Dutch snail mail keeps up with the game
Given the sweeping changes he has implemented during the five years he has managed the mail division of TNT, the Dutch post and logistics group, Harry Koorstra appears anything but indecisive.
Speed has been essential in tackling issues that confront mail groups across Europe – how to maintain margins and quality in the face of competition and the decline in postal volumes, largely due to e-mail.
A decade ago, TNT, as it has been known since April, was quick to spot the need to prune costs while also expanding into new services and regions. Yet for all this rapid action, when Mr Koorstra was first offered a job, he took nine months to make up his mind.
It was 1991, and what was then PTT Post had not long been privatised and had still to shake off entirely the yoke of a civil service culture, he explains. It took a direct challenge from Wim Dik, then chairman, to persuade him. "He said: 'If you don't come you are a coward,' " laughs Mr Koorstra.
Having taken the bait and risen through the ranks to the board, running a mail division that processes 17m postal items each day and delivers to 7m Dutch addresses, he has wasted little time ringing the changes.
The latest will see TNT switch the red post boxes and postal uniforms for the Dutch orange that the rest of the group uses. Mr Koorstra acknowledges the emotional pull of the traditional red livery.
However, the savings, in terms of marketing, for example, are compelling and more than compensate for the "limited incremental investment" involved.
TNT delivers 97.3 per cent of domestic first-class mail within 24 hours, a better service level than almost anyone in Europe, says Mr Koorstra.
The flat Dutch landscape and the Netherlands' high housing density makes it easier to deliver post reliably than in the UK, for example. But Mr Koorstra suggests prescience ultimately determined TNT's success compared with the Royal Mail.
"The (UK) system – that is the government, management and the regulator – has been pretty late to introduce a new approach and realise that the mail market will change."
In the early 1990s, the Dutch post group ditched the state-owned "politburo" approach in favour of a Âmarket-led system focused on cost control and service levels and with benchmarks aimed at demonstrating to managers that "by setting high ambitions you get higher quality".
PTT showed global ambition when in 1996 it bought TNT, the express delivery business founded in Australia and then built, via acquisitions, the second Âlargest logistics business in the world by revenues.
When Mr Koorstra took over the mail division, he expected it to lose 20-25 per cent of Dutch mail volumes to competition and e-mail in 10 years. He now thinks it could be up to 30 per cent.
Hence targeted savings, anticipated by 2012, have inched up from Euros 320m to Euros 400m or more, in order to maintain a return on sales of between 22 and 25 per cent.
It means 14,000 of 25,000 full-time mail jobs will be lost or replaced by 20,000 part-time "mail deliverers", who are 50 per cent cheaper to employ. Mr Koorstra says there are plenty of people, particularly women, keen to work for 10 per cent above the minimum wage at hours that suit them.
It does mean the post arrives later, often after the deliverer has dropped the children off at school. But Mr Koorstra says customers are happy to wait an hour or two to keep the tariff low – at Euros 0.39. "And quality has actually improved," he adds.
TNT has proved adept at spotting opportunities in data-related services – part of the shift from physical to digital mail – of which the announcement this month of a deal with Dutch banks to introduce a digital payment slip for bills is the latest example.
"You cannot compensate everything from cost cutting," Mr Koorstra says. "You have to grow elsewhere." Next year TNT will handle Euros 600m in revenue terms of mail for corporate customers outside the ÂNetherlands.
It has been a front-runner among European postal operators trying to acquire minority stakes in liberalised postal services.
While liberalisation is moving slowly, it remains "very attractive", Mr Koorstra says. "Take Germany.
It is a market of 80m Âinhabitants, 36m households – a Euros 12bn market in mail. Whether (liberalisation comes in) 2007, 2008 or 2009, I don't care . . . A market share of 20 per cent is a modest goal."
