Dutch postal operator PostNL has successfully reduced operating costs and improved quality byoffshoring video coding of illegible addresses on letters and parcels to Asia.
Mario Suykerbuyk, Managing Director of Shore, told CEP-Research how the innovative solution cameabout: “In October 2009, we launched a cost-saving programme at PostNL to see if we could optimiseour costs and primary processes. One idea involved video coding mail, using optical characterrecognition (OCR) to automatically read the address on the envelope. We still have around a millionitems every day that have to be coded by hand. Sometimes you can’t read the handwritten address, orthe house number and postcode do not correspond with the address. If you type in the wrongcombination, the letter is sent to the wrong house. It then has to be sent back to the sortingcentre, sorted again and delivered to the right house: a very costly process.”
“We wondered whether we could do it cheaper, centralise it, take it to Eastern Europe or evenoffshore it to Southeast Asia. We explored the opportunities around the globe, starting with a longlist of sixteen potential partners, gradually reducing it to six and later to three. We then testedthese during the peak Christmas season, before finally choosing a provider that really delivers oncosts.”
Following the decision, PostNL set up its wholly owned subsidiary Shore in partnership with SPiGlobal Solutions in the Philippines. Shore digitises a range of hand and machine written documents,from invoices and reply cards (from magazines for example) to special offer forms and envelopes.Video coding services are offered for letters/flats, registered and international mail, as well asparcels. Under the partnership with SPi Global, PostNL offshored its letters and flats to thePhilippine capital Manila.
The video coding solution scans addresses on mail items that cannot be read automatically by thesorting machine and sends this information over a fast and secure data connection to the other sideof the world. Professionally trained data specialists then enter the correct addresses so that thesorting machine can sort the mail properly. This enables PostNL to rapidly increase the number ofaddresses processed by more than 500% within 15 minutes, offering ultimate flexibility.
“We especially benefit from cost reduction, cutting labour expenses by 60 to 70% in comparisonwith those in Western Europe. But what we didn’t expect was the sudden sky-high improvement in ourquality. It was up 3.5% right from day one and went up even further to 8%.” The 8% quality gainmeans that 80,000 more letters a day are sorted correctly. “The cost effect on labour was alreadysignificant, but the cost effect on quality was even better. No matter how much mail there is, wecan always process it,” he said.
What’s more, making better use of video coding capabilities has cancelled out the need for thesorting code previously used to match large-volume letter mail to the information required forautomatic sorting. The initial results show that this new process offers additional advantages,with sorting equipment failures dropping from 7 to 4%. The solution is well adjusted to volumefluctuations, allowing easy handling of volume deviations in daily planning, volume peaks and lowsduring the course of the year, and delays due to weather or traffic. Multiple video coding sitesensure real-time delivery; in just 0.5 seconds images are transmitted to PostNL’s Asian sites witha turnaround time of less than 15 seconds in the online process.
Thanks to the video coding system, PostNL has achieved a total cost reduction of 70% over an18-month period. “We started off with letters and flats. To boost business even more, we are nowoffering our OCR video coding solution to other companies, currently negotiating with variousnational postal operators in Western Europe. We have the infrastructure, we have the web codingplatform and we are now inviting other postal companies to use it so that we can share the coststogether.”
The company also does video coding for parcels. Since June 2011, PostNL Parcels has beencarrying out the video coding for all its Dutch sorting centres in the Philippines and Vietnam.Video coders in Asia enter the parcel address details that the sorting machines are unable to read.The details, transmitted as an image, have to be entered and sent back to the sorting centre in theNetherlands within just 18 seconds. Parcels can then be sorted automatically by machine. Tens ofmillions of parcels will now be coded in this way every year.
“Video coding is a growing business and, despite an overall decline in letter volumes, it islikely to remain stable because C2C and C2B mail is not being affected as much. He adds that Shoreis now cooperating with different companies including big names in the Netherlands and WesternEurope, like Office Depot and market research company GfK.
Suykerbuyk says that Post NL Shore has grown rapidly, now employing thousands of people at threesites in Asia and serving over 20 customers in its first year of operation. The company will haveprocessed over 500 million images in 2011 and Suykerbuyk expects the company’s revenues to nearlydouble in 2012.
Detailed information on the video coding system can be found on Post NL’s website at: www.postnl.nl/shore.
