A Guide to Better Postal Services Procurement. A GUIDE TO better POSTAL SERVICES PROCUREMENT

A Guide to Better Postal Services Procuremet A GUIDE TO better POSTAL SERVICES PROCUREMENT

itroductio The NAO has published a report aimed at improvig the procuremet of postal services i the public sector which idetifies aual potetial savigs across the public sector of 31 millio. I additio to the mai report, a good practice guide, based o public ad private sector practices has bee produced, highlightig six key areas of good practice. This leaflet drawig o both of these, is a guide to help your orgaisatio save moey ad improve the quality of the postal services you procure. A full Good Practice Guide, the mai NAO Report ad this guide are available at http://www.ao.org. uk/publicatios A GUIDE TO better POSTAL SERVICES PROCUREMENT

A GUIDE TO Better POSTAL SERVICES PROCUREMENT

cotets This booklet cotais a summary efficiecy improvemet tree, six key actios to implemet good practice, ad a selectio of useful referece sources. A B C D E F G H Efficiecy improvemet tree Select the appropriate mail products Improve the accuracy ad maagemet of customer address data Usig procuremet ad supplier egagemet good practices Icrease the availability ad use of maagemet iformatio Developig a itegrated commuicatio strategy Develop capable ad effective maagemet structures Referece sources A GUIDE TO better POSTAL SERVICES PROCUREMENT

A efficiecy improvemet tree Icrease quality ad effectiveess Assig maagemet accoutability 1 Use Maagemet Iformatio 4 Speed 5 Security 6 Icrease marketig impact7 Better use of mail products Paymet methods8 Mailsort ad Cleamail12 Packetpost9 Special delivery10 Iboud products11 1 Assig resposibility for postal efficiecy; Put i place a fiacial maagemet structure to ecourage efficiecy; Develop ad recruit postal skills ad experiece; Commuicate good practice. 2 Active cotract maagemet; Aggregate with other departmets; Cetralise iboud ad outboud activities. 3 Develop strategies across the departmet ad across multiple departmets; Review processes; Use lower-cost commuicatio methods for customer ad itraoffice mail. 4 Leverage existig fiacial ad postal ad pritig operatios systems ad supplier iformatio to gather performace data; Bechmark postal services performace. 5 Guarateed date of delivery. 6 Assess use of high security products; Improve security desig of mail piece (e.g. use of disguised mail). 7 Customer targetig; Improve commuicatio desig of mail piece; Cosider use of COI for marketig strategy advice. 8 Use of edocketig to improve ivoicig; Assess use of Postage Paid A GUIDE TO Better POSTAL SERVICES PROCUREMENT

Reduce cost of service Reduce price/uit Reduce volume Supplier ad cotract maagemet 2 Egage with market place Itegrated commuicatio strategy 3 Reduce re-seds Respose services 13 Class of mail 14 Size ad weight profile 15 Egage with OGC ad OGCbuyig. solutios 16 Postal suppliers 17 Exteral providers for geeratio/ pritig/fulfilmet/ sortig 18 Improve customer address data 19 Impressios compared with frakig machies. 9 Use of Packetpost where volume makes it appropriate. 10 Reduce use of special delivery. 11 Iboud sortatio process chages. 12 Improve customer address data, software or mechaical mailsort implemetatio, maual sortig. 13 Reduce free reply services. 14 Move dow to Secod Class, Mailsort 3. 15 Audit mail profile to assess impact of Pricig i Proportio. 16 Leverage OGCbuyig. solutios kowledge ad tools for good practice. 17 Leverage OGC.bs framework agreemets to achieve beefits from competitive tederig; Negotiate with Ed to Ed ad DSA suppliers to fid best product to fit busiess requiremets; Leverage supplier kowledge (e.g. to perform a mail audit); Ecourage iovatio i product developmet. 18 Mail as a maaged service/solutio; Cosider use of Cetral Office of Iformatio. 19 Compare address data with Royal Mail Postcode Address File; Alig customer data across iteral systems. A GUIDE TO better POSTAL SERVICES PROCUREMENT

B select the appropriate mail products Key questios for orgaisatios to ask: 1 Do you use work share products for outboud mail? These ca offer discouts of 5-46%. Work share products ca be doe by: Software sortig, so prited i post code order Mechaical sortig machies, to sort ito post code groups after pritig Outsourcig the sortig Maual sortatio 2 Could you use Cleamail to reduce mail cost? This product has basic address labellig requiremets to get discouts Example: DVLA estimates savigs of 3 millio a year from a mix of software ad mechaical sortig ad ow sorts over 90% of mail. 3 Are there specific deadlies for mail? Do customers expect or eed the mail by a certai date? Savigs could be made by usig a loger delivery service (e.g. two-day, 2d class, Mailsort 3) 4 Have you reviewed paymets methods recetly? Has the departmet cosidered the cost savigs of Postage Paid Impressios over frakig machies? Postage Paid Impressios is a pre-prited alterative to postage stamps or frakig machies Savigs due to reduced equipmet/maiteace costs But there is a miimum threshold for use ( 5,000 per year) A GUIDE TO Better POSTAL SERVICES PROCUREMENT

5 Do you use special delivery? Could this usage be reduced? 6 Is ay sesitive data set i the post? Has the use of disguised mail bee assessed? 7 Higher priced mail products may represet better value overall. Have these bee cosidered? For example, secure delivery could help reduce fraud ad theft. 8 How do you process your iboud mail? Could this be outsourced? Have you assessed supplier iboud mail products? 10 What is the size, weight ad formattig of your post? Have you cosidered the impact of Pricig i Proportio Royal Mail s pricig model from Autum 2006? Size ad weight will affect cost of mail. What mail items could be resized? e.g. C4 sized evelope to DL sized. Costs may rise dramatically if this issue is ot addressed! Example: HM Reveue ad Customs is lookig to save 3 millio a year by chagig the size of New Tax Credit correspodece size. 9 Do you offer free reply services? Is this cost-effective? Does the take-up justify the costs? A GUIDE TO better POSTAL SERVICES PROCUREMENT

Example savigs of pricig i proportio Format ad size Weight Secod class price pre 'Pricig i Proportio' Secod class price after 'Pricig i Proportio Price icrease Large letter, 225 x 160 (mm) 370g 1.14 0.72-37% Large letter, 220 x 220 (mm) 72g 0.35 0.35 il Large letter, 220 x 220 (mm) 26g 0.21 0.35 +67% Source: Postcomm A GUIDE TO Better POSTAL SERVICES PROCUREMENT

c IMPROVE THE ACCURACY AND MANAGEMENT OF CUSTOMER ADDRESS DATA Are outboud addresses ad customer iformatio checked before mail is set? Either whe the iformatio is iput, through regular address cleasig, or before productio? Example of how addresses are checked i a direct mailig campaig before mail is set: 1 Remove records with icorrect or icomplete addresses. 2 Elimiate records that do ot match the Royal Mail s Postcode Address File. 3 Apply the Mailig Preferece Service removes those who have opted out of receivig direct mail. 4 Take out deceased files. 5 Apply the Royal Mail Chage of Address File to remove out-ofdate address iformatio. 6 Apply private sector lists of customers for updated addresses. 7 Check across the orgaisatio to avoid multiple mailshots. 8 Check for duplicates withi mail batch. A GUIDE TO better POSTAL SERVICES PROCUREMENT

Ca the orgaisatio s percetage of udeliverable mail be reduced? Does the orgaisatio use udeliverable iformatio to update address data? Updatig your system with udeliverable iformatio from suppliers/customers could: Save pritig/statioary costs Save costs of processig of udeliverable mail ad checkig of updated addresses Save postage costs Improve customer satisfactio with your service. Has the orgaisatio looked at usig exteral data sources to check address iformatio ad improve customer targetig? Example: Tesco was able to sigificatly reduce retur mail costs by usig Royal Mail udeliverable iformatio for its Tesco Clubcard mailigs. A GUIDE TO Better POSTAL SERVICES PROCUREMENT

D use procuremet ad supplier egagemet good practices Does the orgaisatio have a clear uderstadig of: The busiess requiremets of post? The commuicatio objectives for post? What the rage of supplier products are? Where ecoomies of scale could be used? Has the orgaisatio cosidered: The use of alterative suppliers through the OGCbuyig.solutios framework agreemets? Outsourcig of mail productio, sortatio or processig? Closer, more active cotract maagemet? Workig with other public sector orgaisatios to icrease purchasig power ad use ecoomies of scale? Key Example: Airedale NHS Trust outsourced the prit, productio, ad dispatch of outpatiet commuicatios to Opteco to get productive time, productio, postal costs, ad physical space savigs as well as higher quality commuicatios. Key Example: A large local authority egaged Royal Mail to review their postal services. Royal Mail ad the authority were able to idetify potetial aual savigs of 50,000. Key Example: Hull ad East Yorkshire Hospitals Trust switched from Royal Mail to UK Mail to reduce postal costs. A GUIDE TO better POSTAL SERVICES PROCUREMENT

e icrease the availability ad use of maagemet iformatio Collect data o sped ad volume: Break dow ito mail product, type of mailig, source of mail, locatio of mail geeratio, average cost per uit, percetage of work share used, use of first class/secod class/mailsort 3, address data quality Egage with suppliers to obtai iformatio Use iteral purchasig ad fiace systems. Bechmark postal services performace: Compare agaist public sector peers Compare agaist idustry. Key Example: HM Reveue ad Customs used idustry best practice figures to target savigs of 4 millio a year from improved customer address data. Use maagemet iformatio to focus o: Idetifyig ad aalysig sped levels Delivery performace New improvemet targets Stoppig fraud. A GUIDE TO Better POSTAL SERVICES PROCUREMENT

Public ad private bechmarks (2004-05) Idicator A large govermet departmet A Agecy with high mailig eeds A large govermet departmet A Agecy with high mailig eeds Private sector - Fiacial services Private sector - Utilities Average cost per item 1 27.8p 21.7p 24.1p 21.5p 22.0p 20.4p Percetage of 'workshared' mail 56% 93% 60% 88% 73% 81% Percetage of mail set by: First Class 41% 1% 2% 20% N/A N/A Secod Class 58.5% 99% 87% 49% N/A N/A Mailsort 3 0.5% 0% 11% 31% N/A N/A NOTE 1 A more complete breakdow of public sector breakdows ca be see i our mai report (http://www.ao.org.uk/publicatios) A GUIDE TO better POSTAL SERVICES PROCUREMENT

f does the departmet have a itegrated commuicatios strategy? Orgaisatios eed to: Uderstad customer eeds Uderstad the orgaisatio s commuicatio objectives ad policies Develop the commuicatio strategy, balacig cost ad beefit of commuicatio chaels Coordiatio betwee commuicatios ad procuremet teams to uderstad advatages ad commercial issues with the use of postal products Develop strategies across departmets for joit mailigs Challege the demad for iboud ad outboud mail Is the mail piece ecessary? Is it the appropriate class ad product? How is mail set most efficiet size ad weight? Assessig post withi a commuicatio, productio ad delivery value chai (see figure opposite) Key Example: The DWP s Pesio Service i respose to a customer survey is ow acceptig pesio applicatios over the phoe, reducig iboud post by 60% ad gaiig productive time savigs. The postal value chai Outboud Commuicatios Start Commuicatio Strategy Need for commuicatios Choose commuicatios method Geerate electroic correspodece Apply address data rules Iterally or exterally drive Cotact strategy: Face to face Web Telephoe/ SMS/fax Correspodece Choose mail or courier product A GUIDE TO Better POSTAL SERVICES PROCUREMENT

Maagemet Procuremet Iboud Commuicatios Start Pritig ad mail productio Statioery maagemet Delivery to local delivery office Customer commuicatios Sortig by post code Mail product choice Pick-up of mail from customer Delivery to addressee Udeliverable Mail room operatios Supplier passes mail through their sortig offices Receipt ad process Maagemet Iformatio collectio ad moitorig Source: Natioal Audit Office A GUIDE TO better POSTAL SERVICES PROCUREMENT

g develop capable ad effective maagemet structures What maagemet structures are i place? Is there a seior maager with clear accoutability for postal iitiatives ad moitorig postal use? Are there icetives for all busiess uits to be efficiet i postal service use? Is there clear commuicatio of procuremet policies? Is there a strog relatioship betwee postal teams ad other areas of the departmet to review commuicatio requiremets? Such as, Supplier accout maagers workig together Ati-fraud ad post teams workig together Call cetre ad post teams egagig to eable effective call cetre usage Post ad publicatios workig together to eable beefits o mail pricig schemes h referece sources NAO Good practice guide, mai report, ad this guide http://www.ao.org.uk/publicatios/idex.htm OGCbuyig.solutios http://www.ogcbuyigsolutios.gov.uk Royal Mail Pricig i Proportio http://www.royalmail.com/pricigiproportio Postcomm http://www.postcomm.gov.uk/ A GUIDE TO Better POSTAL SERVICES PROCUREMENT

Natioal Audit Office 2006 Layout ad productio by NAO Iformatio Cetre DG Ref: 6647RF Prited by CW Prit