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Network Revamp Delivers for Postal Service

BCG helps a postal service make fundamental network design decisions quickly and with a high degree of confidence.

A national postal service was grappling with the same challenges faced by many of its peers throughout the world. Demand for letter services were declining sharply, with forecasts warning of an 11.4% annual decline by 2019. At the same time, new regulations significantly limited the options for comprehensive reform. Adding to its problems, the postal service faced significant fixed costs, which represented approximately 80% of its operations.

With help from BCG, the postal service developed reform plans that included a shift to a two-tier service model, a new pricing approach, and increased automation, which would lead to the shutdown of the separate letters network.

BCG helped the postal service create a detailed design for the new end-state operating network. It also created a suite of integrated models to design the new network structure and assess the financial benefits and required investments. The service also developed a systematic view indicating how specific changes in the network structure would affect each stage of the delivery chain and what the impact would be on financial performance and costs.

The postal service is now reaping the rewards of its new strategy. The project has allowed the service to make fundamental network design decisions quickly and with a high degree of confidence. It focused the organization on optimizing the network structure and fully understanding cost and service level impact of design changes. As an immediate result of the project, the service launched a comprehensive investment program to implement a fully automated sortation solution.

The organization continues to use BCG models and tools for ongoing refinements of its network design. The overall program is targeting benefits of several hundred million dollars.

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