Mail Network Optimization Project

1. Mail Network Optimization Project Interaction with the Staff Side New Delhi, November 23, 2010

2. The Background Impact • Inconsistent quality of service • High operational costs • Eroding customer base External Factors Systemic Issues • Declining mail volumes • Competition from Domestic and Inter-national players • Absence of regulation • Change in mail profile • Customer Demands(e.g. Track & Trace) • Difficulties of existing mail network vis-à-vis changed mail profile • Low level of IT induction in mail processing • Low productivity and ageing workforce • Delivery inconsistencies and visibility • Lack of customer focus

3. The Scope of Project "Get the core right" • Optimise India Post's network from collection to delivery • Standardize processes with focus on significant quality improvement & reduction in network complexity • Put in place an effective performance measurement system throughregular reviews SCOPE "Modernise the look and feel" • Improve the ambience of mail offices • Upgrade processing facilities and improve working conditions for employees • Make staff and customers proud of being associated with India Post

4. The Approach Start with limited product range for prioritised cities 1 • Early pilot and broad involvement of field units • Rigorous monitoring Increase the product range for these prioritised cities 2 PROJECT APPROACH Expand to all India for all products 3

5. 2 3 1 The Project Plan All India 2012 Roll-out 2011 Geographical reach Prioritycities "Wave 1" 2010 Scenario-based designand pilots Scenario-based design Speed Post & International mail Ist class IInd class Product range Approach reflects a strong need for immediate tangible impact

6. Wave 1 Wave 2 Wave 3 8 5 6 Cities in scope Timeline Project Waves for Speed Post • Mumbai • Delhi • Kolkata • Chennai • Bangalore • Hyderabad • Noida • Gurgaon • Pune • Mysore • Howrah • Bhopal • Trivandrum • Chandigarh • Nagpur • Ahmedabad • Patna • Kochi • Lucknow • March-July • August-September • September-November SOURCE: Mail Network Optimisation Project

7. Network optimisation: Key Operational Areas (Speed Post) • What is the right network topolgy? • How many processing SPCs do we need within one city (and where)? • How many sorting hubs do we need across cities (and where)? 1 • What are the right processeswithin the facility? • How to ensure standardisation? • How to maximize productivity and quality? 2 • What is the right network schedule? – Which cut-off timesand processing windows at each processing step across the value chain would facilitate next day delivery? 3 • How to measure India Post's performance? • How is the share of next day delivery (D+1)? • Track & Trace: Are 100% scans ensured across the network? 4 Optimization of delivery in wave 2 (1st class mail) as SpeedPost only accounts for ~10% of delivery volume SOURCE: Mail Network Optimisation Project

8. Initial Impact of the Project in terms of Operational Improvement Easier sorting – Ensure minimum multiple handling 1 Less workload – reduce no. of bags & missorts between different locations Better equipment – Ease of working for staff at SPCs with new equipments 2 Higher throughput – Ensure higher processing with improved process design Streamlined workflow – by having optimised inflow of mails in the processing centers 3 Prioritized processing – Ensure processing prioritisation based on the time of the day for maximum connectivity Keep everyone informed –Regular interaction and display of SPC's daily performance, suggestions and feedback encouraged 4 Training & Incentives – Incentivise high performers and help all staff with newly developed training modules SOURCE: Mail Network Optimisation Project

9. The project has witnessed significant changes Hard facts Soft facts Changes in day-to-day life Financial improvements Quality/performance improvement Complexity reduction Proud to be part of India Post • International EMS: IT interface fixed (19:59 timestamp) ~Rs. 1.5 crore revenue recovery • D+x performance in 6 metros improved by ~1.0 day over last months • Productivity and throughput improved across centres by more than 50% • Comprehensive set of 18 KPIs for Speed Post developed, scorecards and VCs institutionalised • Detailed Speed Post Manual developed to ensure standardi-sation of processes across India • Quality management cells institutionalized • Network schedules in 6 metros revised using comprehensive model • Instructions to merge international EMS inbound network with Speed Post issued • Multiple sorting at SPC "outlets" reduced, e.g., Bangalore (6 sub hubs), Mumbai (GPO volumes) • Network topology model developed with revision of sorting hubs from 315 to 89 • Integrated SpeedPost database being developed • Directorate rigorously monitoring the progress through score card • All CPMGs involved (focus until date on 8 circles) and actively participating • Performance dialogues initiated on a daily basis across the organisation • New equipment tested and introduced to improve working conditions (e.g., roller containers, revised sorting cases, roller trays, bag scissors) • Project has brought comprehensive look at the all the stakeholders • Comprehensive Look and Feel workstream initiated and institutionalized (run by BD team) 1 3 9 13 18 19 14 10 4 15 5 20 11 16 6 12 7 17 8 SOURCE: Mail Network Optimisation Project

10. Number of final selections at each Speed Post Centre Number of bags closed across Speed Post Centres Number of Speed Post Centres 315NSPCs Sorting complexities necessitated changes in the operational network for Speed Post 314Selections 315  314 = 98,9101 1 Assuming that there is at least one mail from every NSPC to every other NSPC SOURCE: Mail Network Optimisation Project

11. Input components of the network topology model Inputs Outputs Locationinformation D+xpercentage Processing Volumedata NSPC-POmapping Simulationof mail flow in the network For differentnumber of NSPCs Air/roadconnections Volumeflows Cut-offtimes Throughputrequirements SOURCE: Mail Network Optimisation Project

12. Basic NSPC and Post Office information Data type Source Data characteristics • List of NSPCs and delivery POs covered by Speed Post taken from the official Speed Post Directory • Consistency checks on NSPCs done by BD Directorate • 315 NSPCs • delivery POs with unique pin codes • Mapping of POs to corresponding NSPCs List of NSPCs and Delivery Post Offices1 • Classification of NSPCs done based on population • Population figures taken from 2001 census reports • Urban: Population >5 lakhs e.g., Delhi, Mumbai • Rural: Population <5 lakhs e.g., Pauri, Vashi Urban/rural classification of NSPCs 1 SSPCs have not been considered for comprehensively modelling as they do not play a role in arriving at an optimal NSPC – PO mapping SOURCE: Mail Network Optimisation Project

13. 85% of data is usable which is sufficient for the purpose of modeling Post Office coordinates and booking/delivery volume Percent of average daily booking volumes Coordinates (Latitude / Longitude) 12.0 All coordinates Unique coordinates Duplicate1 coordinates Questionable2 coordinates Missing coordinates Used for modelling as is PO coordinates assumed to be same as NSPC coordinates Note: 100% = 10 million per month • Booking/delivery volume information at the post office level is used to split the “from-to” NSPC volume matrix (previous page) between the POs • For post offices for which no volume information is available, the average daily booking and delivery volumes are assumed to be 1 Booking / Delivery Volumes • Coordinate • Volume : http://itouchmap.com/latlong.html : Jan - Apr 2010 PO level data from Speed Net Source 1 Duplicate coordinates exist since India (specially rural areas) is not yet completely mapped by latitude/longitude providers 2 The distance between PO and corresponding NSPC is more than 200 km as per the coordinates SOURCE: Mail Network Optimisation Project

14. h Air connections • List of ~70 domestic airports in India picked up from a global list of airports • Latitude/longitude information taken from http://itouchmap.com/latlong.html Text Airports Text • List of 6,633 domestic flights collected from airlines • Flights mapped to airports in the above airport list Flights Airport category Loading time, hours Unloading time, hours Example Loading/Unloading Times Airports classified in 3 categories based on domestic cargo traffic A 2.0 1.5 Bangalore B 1.5 1.0 Bhopal C 1.0 0.5 Dibrugarh SOURCE: Mail Network Optimisation Project

15. 35 km/hr 20 km/hr 1.25 1.45 Urban Urban Rural Rural Road connections Factor Assumption Reasoning • Air distances calculated based on latitude/ longitude information • Air distances multiplied by detour factors Detour factor • Standard practice for distance calculation • Detour factors taken based on sample calculations for a few NSPCs Distances • Separate MMS speeds assumed for rural and urban NSPC-PO travel • All NSPC-NSPC travel is assumed to be rural • Based on inputs from the field MMS Speed SOURCE: Mail Network Optimisation Project

16. 16:00 hrs 19:00 hrs 09:00 hrs 13:00 hrs Scenarios Metros Rest Cut-off times (1/2) Parameter Explanation Assumption Reasoning • Time at which MMS vehicles leave booking post offices to take articles to origin NSPCs • All articles booked after this cut-off are assumed to be booked the next day • Majority of post offices do not work beyond 16:00 hrs but there are a few post offices which offer booking up to 19:00 hrs2 or later Cut-off from POs • Latest time by which MMS vehicles carrying articles from the destination NSPCs reach the delivery post offices • Articles that arrive at the delivery post office after this cut-off, will not be delivered the same day • Second delivery rounds have been introduced in the 6 metros • Only single delivery round is feasible in rural areas because of long distance Cut-off to POs1 1 MMS vehicles leave the destination NSPCs 3 hours before this cut-off i.e. at 10:00 hrs for urban POs and at 06:00 hrs for rural Pos 2 Only for 6 metros which have 2nd delivery round. 1900 cut off doesn’t mean commitment to customer. Not all mail booked till 1900 would be delivered in D+1 SOURCE: Mail Network Optimisation Project

17. 20:00 hrs 01:00 hrs 21:00 hrs 02:00 hrs Options Cut-off times (2/2) Parameter Explanation Assumption Reasoning • Time at which articles leave origin NSPC to be taken (by flight/road) to destination NSPC • Articles unable to be processed at the origin NSPC by this cut-off, will not be connected on the same day • Right cut-off time can vary depending on number of NSPCs and hence need to be optimized Cut-off between NSPCs A processing time of 120 minutes is assumed at both origin and destination NSPC Articles need to arrive 2 hours before the cut-offs to be able to get processed and connected the same day Processing time  SOURCE: Mail Network Optimisation Project

18. Outputs of the model Inputs to the model Working of the model Contents

19. 40 Scenario 1 Scenario 1 Output of the network topology model – Scenario 1 Configuration Comparison ‘D+1’ % Network complexity Quality Percentage ‘D+1 plusD+2’ % No. of NSPCs • Cut-off from POs : 16:00 hrs • Cut-off between NSPCs : 21:00 hrs • Second delivery round : for all urban POs 1 Measured in terms of number of bags closed in a day assuming 1 bag from every sorting hub to every other sorting hub SOURCE: Mail Network Optimisation Project

20. 70 Scenario 2 Scenario 1 Output of the network topology model – Scenario 2 Configuration Comparison ‘D+1’ % Network complexity Quality Percentage ‘D+1 plusD+2’ % No. of NSPCs • Cut-off from POs : 19:00 hrs • Cut-off between NSPCs : 24:00 hrs • Second delivery round : for all urban POs 1 Measured in terms of number of bags closed in a day assuming 1 bag from every sorting hub to every other sorting hub SOURCE: Mail Network Optimisation Project

21. Scenario 3 Scenario 1 Output of the network topology model – Scenario 3 Configuration Comparison ‘D+1’ % Network complexity Quality Percentage ‘D+1 plusD+2’ % No. of NSPCs • Cut-off from POs : 16:00 hrs • Cut-off between NSPCs : 21:00 hrs • Second delivery round : for POs in the 6 metros 1 Measured in terms of number of bags closed in a day assuming 1 bag from every sorting hub to every other sorting hub SOURCE: Mail Network Optimisation Project

22. 60 Scenario 4 Scenario 1 Output of the network topology model – Scenario 4 Configuration Comparison ‘D+1’ % Network complexity Quality Percentage ‘D+1 plusD+2’ % No. of NSPCs • Cut-off from POs : 19:00 hrs • Cut-off between NSPCs : 24:00 hrs • Second delivery round : for POs in the 6 metros 1 Measured in terms of number of bags closed in a day assuming 1 bag from every sorting hub to every other sorting hub SOURCE: Mail Network Optimisation Project

23. 80 45% 7% 140 48% 20% 310 51% 100% Deciding the ‘right’ number of sorting hubs ILLUSTRATIVE No. of sorting hubs Structural quality1 Operational complexity2 ‘Right’number of sorting hubs? …will be compensated by delays due to increased operational complexity Better quality due to improved network structure… Factor ~ 3.0 Subjective trade-off between structural quality and operational ease 1 Measured in terms of ‘D+1’ % as per the network topology model 2 Measured in terms of number of bags closed in a day assuming 1 bag from every sorting hub to every other sorting hub SOURCE: Mail Network Optimisation Project

24. Other outputs provided by the model • List of sorting hubs • Mapping of post offices to sorting hubs • Expected daily volumes at sorting hubs • Volume flows between sorting hubs • Expected throughput requirements at sorting hubs Note: The above outputs are provided for specific configurations SOURCE: Mail Network Optimisation Project

25. New Speed Post Operational Network • 89 Sorting Hubs • Sorting hubs: Location and number arrived at through a comprehensive modelling • Only Sorting Hubs to close bags for each other, only a few intra-Circle hubs allowed • Booking interface not reduced • Overall expedited processing, transit and delivery time, reduced sorting complexity (back-routing to a small fraction of mail notwithstanding) SOURCE: Mail Network Optimisation Project

26. Key Performance Indicators for Speed Post Performance Management: Fortnightly Review through VCs KPI What does it do? Transit analysis within city Measures speed and reliability of processing of Speed Post articles from booking to delivery 1a Transit analysis across city 1 1b D+X reports Time per leg of transit within city 1c Time per leg of transit across city 1d Scans compliance in the entire network Measures for each processing step whether articles got scanned as prescribed 2a Scan com-pliance reports 2 Scan analysis per leg of transit within city 2b Scan analysis per leg of transit across city 2c Measures for international inbound article the efficiency of movement at every step before merger with Speed Post Percent of F-scans in SpeedNet vs. F-scans in IPS1 3a Inter-national reports 3 Percent of F-scans in IPS vs. D-scans in IPS 3b Share of SpeedNet Delivery scans vs. IPS F-scans (TBD) 3c Articles processed per hour per FTE Supports achieving better D+x and scan performance 4a Staff absenteeism 4b 4c Share of bags without bag labels 4 4d Share of articles not processed in SpeedNet Support-ing KPIs 4e Share of articles closed after cut-off time 4f Share of missorted articles 4g Share of articles with missing pin codes 4h Share of articles not dispatched same set SOURCE: Mail Network Optimisation Project

27. System based Performance Report: Sample web page SOURCE: Mail Network Optimisation Project

28. Sample Circle Score Card SOURCE: Mail Network Optimisation Project

29. NTD D+x of 6 metros Average of full month, in days Impact in terms of improved transit and delivery performance 3.57 -1.01 days 2.86 2.69 2.60 2.56 December May June July August 2009 2010 SOURCE: Mail Network Optimisation Project

30. To ensure sustainability, a Speed Post manual has been developed Speed Post Manual Objectives • A relevant document for Speed Post operations across the country • To help achive reliable, fast, and standardised Speed Post operations • Modular approach allows for flexible updates to keep the Manual up to date Processes within facilities Performance management Network topology Network schedule How many processing SPCs should exist in a city? How to ensure standardisation and maximise throughput and quality? Which are the right cutoff-times and processing windows to allow for maximum next day delivery? How to use the to ensure constant performance monitoring and improvement? SOURCE: Mail Network Optimisation Project

31. Incentives for good performers being planned through training Recognition of good performers Training at Bangkok for SPC Managers, ASPs Find out need for training Train people to help them to also become star performers Recognition Focus and training SOURCE: Mail Network Optimisation Project 30

32. Look and feel Branding Infrastructure Technology Recognition and training The "look and feel" Ensure uniform brand/appearance across locations Develop standardised and consistent, interior and exterior of the building and supporting infrastructure to the line team Decide on the new tools and technologies to be used and also on how do we upgrade the exiting ones to ensure faster, better services Develop scheme for recognising star circles/ performers Ensure 100% trained staff on field SOURCE: Mail Network Optimisation Project

33. 1 Speed Post update 2 Approach for First Class

34. 1 2 3 First Class Mail Network need a revamp as well Volumes and revenues in First Class Mail are on a declining trend (- 20 to - 25% over the past 5 years) The context for change Current performance does not match customer expectations, they expect a substantial improvement in D+x First Class Mail offers untapped potential that India Post could capture with high-quality network SOURCE: Mail Network Optimisation Project

35. First class accounts for ~63% of mail volumes and ~34% of revenues, but is on declining volume and revenue trends Share of traffic and revenue Development of First Class over time Crore items (%), 2008-09 Volume (crore) Unregistered Registered Postal 654 (100) 579 -5% p.a. First class mail 413 (63) 498 496 Second classmail 150 (23) 561 465 460 481 478 449 443 International 17 (3) 18 18 17 17 16 Speed Post 74 (11) 2004-05 2005-06 2006-07 2007-08 2008-09 INR crore (%), 2009-10 (Projected) Revenue (INR crore) 1 Postal 3,436 (100) -4% p.a. First class mail 1,178 (34) Second classmail 1,215 (36) International 307 (9) Speed Post 736 (21) 2004-05 2005-06 2006-07 2007-08 2008-09 1 Revenue figures are for First Class and Second Class Mail as they are not separately tracked SOURCE: Mail Network Optimization Project, Book of Information 2008-2009, MIS reports, Costing department

36. Bulk mailN = 38 (bulk) Unregistered mail N = 51 (non-bulk) Registered mailN = 69 (non-bulk) Customers are aware of India Post’s insufficient performance and expect improvements in the range of 2 to 4 days for delivery Actual performance1 Perceived performance Expected performance 3.5 3.4 N/A TD delivery 2.5 2.5 2.9 2.0 1.8 0.8 1.5 1.6 1.7 4.8 3.5 N/A NTD delivery metro to metro 2.8 2.8 2.9 2.8 1.6 0.7 2.0 1.9 2.2 6.5 4.2 N/A NTD delivery metro to non-metro 3.2 3.3 3.5 4.0 1.7 0.6 2.5 2.5 2.9 1 Performance based on test-letter program conducted by Project Team from 31/08/10 to 06/09/10 (total sample size: 438, of which 238 unregistered letters and 200 registered letters) SOURCE: Survey of 120 retail customers and 38 corporate customers (30/08/2010 to 08/09/2010), Project team test letter program

37. Untapped growth potential can be captured … …by leveraging India Post’s unique and large network India Post is in a good position to capture future growth opportunities in case it can turnaround its First Class mail business • Indian mail market is underpenetrated with Indians receiving less than 10 mail articles/person vs. 200 articles/person in Germany and 600 articles/person in US • India Post has a strong network with ~155,000 post offices, which means that with a ratio of one office for ~7,000 Indian citizens it provides a very dense service infrastructure • Majority of ordinary non-bulk mail is posted through letter boxes. With ~685,000 letter boxes across the country, India Post provides a wide network Capturing the growth opportunity in the future will only happen if quality is improved, which will require an operational transformation of the First Class product segment SOURCE: Mail Network Optimisation Project

38. Main differences between First Class and Speed Post • Higher fragmentation of network (more facilities, less concentrated volumes) • Higher intra-city complexity (more facilities, less standardized flow) What is the right network topology? 1 • Higher planning complexity (multiple transport modes involved) • Lower planning capacity What is the right network schedule? 2 • Relative importance of processes within sorting facilities lower in First Class • Relevance of sorting automation and of improvements to delivery preparation higher in First Class (higher volumes) What are the right processes? 3 • Lack of objective data hinders performance measurement • Low performance management orientation and lack of consistency of existing reports for unregistered mail How to measure India Post's performance? 4 For First Class, we will focus on the same elements as for SpeedPost, while recognizing differences NOT EXHAUSTIVE Text Text SOURCE: Mail Network Optimisation Project

39. Continued support on Speed Post Proposed approach for First Class wave – Initial efforts will focus on topology (country-wide and intra-city) and network scheduling Sep-10 Oct-10 Nov-10 Dec-10 13 20 27 04 11 18 25 01 08 15 22 29 06 Build preliminary topology model Build comprehensive topology model Define facility for consolidation1 in the 6 metros “Getting the core right” in country-wide and intra-city topology is a prerequisite to achieve long-term impact as it will create the basis on which scheduling and process improvements can be built on and sustained Define optimal Network Schedule (between 6 metros) Processes – Build First Class manual based on SpeedPost Manual Processes (delivery) – Identify improvements in delivery preparation Processes (sorting) – Implement First Class manual and develop additional improvements in consolidated facility Codify best practices Build KPI architecture based on SpeedPost and redesign test-letter program Develop strategy for sorting machines SOURCE: Mail network optimisation project

40. First Class Mail Network Optimization: Study in Progress • Study of mail profile in 6 cities currently undergoing • Mapping of P.O.s to mail offices undertaken • Level I and II sorting offices being planned • Delivery Office process optimization pilot being undertaken in metro cities SOURCE: Mail Network Optimisation Project

41. Any questions or comments?