The Royal Mail Group has been doing very well in an environment that is becoming increasingly challenging, according to its CIO, David Burden. The financial performance of Royal Mail is improving, and this is in part due to cost efficiencies across the business that are being supported by IT.

The organisation is facing some very substantial and public issues, not least its pensions deficit. But the biggest difference is that from 1 January 2006 the UK market was opened up to competitors. “It is a brave new world now,” says Burden. “We are beginning to see the effects of earlier moves, and the measures are being felt on the revenue and nature of the work. Other organisations are now licensed to deliver in the UK and in the same way as in the telecoms market, they have access to our downstream delivery services.

"“It is a brave new world now. We are beginning to see the effects of earlier moves, and the measures are being felt on the revenue and nature of the work”"

David Burden, CIO, Royal Mail Group

“At the same time, Royal Mail is subject to price controls by the government regulator. So we are operating in a very competitive market where there are stringent price controls, a pensions deficit and a need to invest in the business in order to modernise.”

Technology is playing a big role in facing the market challenges, according to Burden. “We are making technology investments to improve the efficiency of the business, using automatic sorting and so on, and in the back office to improve business efficiency.”

But he believes there is another dimension, which concerns the way in which the business of Royal Mail itself is changing. “The business is traditionally about the physical transportation of mail, but it is the information about the transportation of mail that has become increasingly important,” he says.

“For example, in internet commerce providing information-rich services, where we can track and trace deliveries and also improve the quality of the service, is critical.

“For internet retailers the customer experience is not just about the product and price, it is about the delivery too. Big internet players are very anxious to get rich information and address issues as part of their offering.”

The internet has been a double-edged sword for Royal Mail, according to Burden. “Email has changed communications radically, but has also changed the physical side of sending things. E-fulfilment and the direct mail side of the business have exploded. The internet has been an interesting paradox, many traditional parts of the businesses have gone, but there has been a huge growth in others.

“What has emerged is a very complex hybrid, with reverse logistics too where parcels are returned, so the business has changed in nature. There has been a massive rise in the growth of parcels and packages to manage. It is all good exciting stuff.”

Technology is at the foundation of many of these business changes. Royal Mail has introduced an electronic postage product, SmartStamp, and has entered into partnerships with the very large internet players.

Royal Mail has introduced the ability to generate electronic two-dimensional barcodes – or SmartStamps – to speed up this part of the business. SmartStamp has slowly built using subscriptions and is proving very popular with smaller businesses. Royal Mail is also using RFID to track mail flows and a telemetry-based system for its fleet vehicles.

Burden says the organisation also dealt well with the introduction of chip and pin, and has had good progress with putting new accounting systems into its 14,230 post offices. The organisation has also introduced a Track and Trace system for Royal Mail Special Delivery, which handles two million items a week, and has extended this for e-fulfilment, giving an electronic proof of delivery where customers can see a signature online.

Burden says Royal Mail is realising that although its business is based on the physical collection and sorting of items, its supply chain management has to be fully integrated from an information point of view. “Those information flows are just as important as the physical side,” he says.

“There are major challenges in our business, and we are working away at all of them. We are very pleased with the quality of service we have achieved, and are looking at how the information flows, and when things go wrong, why, when and what to do about it.”