Mail is in danger of being destroyed in this country by mismanagement and a lack of political will. Volume is down 30 – 40 per cent and little is being done to realign the business with commercial realities.

We have had the chairman and the CEO of Australia Post publicly talking down mail with headlines announcing the end of mail. These people are well paid to run the business, not denigrate it. If a young marketing person reads the newspaper (or blog) and sees the head of Australia Post saying that mail is finished, what are they going to promote to their clients? Mail would not rate a mention because even Australia Post has said it is all over for mail.

The CEO Ahmed Fahour is employed to run one of the largest logistics companies in Australia. Why are five out of the top nine executives at Australia Post ex NAB bankers ? This is a logistics business not a bank. Is Fahour honestly telling us that those people are the most appropriate people in Australia for those roles – and it is just coincidence that they used to work with each other at NAB?

By raising prices Fahour is essentially saying that he has exhausted all avenues of cost saving – he is also implying that Australia Post is the most efficient logistics business in Australia. Surely he would not raise prices if he felt there were some efficiencies to be gained or cost savings to be made? Seems to me that Fahour is being paid a lot of taxpayers’ money while avoiding making the hard decisions and taking on a bloated, heavily unionised work force.

The introduction of Priority Mail and Regular Mail is a good concept, but it only works if you cut the head count of the business. The idea is to smooth out the peaks and troughs of mail volumes and allow for a more efficient processing system. What is the point if you don’t reduce your head count in the mail processing area? Fahour has effectively reduced his sales revenue but has not taken advantage of improved processes by cutting heads.

According to their annual reports Australia Post has seen 6.5 to 11.5 per cent of staff leaving annually of their own accord. You do not even need to make anyone redundant – just wait for them to leave. Of course, you would have to replace some of them but if you lose 2,000 people at an average wage cost of $70,000, over a couple of years that is $140m in annual wages.

Do we need daily delivery of mail and alternatively, could the public have mail delivered every second day? With every second day delivery, each Postie could deliver mail to two areas, simply alternating each day. If the decline in transactional mail continues then that would mean that the local Postie will be delivering the same as he was eight years ago.

There are more than 6,000 Posties working for Australia Post. If we assume that not all delivery areas can be shared let’s say we lose 2,000 of them. We will assume posties earn a little less than the average $70,000. Roughly another $120m saved. So in fairly quick time we can save $260m a year if the Unions can accept the fact that the business volumes have declined. According to my contacts at Post there is still plenty of fat in management. So additional cost savings are there to be had.

Australia Post has recently sold its mailing business. It invested millions into this business to compete directly with its clients. Fortunately they were not a particularly competent competitor. Having friends working in operations at Post Connect was an eye opener. Their tales of government department bureaucratic waste were legendary. Why was Australia Post even in this market ?

Australia Post has a joint venture with China Post called Sai Cheng. You can lodge mail in China with an Australian return address and Postage Paid Australia indicia. Australia Post is a government owned service provider giving Chinese mailing companies the ability to compete directly with Australian mailing companies with the obvious cost savings. I am sure my Work Cover insurance would be a little higher than my Chinese competitors. The Australian government sets expensive (and worthwhile) safeguards and then has one of its agencies actively working to hurt our industry.

This is another example of Australia Post overstepping its boundaries and a blatant example of empire building. Australia Post is not going to generate extra mail volumes by helping Chinese mailing companies – they are just going to move the work offshore. Foreign competition is not something new to the print and mail industry. But I would have thought the Australian government would not be actively assisting foreign companies win work. What is the overall employment and tax loss to our government by Australia Posts joint venture in China?

The New South Wales Waratahs Rugby teams welcome packs were printed and mailed in China. There is a printing company in Sydney who does not print them anymore and there is a mailing company in Sydney who does not process the mail. It is all on the Sai Cheng website – under Customer Case – then ‘Success Stories’. Success Stories? An Australian government agency is directly undermining Australian businesses. The clever country indeed.

Australia Post waste

Mail houses can tell a thousand stories of waste at Australia Post. Why does our mail pick-up truck regularly arrive three hours before pick up time? Why do we get four trucks on one day ? One to deliver white tubs, one to deliver empty cages, one to deliver small letter trays and one to pick up mail. Last time I checked trucks were not cheap.

Australia Post’s logistics division needs to be overhauled. Post has started rebranding its red trucks into Star Track trucks. It now owns Star Track 100 per cent. Get on with moving logistics to Star Track. We have empty Post trucks driving around Sydney all day. Mail houses should have to advise Post how many cages of mail they have. Book it in with Star Track. Star Track can pick up mail much more efficiently than Australia Post as they are picking up pallets from other locations. We can label each cage with barcodes and information to improve ease of processing by Post.

As a business owner I would not mind if Australia Post picked up multiple times a day through Star Track. I am prepared to change my business if it helps Australia Post reduce costs and thus postage prices.

Malcolm Turnbull MP, currently the minister responsible for Australia Post, recently stated that if a business owner cannot find five per cent costs savings they are not trying. This was in relation to the cuts to the ABC and SBS. Fahour is running a business with declining volumes and has made a 3 per cent cut in staff. Are there no other staff at Post that are surplus? Is there no facility that can be closed ? No transport efficiency to be had ?

I am far from an impartial observer – my business relies on Australia Post – but if volume at my own business was down by a third I would not reduce my head count by just a few per cent.

Deregulation

Deregulation is the key to the survival of mail. Australia’s population is obviously concentrated in the capital cities and some key regional cities. The current government is very keen on digital mail boxes for government communications. No problem. Deregulate the market, allow new providers to only mail to and within the capital cities and major metropolitan areas. Sydney Mail, Adelaide Mail etc linked by efficient non-government transport providers. The government could sell licenses for these markets to private companies. This money could be used to pay redundancies for staff not required in the new businesses. You would have commercially focused businesses with an incentive to promote the print and mail market. Alternatively, just allow Salmat, PMP, DHL and others to compete in which ever market they wish and compete head to head with Post. I wonder who would be left standing at the end?

Mail is not the only way to communicate. We are working with legislation from a century ago. Mail is becoming less critical to the functioning of the government and country. We can move to deregulate the market as there are viable alternatives to communicate. Mail does however remain on balance the most trusted and effective way to communicate advertising material to a wide audience.

Any essential mail can be emailed or distributed through the digital mail boxes. If banks, advertisers or governments want to mail to regional areas – then they can pay for it. Mail to main metro areas and email to the rest. The government can subsidise regional mail if it likes – but do not threaten our industry by lumping it all together and calling it a $300m loss.

The key points here are :

• Direct Mail and unaddressed mail is increasing in volume.
• Transactional mail is declining.
• The majority of the population lives in major cities.
• Regional deliveries are very expensive.
• Mail is no longer the only secure method of communication

Imagine if mail was only delivered to large metro areas? The cost of a stamp would be under 50 cents. We as a community are subsidising regional areas. The issue is that these subsidies are threatening the viability of the whole system. As a mailing company if the market was deregulated I could offer my clients two options. Mail to 80 per cent of your database at a low price and email the brochure to the other 20 per cent.

The government needs to look at the wider picture. You have a government monopoly that is inefficient with management that shows no sign of improving. The print industry employs thousands of people generating billions of dollars in economic activity. The effect of Australia Post raising prices is simple: less mail = less print = less employment = higher unemployment benefits and a lower tax take. If the government was worried about the car industry and a few thousand workers – where is the concern over our industry?

The most important issue here is what is the end game? In ten years after successive price increases and associated drops in volumes mailed, the price of a stamp is $2 or $3. No-one mails anything and the industry withers away. Australia Post makes 20,000 people redundant, the Union cries poor and the print industry is decimated. Who are the winners? Much better to cut hard now and keep a great industry alive.

We do not want hand outs – we want Australia Post and the mail system dragged in the 21st century. Fahour, do not destroy our businesses because you cannot fix yours.

Hard decisions for Stakeholders

• The Government – needs to deregulate the market or allow a change in delivery standards.
• Australia Post management – putting up the price without cutting costs is weak management. Volumes continue to fall. We do not need small adjustments, we need radical surgery.
• Australia Post Board of Directors – Employing senior management with a logistics background would be a good start.
• Unions – need to realise that if a business has a reduction of thirty to forty per cent in volume then that business will need to reduce staff levels. What is the union proposing?
• Users – mail houses, printers and others – we need to accept that service levels will change. If there are tangible benefits to our industry we need to assist with change, even if it adds some costs to our businesses.

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