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ust over a decade ago Parcelforce celebrated winning a Commercial

23rd May 2002, Page 46
23rd May 2002
Page 46
Page 47
Page 46, 23rd May 2002 — ust over a decade ago Parcelforce celebrated winning a Commercial
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Which of the following most accurately describes the problem?

Motor parcels survey, in which we anonymously tasked leading nextday delivery companies with getting a package from England to Belfast. Using full-page adverts in

lational newspapers Parcelforce noted the irrival times of its two closest rivals, confirm ng its own victorious margin with a catchy ;logan: "Belfast...Belfast...Belfastest".

It was a show of confidence to which the 3ost Office felt its newly branded parcels divi;ion was entitled. With a sleek vehicle fleet and dentity, the postal service felt Parcelforce was superbly placed to challenge emerging players such as TNT and Securicor which were suc

cessfiilly tapping the burgeoning commercial market for time-sensitive parcels deliveries. After all, with depots in nearly every town in the country, the Post Office had a transport and logistics infrastructure that its private-sector competitors could only fantasise about.

But in the event running a lean and hungry express parcels business as part of a stateowned organisation with an obligation to provide a universal delivery service proved more burden than bonus. Parcelforce has lost almost L400m since 1991 and this year alone there could be L20 om worth of red ink.

The operation is being restructured as part of a massive shake-up at Consignia—the much-hyped new name for Post Office— which is designed to deliver ii.abn of savings and return the organisation to profit by 2oo5. According to press reports, up to 40,000 jobs could go over the next three years, affecting thousands of truck drivers.

Consignia confirms that around 4,000 and truck drivers will go at Parcelforce and : supporting internal parcels operations in ; initial round 01 15,000 job cuts.

Under the plan, from July Parcelforce w focus exclusively on the growing market f guaranteed next-day and two-day busine deliveries, for which it can charge premin. prices. Cheaper three-day-plus services— market Consignia says has halved in fl years—will be scrapped. These less time-se sitive deliveries are mostly to homes, repr senting o% of the 150 million parce Parcelforce handles each year. They will I transferred to the original letter delivery bu! ness, the Royal Mail.

'MOWN

Distribution centres at Liverpool, Leeds, ea London, Glasgow and Reading will close, ; will 5o of rot local depots. With them will E 6,700 of the 11.700 jobs at Parcelforc Redundancies will hit the dedicated parce units and support roles elsewhere i Consignia—and the figure does not include "natural turnover" of 1,200 employee though some will be offered other jobs. Chairman Allan Leighton—who made h name running Asda—admits Parcelforce been "out of step" with the marketplace an its business model does not work, "Most our costs and losses are tied up in keeping a infrastructure for non-time-guaranteed se vices which customers are moving away frot and which we cannot make profitable," I-. asserts. "In contrast we see real potet tial in the express marketplao where we've grown our next-dl revenue by 5.5% in 18 months." The other big change fc Consignia is a move to sen more mail by rail. Howeve trains are best suited to bul consignments—subscriptio magazines, promotion; mail and the like—whet Consignia faces ne,

competition uncle measures being recon mended by postal regulz tor Postcomm.

Consignia also plans a "mor itegrated road-based regional hub and spoke [stem", with four of its 16 mail distribution .intres closing and a new Midlands hub pening next year. These moves will cut onsignia's fleet—the biggest in the UK:om 44,coo vehicles to 4i,5oo.

In another cost-cutting step, Consignia is msidering shifting to a contract-hire rrangement for its entire fleet, including ,000 HGVs and more than 2,200 trailers. he firm currently owns 44% of its HGVs; the !st are leased. Running this fleet costs it 4o om a year; an outlay it wants to reduce.

It's not clear exactly how many truck drivers all eventually lose their jobs in the Consignia aake-up, but the figure is certain to run into aousands. For them, at least, the current h.ortage of HGV drivers is good news: the .oad Haulage & Distribution Training :ouncil estimates there are 40,000 vacancies a the UK. And RHDTC chief executive Ian Ietherington says: "I don't think many lonsignia drivers will find it difficult to find ibs, although it will depend on the area." He oints out that they have a good reputation as arning from a "disciplined workforce".

)ne option fix "up to 900" redundant drivers ; the opportunity to become owner-drivers. hey could lease vehicles, mainly 3.5 or 4.5inners, from Consignia and look for work. Iowever, a Communication Workers Union CWIJ) official who is involved in talks with :onsignia on this scheme, says at has drawacks, including a clause which contracts driers to provide a service to Consignia even if aey are ill. Failing to turn up could cost drivers aousands of pounds in penalties, he says.

Other deterrents include the age of many of ae Consignia drivers, who are likely to choose retire early on their redundancy package, nd cultural barriers to going self-employed ihen drivers have spent decades working in he public sector, "They are a risk-averse (inch of people," says Hetherington.

Many believe this restructuring is make or Teak for Consignia. The European :ommission wants Europe's postal systems to le liberalised and the regulator, Postcomm, has oroposed that restrictions on outside companies ntering Consignia's market should be abol

ished by March 2oo6. Consignia wants time to get its business on its feet before being forced to compete. Not surprisingly, opening the market would be welcomed by rival carriers, many of whom have campaigned for an end to Consignia's monopoly on deliveries under Li.

Opponents of liberalisation, including the CW-U, say that while competition might herald cheaper deliveries for businesses, it would destroy the Royal Mail's centuries-old ethos of delivering a letter anywhere in the UK for the price of a stamp. Private carriers would "cherrypick" lucrative destinations, they say, while remote areas would be left without post offices, and with dearer stamps and fewer deliveries.

Supporters of competition, such as the Adam Smith Institute, point out that post offices in countries with scattered populations, such as Sweden, Finland and New Zealand, compete on the open market but still offer a universal service. Consignia's future success does not depend on holding out against competition, it says, but in embracing business opportunities in e-commerce and home shopping.

The challenge for Consignia is becoming all things to all customers: from the express carrier whizzing a business package overnight from a London bank to a factory in Chicago; to Postman Pat, out in all weathers to deliver birthday cards, catalogue orders and bank statements to remote farmhouses. The trick will be to become a jack of all trades, without becoming master of none.


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