Canada Post vows to deliver modernization
Canada Post will invest billions of dollars to modernize its postal plants across the country in coming years, says president and CEO Moya Greene.
"We need to look at capital renewal in our company," Greene told the Vancouver Board of Trade in a recent speech. "Our plant equipment is nearly 40 years old."
The capital-renewal program is the first of three challenges facing the Crown corporation, she added, along with more "fully" engaging its workforce of 71,000 people, and improving its focus on the customer.
Greene said Canada Post's management team is now "building the platform" for the next 25 years, and is looking at expanding its traditional networks.
Given the sheer size of the company, the capital improvements must be introduced gradually, she added – hopefully to be funded by Canada Post revenues, which are expected to increase 4.3 per cent this year to $7.2 billion from $6.9 billion in 2005.
But it will take a year, when a capital-improvement plan is expected to be in place, to determine the source of funding and the total cost, she said.
"I don't know the answer to that question (about cost) yet," said Greene. "We're just in the process of turning our minds to: Where do we need to put the renewal? How would we do it?
There are many options available. Many different kinds of postal equipment have come onto the scene in the past 20 years.
"I think it's fair to say, though, it's in the billions."
Greene said the new facilities will include modern sorting equipment and technology aids on a single floor, along with more seamless point-to-point service across the country.
"We're going to skip a couple of generations, because we haven't done anything in 35 years," said Greene, a former executive with TD Securities, the Canadian Imperial Bank of Commerce and Bombardier Inc., who took the helm of Canada Post last year.
Customers will be able to track and trace mail in real time more easily than they can today, she predicted, thanks to technological changes and the transfer of information to a single website. Toronto will also become an expanded parcel hub. "That's the most crucial area, because about 40 per cent of the parcels in the country are going there first."
Canada Post handles 11 billion pieces of mail per year.
The total has climbed back to where it was in 1995-96 after falling to 9.2 billion at its lowest point in 2000-2001.
Once known for often-bitter Christmas-time strikes and half-billion-dollar deficits, Canada Post has been profitable for the past 11 years. It posted a $190-million profit last year.
Greene indicated the proposed changes will also reduce the mail-handling layers, as Canada Post aims to achieve a faster throughput that will enhance profitability.
"A modern parcel hub does not have many levels to it," said Greene. "It's on a single level and the loading docks move directly from one part in and the other part out – in a very smooth and streamlined way.
"So you don't want to see a whole bunch of levels in a logistics company. New hubs for the handling of many items like our company would have far fewer levels than we do."
The company has already announced it will close a mail-sorting plant in Quebec City next year.
Canada Post also plans to expand its online services, especially its E-Post system, which most major banks use to transfer funds. A separate subsidiary, E-Post, has been integrated into Canada Post's flyer business, which generates $3.4 billion per year.
The company is also putting all of its electronic offerings together on its Canadapost.ca website. Greene said Canada Post's challenge is to give customers "a multi-channel" way to receive bill statements and offer new goods and services.
"More and more personal communication is going exclusively e-mail, but business communication has still got a lot of paper attached to it," said Greene. "Statement bills and invoices, for example – that's about half of our business. The majority of consumers still like to receive a paper version of a statement.
"Very few of them, only about four per cent, are satisfied to receive an electronic version exclusively. There will always be a need for paper."
However, Canada Post does not plan to extend delivery to Saturdays as it deals with approximately 220,000 new addresses per year.
"We think that we do very well with the service standards that we have in place," said Greene, adding customers are not asking for Saturday delivery.
Audited results show Canada Post delivers 97 per cent of its mail on time and customers usually don't have to wait longer than an extra day for the tardy three per cent. She said the firm will likely concentrate on capital improvements, workforce engagement and customer focus rather than worry about the small percentage of late deliveries, which are sometimes subject to uncontrollable factors.
During a question-and-answer session following her speech, she refuted the idea that Canada Post is using taxpayer funds to maintain a monopoly on the mail.
"Whatever monopoly Canada Post might have had 20 years ago, or 25 years ago, is a vastly shrunken one today," said Greene.
While Canada Post has an area of the market known as "exclusive privilege," several companies have entered the market and taken over different parts of the value chain, and the Crown corporation's share is becoming ever smaller.
More than half of Canada Post's business is fully competitive and the parcel market is audited every year to make sure the government-owned firm does not have exclusive privilege.
The share of the market that was reserved for Canada Post 25 years ago in order to defray the enormous cost of obligatory service is much smaller today, Greene argued.
The postal service is expected to show a profit again this year, with the Christmas rush, once again, playing a large role in determining the exact net gain.
"We have a couple of months to go – and they're big months for us," said Greene. "We have a lot of seasonality in Canada Post."
(Monte Stewart can be reached at [email protected])
