DYNAMICS OF ICT IN POSTAL AND COURIER BUSINESS

DYNAMICS OF ICT IN POSTAL AND COURIER BUSINESS ABSTRACT The emergence of information and communication technology (ICT) has had a great impact in the postal sector. Internet and e-mail has taken a big chunk of the postal business and was seen as a threat to the postal business. Postal Corporations have gone through significant changes since ICT emerged in the 1990s. The dynamics of ICT has however been a blessing to the Postal Corporations which have adapted to the new environment. Besides ICT challenges, private courier service providers continue to invest heavily in the sector. The East and Central African Postal Corporations should therefore digitize so as to gain a competitive advantage in the postal market. 1.1 BACKGROUND OF POSTAL AND COURIER SERVICES Postal services started way back when messengers were used to take mails to the military. The first known postal and courier services cutting across continents dates back to 1475 B.C. in Iran during the Babylonian Empire. When commerce developed later on, messengers accompanied and supported commercial and clerical activities. Commercial success was achieved in the late middle ages when private messenger services between cities were established. Postal Services were nationalized all over the world and integrated into state administrations with the emergence of the modern Nation- States. On the nationalization of postal services, it became inevitable to regulate the international Postal activities as part of agreements between national governments. This saw the creation, in 1874, of the Universal Postal Union in Bern, Switzerland which is still in existence to this day. Postal services improved in the 19 th century with the development of Nation-States. Telecommunication services were integrated into postal operators and were called PTT i.e. Post. Telephone and Telegraph. Postal services became then a monopoly and were driven by political administrations to achieve their objectives of communication, regional development, and employment among many others. Postal environment was then very stable because it was a monopoly. There was very little if any of technology within postal activities because postal was mostly manual business. The main activities of postal business were collection, transport, manual sorting and manual distribution of mails and registered parcels at specific centers within urban and peri-urban.. Postal administrations during this period were the main employers in many countries of the world. Little changed in posts for many years until now in the age of digitalization. 1.2 Growth Postal/Courier Services Postal services grew steadily until in 1980s when private operators (courier firms) emerged especially because of quality problems in postal services. The private firms started offering 1

express courier and to some extent parcel services. There was also an increase in globalization trade which meant cross border trade, most of these express couriers quickly expanded their services to transnational level. The ecommerce through inter-continental trading partnership followed soon after. Liberalization was introduced in 1992 by the European Commission. The European Commission came up with three documents: The Green Book of 1992, a first Framework Directive of 1997 and a Second Framework Directive of 2002. In the Green Book the European Commission structured the future postal sector. The 1997 First Framework defined the Universal Postal Service. In the second Framework Directive of 2002 the monopoly protection was reduced to 100 grams in 2003 and later reduced to 50 grams in 2006. The industry experienced a real decline of mail revenues in 1990s. Cyber Internet services spread widely across regions with cheaper and more reliable instant email services quickly becoming a preference to postal letter services. As a result organizational transformations had to be conducted to create professional corporate structures, change attitudes, move away from conducting business like an administrative entity and become market driven organizations. Postal Operators therefore started thinking of ways of innovating the corporations as a way of increasing revenue. The Postal Corporations have become more customer oriented by setting up marketing departments with the role of promoting the postal services to gain competitive advantage over upcoming courier firms. Heavy infrastructural investments were also undertaken by Postal Corporations in East Africa. Postal Corporations have changed from the traditional way of conducting postal business by redefining titles like head postmasters to Branch managers in line with normal titles in the business world. The postal corporations have also become more innovative by adding none traditional services to their portfolio. Some of the nontraditional services are agency services and Huduma services in Kenya. 1.3 Postal Service Reforms Regulators globally initiated a reform to reduce the monopoly protection of mails (currently up to 50 grams). At the same time Postal Corporations were required to provide Universal Postal Services. Imposed Universal Postal Service obligations and monopoly reduction have forced the traditionally managed Postal Corporations to restructure and become efficient. The World Bank has continued to support for restructuring of the traditional Postal Corporations especially in developing countries by providing financial support. 2

The other actor in the reform is universal Postal Union [UPU]. UPU has not been pushing for sector reform per sec but instead has been pushing for service quality across countries [finger et al; 2005]. 1.4 Challenges in Postal Services There is fierce competition between the mushrooming private courier service providers Such as local bus companies, multinational firms like FedEx and UPS. Some of these operators operate illegally and therefore do not pay taxes. The existing deregulated legislations allow the light parcel services to anyone in and out of the region so long as the firm has conformed to laid out procedures and remits taxes to the governments. Additionally, most of the small traders have joined the band wagon with higher proliferation mechanisms that have posed great challenge to Postal corporations. However, unlike, the private venders, Postal corporations still enjoy a measure of advantages. For example, philately (the desi gn of) and production of stamps, the letter boxes, and the nationwide infrastructures. Most corporate bills and letter handling are still a preserve of Postal Corporations. The East and Central Africa Postal Corporations have maintained the UPU standards to enable them have a wider reach across continents. Postal corporations have an aging work force, however to rejuvenate the aging workforce Postal Corporations have recruited younger workforce. The new recruits require training in specialized postal services and in ICT. 1.5 ICT Developments The following are the ICT Developments: Market dynamics and competition. Modern markets for postal services are highly dynamic because of the changing consumer behavior. Today s consumers are different from the yester years. This is because of globalization and the new information and communication technologies. According finger et al, 2005, 80% to 85% of total mail volumes in industrialized countries are generated by global business customers. 3

Express and parcel services are increasingly global, but the mail market in developed countries is national while as those of developing countries is international. In all these services customers are demanding faster, more reliable postal services, and a wider range of products. Customers are also demanding tracking services to monitor the movement of their mails and parcels. Monitoring gives customers an advantage in planning the process of clearing the parcels when they arrive. The customer is also becoming sophisticated demanding competitive prices which meet their personal requirements. According to International Post Corporation(IPC) the trend in demand is for postal and logistics services to be more standardized, available from a single buying point, across geographical areas and transport modes, for all consignment weights and types, in a range of time- definite options. Key customers [bulk or direct mailers] are demanding competitive prices, better fast services from the postal operators. New entrants. The other reason why postal operators/courier have to embrace technology is because of the new entrants in the postal markets with for example, DHL, TNT, UPS and FedEx as well as other national and transnational operators. Most of these new entrants have better and faster technology thereby imposing very stiff competition. Suppliers The postal matter suppliers of both hardware and software solutions have become important. This is because postal solution hardware and software are not easily available and are quite sophisticated for example sorting technologies [Siemens, Alcatel] other hardware [e.g. Pitney Bowes in Franking Machines). These suppliers are evolving into significant stakeholders of the sector, and have started to play an increasingly important role in developing new technologies. E- Marketing E-marketing is increasingly becoming important because of the ease in buying and selling of goods. This offers a big opportunity to postal corporations/couriers because the products have to be physically delivered to the buyers. Postal/courier firms need only to get organized and form 4

partnerships with for example supermarkets and other big shops to deliver their goods to customers who buy on line. This is a big business in developed countries. 2.0 DYNAMICS OF ICT ICT will transform and shape the future of postal industry. According to UPU mails have reduced significantly over the last few years. The trend does not show any signs of growth but continues to show a downhill trend. According to (IPC, 2002) the mail volume in 1990s has slowed down compared to growth rates of the 1980s. This slow growth of mails can be attributed to the growing use of email and the internet by the consumers (Nader, 2004). ICT increases the availability of information to customers making the dependence on institutions for business information less. This empowers customers to be in control over products and services that they want. This is because of great transparency in information availability. This has led to greater competition and innovation leading to higher efficiencies. It is only those organizations with better technical know that will gain competitive advantage. ICT leads to efficiency in the production and processing of mails and parcels. The postal Corporations/courier firms that will make best use of ICT will remain competitive and profitable in the market. There is no doubt that ICT has taken away some of the services rendered by the sector. However one thing is amazing, instead of this development impacting negatively on the sector, more investors are jumping the queue to obtain licenses from the Courier Regulators to tap into the lucrative courier business (Godwin.2008). ICT has had a positive impact on the courier business contrarily to the expectations of many. It has enhanced and increased the courier operations by making it more effective and efficient. Godwin, 2008 citing William Opeoluwa, chief executive officer of Rowsy International Cargo And Courier Limited of Nigeria information and communications technology said that ICT has brought a lot of advantages to the sector. ICT has made it possible for courier firms to locate their shipments and locate their movements. Individuals can also download information about particular companies from their websites and track the movement of their goods and services. ICT has enhanced security of mails and parcels by incorporating CCTV Cameras, making it difficult for pilferage and stealing to take place. ICT can be used to sort letters thus increasing the speed of sorting and reducing missorts. This has created greater confidence to the customers 5

thus increasing postal business. ICT has also made it possible to detect prohibited goods that are not allowed to go through the posts for example drugs and explosives. Recommendations ICT should be used to digitalize all postal operations to make posts/courier become one stop shop for all e-service solutions. This would help in: Online application to design and send direct mailings to customers. Online ordering of all kinds of materials such as stamps Online shopping of different postal products Online payment of bills for customers. On line change of address which is then communicated to the various customers. Online notification of customers regarding their parcels or mails that are pending for collection. Online payment for various postal services. Online sending of money. Invest in regional computer database system to manage all parcels to enhance delivery of services Research in the computing and distributive technologies to increase mail security Postal Corporations should have technical and organizational capabilities in ICT through training to enable them become competitive in the market. Conclusion The emergence of ICT was viewed as threat to the Postal business because it was taking a big chunk of mails since most customers started using email and internet. But the experience today is that the Postal Corporations/courier which have adapted to the technology have found it most rewarding and increased their business and profitability. 6

References (1).Commission of the European Communities. 1992. Green Book on the Development of the Single Market or Postal Services. [2] Commission of the European Communities. 2004. White Paper on Services of General Interest. [3] Ecorys. 2005. Development of competition in the European postal sector. Study for the European Commission. [4] FINGER, Matthias, Ismail ALYANAK, Pierre ROSSEL. 2005. The Universal Service in the Communications Era. Lausanne. [5] International Post Corporation. 2002. Strategic Perspectives on the Postal Market 2002-2004. [6] International Post Corporation. 2003. Strategic Perspectives on the Postal Market 2003-2005. [7] International Post Corporation. 2004. Strategic Perspectives on the Postal Market 2004-2006. [8] NADER, Fouad H. 2004. Mail Trends. Stamford. [9] Universal Postal Union. 2004. Postal Market 2004 Review and Outlook. Bern. [10] Universal Postal Union. 2004. Guide to Postal Reform Module I Foundation for Reform. Bern. [11] WALSH, Tim. 2001. Delivering Economic Development. London. [12] World Bank Group. 2004. The Postal Sector in Developing and Transition Countries. Edited by Pierre Guislain. Washington. 7