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2013 03 18 webinar 2013 combating revenue leakage


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2013 03 18 webinar 2013 combating revenue leakage

  1. 1. Prepared byWith the Assistance ofChris PatersonJP DucasseCombating Revenue Leakage
  2. 2. Webinar OutlineLeakage – definition and overviewOverview of a general framework to combat leakageMeasuring leakageEstablishing mitigation policiesCombating leakageWhat you should consider2
  3. 3. Combating revenue leakageDefinition*Combating revenue leakage consists ofengaging in activities that help a Post:Collect all the postage revenue owed to it, andCurb the sources/reasons of leakage.Leakage stems from one of four main risksCounterfeit (e.g., illegal issues, fake imprints)Bypass mail (e.g., mail inducted without any formof payment)Shortpaid or underpaid (e.g., mail tendered withinsufficient postage)Problems related to billing or postage collection(e.g., bad cheques; accounting errors)Combating revenue leakage consists of settingpolicies to mitigate the sources of risks3* Source: UPU Consultative Committee – Postal Revenue Protection Working Group
  4. 4. Steps in the right direction4But room for improvementRecent trends• Global awareness of leakageissues has increased (75% of postsadmit they experience leakage)• Posts have heavily invested inrevenue protection technology,making some channels moresecure (meters, stamps)• Verification technologies (e.g.,OCR-based) becoming moreeffective and/or more affordableand scalable• Not all posts have established a well-structured revenue protection function• Fraudsters too leverage technologies...• New products may not be ‘leakage-free’• ROI of technology solutions is still anissue, e.g., for smaller posts• Mail acceptance and verification is stillvery much manual and time consuming,and often plagued with inconsistencies inperformance.
  5. 5. A broader choice of technologies isnow available to fight leakage5Evidencing• Deployment of digital meters in smaller emerging markets• Anti-fraud security measures (special inks, holograms…) for stampsAcceptance/verification• E-documentation• Sorters/counting machines for piece count (for sampling, verificationor terminal dues purposes)• Modular dimensions/weight/data capture solutions for use in postofficesProcessing• Lower-end sorters suitable for mid-tier posts• Large CFC with on the fly weighing of parcels or letters• Capability to trace back an item to a specific senderBilling/reconciling software solutions(e.g., USPS Permit RP project)A fewexamples
  6. 6. Two main challengesMeasuring and identification is difficultA touchy issue : leakages relate to posts’ weaknesses - a mix of fraudand (operational or accounting) issues;Amounts recovered are just the tip of the iceberg;Posts use multiple channels and processes;Data sources are diverse (spot checks, sampling, data from operationsand from accounting systems) and don’t necessarily match.There is no off the shelf mitigationOptimal responses will depend on :Products’ terms and conditions (e.g., preparation requirements);Product and channel mix (stamps, permit mail, metered mail, webbased payments), letters vs. parcels…Post’s use of technology (sorting, barcoding, accounting systems) vs.use of manual processes.6
  7. 7. Global posts’ top concerns :identification and controls, HRissues, streamlining operations7Top 5 concernsexpressed byPosts worldwide
  8. 8. Typical leakage issuesProblemsAccuracy of discounts claimed vs. postagepaid (non-compliance with preparationrequirements)Actual number of bulk mail items entered vs.number on mailing statementUnderpaid (shortpaid) mailBulk mail deposited at “wrong” places (e.g.,collection boxes) – “bypass mail”Malicious duplication of e-parcels / PCpostage/meter imprints (fraud)Errors/discrepancies inreconciliation/invoicing/payment processMultiple root causesOverly complex (or poorly understood)product terms and conditionsFraud (on the part of mailers or postal staff)Acceptance, verification and billingprocesses poorly documented OR notfollowed by postal staffPoorly designed or executed sampling plansLack of integration of the Post’s informationsystems (data from operations, accounting)– islands of automation in oceans of paperforms8
  9. 9. Combating revenue leakageA framework9Measure &IdentifyLeakageEstablishMitigationPoliciesCombatLeakage
  10. 10. Measuring and identifying leakageMethodological approach10Measure &IdentifyLeakage• Identify criticaldimensions of themail flow toensure adequaterepresentation• Develop atargeted workingplan• Whichmeasurements?When? How? Bywhom?• Conduct pilotstudies to:a. Generate optimalsample sizes(Understandvariability);b. Assess theconstraints forsampling• Physical sampling isadministered• Engage in real timerevenue leakageestimation• Update skipsquarterly to retainoptimum currencyand integrity• Leakageestimation isnot revenuerecovery• Effectiveestimationprecedesandfacilitatesrecovery.• Randommonitoring ofphysicalsampling.• Validating dataintegritiesensuressampling occursas intended.AuditExistingSystemsIdentifyCriticalDimensionsDevelop aSamplingRegimeSamplingandEstimationMonitoring&Validation
  11. 11. Audit Existing SystemsExisting revenue recovery mechanisms tend to exhibit a bias to higherrisk customers which is at odds with a simple random sampling approachacross the entire mail flow.Assess the appropriateness for leakage measurement of the existingrevenue checking system, if it does exist.Systems configured for revenue recovery only may not be suitable formeasurement.Effective leakage measurement depends on identifying the criticaldimensions of the mail flow.11Measure &IdentifyLeakageAuditExistingSystems
  12. 12. Identify the critical dimensionsHow then do we identify the criticaldimensions of the mail flow?A stratification process delineates thelevels where leakages emanate from.There is a need for adequatesampling across each of thesedimensions.This then provides postalorganizations with an estimate ofrevenue leakage at each dimension.In understanding revenue leakage atthese sub-levels then combativepolicies may be devised to targetproblematic areas.12Measure &IdentifyLeakageDefining ObjectivesPhysical Sampling andestimation process.Estimate Revenue Leakage RiskLetters ParcelsConceptualisation will differslightly in content to Letters.MAILTYPEFacilities byGeographicalLocationM1BulkFacilitySort CenterDelivery UnitSegmented SamplingFrameAdopted to ensure eachcritical component in thecomposition of mail iscaptured.M2MnLevel 1 Stratificationensures eachlodgement facility iscaptured across eachwide geographical unit.Level 2 Stratification:Ensure each product segmentrelevant to a specific facility iscaptured.Time Dependant ElementsCross representation of time of the day, days in the week,months and quarters of the year.Time Dependant ElementsIdentifyCriticalDimensions
  13. 13. Develop a sampling regimeDetermine optimal sample sizes on a rolling basis usingThe underlying sample dataAdvanced distribution-free statistical methodologiesSeek to estimate leakage at 95% confidence and within +/-5% precisionDesign a sampling system that is capable of dealing with the practicalimpediments of data collection, that may alter the degree of data integrityTight processing windowsResourcing constraintsSample space issues.13Develop aSamplingRegimeMeasure &IdentifyLeakage
  14. 14. Implement an estimation frameworkCollect, record, and transmit sampleinformation to generate final estimates at avariety of levelsIntegrated algorithms can generate finalestimates at a variety of levelsTake action via policy responses tomitigate revenue leakage in a targetedmannerThe rolling nature of the estimationfacilitates the benchmarking of policyeffectiveness14ImplementEstimationFrameworkMeasure &IdentifyLeakageSampleComputeEstimatesDefinePoliciesProcessing CenterLetters Flats ParcelsStamped%Leakage%Leakage%LeakageMetered%Leakage%Leakage%LeakagePermit%Leakage%Leakage%Leakage
  15. 15. Combating revenue leakageA framework15Measure &IdentifyLeakageEstablishMitigationPoliciesCombatLeakage
  16. 16. Effective revenue protection policieshave impacts across the boardCustomer relationsImpact on mailers’ mail production processes, training requirements, compliance costs(new investment)Changes to terms and conditions impact product convenience and demandBusiness processesImpact on quality of service and personnel costs (overtime)Major initiatives such as “seamless acceptance” impact work positions (e.g., forverification clerks)Impact on information systems (turning new data into revenue recoveries…)Technology solutionsA different response for each channel (e.g., retail vs bulk mail)Measuring the ROI of proposed technology solution vs. improving/fine-tuning currentprocessesPeople and trainingRev Pro awareness + training on current and new processesSetting KPI and monitoring compliance with processesFoster cooperation between R&D, marketing, operations, and finance16EstablishMitigationPolicies
  17. 17. Combating revenue leakageA framework17Measure &IdentifyLeakageEstablishMitigationPoliciesCombatLeakage
  18. 18. Discussing “acceptable” tolerancelevels – Royal MailBackgroundRoyal Mail “reversions” have increased dramatically as part of its program to improveoperational efficiencies.Mailers called for more “transparency” and “proportionality” (of fines) while RM insisted 100%compliance was needed for both revenue protection and operational purposes.In 2012 industry outcry prompted RM to launch industry-wide discussions .There is no “perfect mailing”What evidence should be provided by the Post’s revenue protection teams to mailers ?Which mail attributes should rev pro teams focus on ?RM has temporarily lifted specific non-compliance penalties (on sealing specs).Policy ImplicationsReview terms and conditions and make them more explicit to increase transparency ?Reposition/strengthen revenue protection units on customers’ premises ?18CombatLeakage
  19. 19. Detecting unpaid/underpaid mail: PostNL19Moving from manual toautomated detection ofunderpaid mail (19 CFC beinginstalled)Automated recovery process forsingle piece mail : paymentcard, online payment byrecipientPolicy implicationsNeed to balance identificationcosts with recovery costs.CombatLeakage
  20. 20. Balancing technology and better controls :SAPO (South African Post)Bulk mail is #1 priority, otherstreams will follow20First mile automation: electronicmanifesting (‘eBDN’)Optimized sampling plans andprocessesWell-trained regional revenueprotection teams2 to 3 m USD recovered everyyearPolicy implications:developing revenue protectioncapability as a step-by-stepjourneyCombatLeakage
  21. 21. Posts in Least Developed Countries stillneed to lay the ground work21CombatLeakageCarrying out revenue protection auditsTo identify/confirm main issuesTo assess robustness of current controlsPrepare and execute revenue protection plansDocumenting current product terms and conditions, productspecifications, and ensuring they are met;Documenting processes and standards (including sampling)communicating on them, monitoring compliance;Training staff along the revenue protection along the value chain/creating teams;Putting in place management processes/measurement and reporting systems to ensurethat revenue protection is managed appropriately and leakage detected;Longer-term, considering the RoI of low-cost technology / rev pro devices – fromcardboard letter scales to lower-end sorters to digital meters at counters.Policy implicationsIn LDCs streamlining current processes is a priority,not technology
  22. 22. Traditional bulk mail acceptancePaper or electronic (e-Doc)documentation submitted with mailingAcceptance clerk samples mailing, andverifies documentation for accuracyAcceptance of statement = proof ofmailing and paymentMailing is inducted after acceptanceSeamless acceptanceOn the fly verification from scans duringprocessing22Source : USPS (2012)Policy Implications- Building mailers’ confidence in new tracking/reporting system- Joint post/industry collaboration is essential (e.g., MTAC in the U.S.)- Automation is just part of the equation, adaptation of information systems is key + HR implicationsRevenue protection moving forward :Eliminating manual verification ?– U.S.P.S.CombatLeakage
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