Royal Mail has achieved much in the past but its plans for modernising delivery operations are less ambitious compared to other postal operators. This is the prime conclusion of a study by WIK-Consult published by Ofcom last week. WIK-Consult had been commissioned by Ofcom to review Royal Mail’s business plan with regard to efficiency initiatives and planned cost savings in the regulated business. The planned initiatives to improve operations are evaluated in comparison to other six postal operators: Deutsche Post, PostNord (Danmark and Sweden), La Poste, PostNL, and USPS.
On 25 May 2016, Ofcom published proposals for a "Review of the Regulation of Royal Mail" for public consultation.
Following the publication of a discussion document in July 2015, Ofcom now set out the findings of their review. This includes Ofcom’s assessment of Royal Mail's efficiency, analysis of its position within the letter and parcel sectors, and consideration of the company's potential ability to set wholesale prices in a way that might harm competition.
Ofcom’s review is based, among other work, on WIK-Consult’s "Review of the Projected Costs within Royal Mail’s Business Plan", a study commissioned by Ofcom in April 2015. On behalf of Ofcom WIK-Consult has reviewed Royal Mail’s business plan with regard to efficiency initiatives and planned cost savings in the regulated business. WIK-Consult assessed Royal Mail’s planned initiatives to improve operations in sorting, transport and delivery and evaluated them in comparison to similar programmes of six other postal operators: Deutsche Post, PostNord (Danmark and Sweden), La Poste, PostNL and USPS. Additionally, WIK-Consult discussed the measures in the context of Royal Mail’s overall transformation and modernisation programme that started in 2008. WIK-Consult concludes that Royal Mail has achieved much in the past but that its plans to modernise delivery operations are less ambitious than what its peers are planning, or have achieved already. Moreover, most of Royal Mail’s international peers have implemented strategies to increase the flexibility of their workforce to allow them to respond better to volume fluctuations. Royal Mail has not yet achieved the same level of workforce flexibility.
Ofcom’s public consultation closes on 3 August 2016. Ofcom expects to publish a statement on its final decisions later this year. Given the declining letters market, and increased competition in parcels, Ofcom is not proposing to impose new price controls on Royal Mail’s wholesale or retail products.
WIK-Consult’s study has been published with Ofcom’s consultation documents on the 25 May 2016. A public version of the study is available for download.
