Keep mail accessible, reliable and affordable
We want to keep mail reliable, accessible and affordable for everyone in the Netherlands. However, for more than 10 years we have deployed a wide range of measures to improve efficiency, cut costs, and keep our mail business financially healthy. Examples include centralising sorting locations, implementing new sorting machines capable of highly automated mail processing, using digitalisation in our processes, and introducing efficiencies to our delivery routes. We have also optimised our pricing to stay profitable while taking into account price elasticities. And in 2019 we acquired Sandd, which led to an increase in our volume base, although substitution means volumes have continued to shrink since then. However, the current position of Mail in the Netherlands is untenable, with the volume of 24-hour mail declining significantly, while we are still obliged to deliver within 24 hours and five days a week.
While we have done everything possible, we foresee this strategy of cost savings and price optimisation no longer being sufficient to provide the sound financial base we need to invest in our people, our network, and the future of postal services for our customers. If we want to keep mail reliable, accessible and affordable for everyone in the Netherlands, we need to look at changes to the current service framework, and both the universal service obligation (USO) and the entire mail business need to evolve with this. Without these changes the USO, as of today, and over time the entire mail organisation will be structurally loss-making, which is unsustainable. More information on PostNL's position on the future of Mail in the Netherlands can be found in the 'Our operating context' and the 'Financial value' chapters.
“The current position of Mail in the Netherlands is untenable”
Continuing to adapt to market developments
In 2023, we began preparing for changes to the management structure within Operations at Mail in the Netherlands, which we will introduce later in 2024. The new structure will divide management activities between personnel processes and logistics processes, enabling us to increase knowledge within each area while managing more efficiently. As part of this change, we plan to switch to a task-oriented working method, where data is analysed to detect deviations in our processes. These deviations are translated into concrete tasks that are then dealt with by managers, so that underlying issues are resolved more quickly and effectively. These changes are necessary to adapt to the changing mail market, with decreasing volumes requiring a different approach to how we operate and manage our Mail in the Netherlands business, including appropriate adjustments to costs.
At the same time, these advances are part of our continuous use of digitalisation, both commercially and operationally, to improve customer interaction, supply chain planning and our operational management model. Modernisation and innovation of our services helps to make Mail in the Netherlands future-proof and include services that combine digital simplicity with physical delivery, such as the digital stamp code and delivery preferences in the PostNL app, to benefit customers and consumers.
Extending efficiencies across delivery routes
During the year, we further implemented the New Mail Route, an efficiency-led model that we began introducing in 2022. The New Mail Route enables us to make better use of our locations and resources, work more efficiently, save costs, and improve quality. One example is the optimisation of mail deliverers' routes, where routes are laid out in logical patterns rather than by postcode, creating greater efficiency and helping to lower costs.
By the end of the year, we had updated around 70% of delivery routes to the new format, from around 1% at the beginning of 2023, and expect to have transferred all routes by the middle of 2024. We also continued to replace old depots with New Mail Route depots, all of which use e-bikes or e-cargo bikes for delivery, meaning delivers can carry more mail and routes can be extended.
Optimising our delivery and sorting process
We introduced a range of delivery and sorting developments in 2023, which enable us to streamline our processes to be more cost-effective, adapt to changing customer demands, and improve quality. At the same time, we are working to offer our people more attractive working options.
These changes involve streamlining delivery days for non-24-hour mail, to reflect declining volumes and the needs of bulk mail customers. We also changed the way we bundle and deliver mail, leading to a more efficient and stable preparation process, improving both quality and our capacity to process the growing number of letterbox packages we deliver. We have reduced the amount of early morning sorting that has to be done by hand by introducing new mail preparation cabinets. These cabinets are wider and have twice as many preparation compartments, helping to reduce the number of sorting steps and simplifying the total process chain. Finally, in the afternoons, large non-24-hour mail is sorted directly into bags ready for delivery the next day.
Introducing a new delivery process for registered mail
We began preparing a new delivery process for registered mail towards the end of 2023, which aims to create a more reliable and higher quality delivery service. We plan to roll the service out nationally starting in the first quarter of 2024.
Adjusting our business while focusing on our people and the environment
Although the developments outlined above were necessary, it is clear that they had an impact on our people, who had to contend with many changes over a short period of time. This impacted their enthusiasm for the job and engagement levels. How we are tackling this is covered in the 'Social value chapter later in the report.
While our mail business will continue to have to adapt, in 2024 we will focus more on improving the way in which we change and ensure that we do not launch too many changes at the same time, drawing on the experiences and feedback of our people and our customers.
Over 82% of deliveries carried out by Mail in the Netherlands are emission-free over the last mile. We currently deliver letters and letterbox parcels emission-free to 96% of residential addresses in the Netherlands. Actions we are taking to reduce our environmental impact can be found in the 'Environmental value' chapter.
The quality of our mail delivery
PostNL has to comply with the Postal Act in the Netherlands, which requires a next-day delivery level of 95% for consumer mail, while each year we make additional delivery agreements with customers. “But whatever promise you make, you want to keep it” says Sipke Spoelstra, director of operations Mail in the Netherlands. And PostNL is working continually on ways to deliver even more mail on time. “One of the ways we increase delivery time and quality is by introducing more machine capacity in our sorting centres so that we can sort faster. But the amount of mail that deliverers can handle mainly depends on how many deliverers there are at the depot. And at the moment, in a labour market that makes it very challenging to hire mail deliverers, it can become a real challenge to deliver all the post that comes in. But we are working very hard on staffing levels,” Sipke says. “Everyone who now joins us as a postal worker receives a permanent contract. And we try to reach new target groups, such as people over 65. We also consider people with additional support needs and, while they often cannot immediately take on a full-time job, we provide them with help from a job coach. It's really uplifting to see!"
