastructure-BasedMore (Under-utilized) ResourcesMore StabilityInformation-BasedFewer (Better utilized) ResourcesMore Frequent PlanningLeveraging your enterprise’s information to monitor and improve operationalperformance (service, efficiency, profitability, costs)

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