Canada Post stamps out letter mail erosion with SAP

At the same time Canada Post was facing the Y2K crisis, it had another pressing concern: letter mail erosion. Executives at Canada Post predicted that the Internet would seriously affect their business; to date, letter mail in Canada has decreased 1.5 per cent per year over the past three years.

“”Considering 50 per cent of our revenue and more than 50 per cent of our gross margins were based on letter mail, it meant letter mail erosion would have a negative impact on our bottom line,”” says Philippe Lemay, executive vice-president of business development with Canada Post Corp. “”In addition, the public saw Canada Post as outdated and inefficient, and customer satisfaction was low. While dealing with the Y2K crisis, it became apparent that it would have to completely overhaul its IT infrastructure.””

Replacing legacy systems

Now, the public corporation is wrapping up a four-year SAP implementation that has cost $500 million and eliminated 1,300 jobs in areas such as administration. The business processes were broken, says Lemay. “”If we wanted to make a price change across a product line, it would cost $1 million and take nine months.””

An analysis revealed that Canada Post consisted of a hodge-podge of unconnected technology. “”We had to replace 130 legacy systems,”” says Lemay. “”It was a mountain of work just to understand the existing system.””

As a result, executives developed a mandate that involved reducing IT costs and implementing world-class IT solutions to make sure Canada Post played a key role in the Internet age.

In November 1999, Canada Post launched E-Post to replace its legacy systems with a single enterprise system. This would provide integration and standardization, address long-standing inefficiencies and essentially change the way the public corporation did business.

Executives saw this less as a technology upgrade than a business development project. “”If we didn’t, we’d leave huge opportunities on the table,”” says Louis O’Brien, vice-president of business transformation and sourcing management with Canada Post. “”We went with SAP because it’s anal-retentive,”” he adds. “”It’s totally integrated.””

Release 1 took place in July 2001, and dealt with Order-to-Cash improvements. The corporate Web site was overhauled in mid-2001. Now, consumers can access the self-service Online Business Centre to track packages, calculate rates and purchase products, while commercial customers can place orders and create shipping documents online using Electronic Shipping Tools. Release 2, in January 2002, involved new procurement, financial processes and human resources for 15,000 employees.

In October 2002, it rolled out a customized version of SAP’s Event Manager, “”a really slick singing-and-dancing track-and-trace system where you can specify a service option embedded in a barcode,”” says O’Brien.

This includes new barcodes, handheld devices that capture customer signatures, more accurate sizing of parcels and a centralized database.

Customers are now able to find out what’s happening with their mail at every stage of delivery.

Release 3, in January 2004, involved human resources refinements for an additional 50,000 employees, automating payroll and providing employee self-service. So far, 69,000 employees have been given self-service access. Of that number, 64,000 have user IDs. Around the same time, supervisors were given portable digital assistants to provide easier access to information such as seniority lists, collective agreements and employee schedules.

Change management issues

But there were challenges along the way. “”We had to cut through employee resistance,”” says Lemay.

Adds O’Brien: “”The thing we missed is the cumulative impact of more change than the poor post office has seen in the past 150 years, especially front-line management.”” As a result, Canada Post spent $100 million on change management. And it’s in the process of rolling out an e-learning project over the course of this year, at a cost of $10 million, to provide online training to employees.

Canada Post has more than 7,000 retail outlets, so launching a new retail product is a huge problem. Rural employees have to be sent to cities for training. The e-learning initiative is expected to reduce launch times from six months to six weeks — or even six days, according to O’Brien.

Canada Post’s customer satisfaction index (CSI) is improving, from 26 per cent to 40 per cent — but it still has a way to go. “”(Customers’) reaction is, yeah, you did improve things, but there are still a lot of pain points,”” he says. Its next round of reengineering is meant to deal with these pain points — it’s aiming for 80 per cent on the CSI.

Benefits are expected to come in the form of savings: an independent review concluded that the project will eventually result in an ROI of at least 26 per cent. Beyond this, Canada Post has a global agenda. It has created InnovaPost, with a mandate to offer IT services to other postal agencies around the world. (CGI owns 49 per cent; Canada Post owns 51 per cent.) “”We want to resell that intellectual property internationally,”” says O’Brien. One country is building an RFP to do its own business transformation; InnovaPost may be part of that bid, according to O’Brien.

Robert Courteau, president and managing director of SAP Canada, says Canada Post is a good example of how the SAP architecture can be extended. “”They’ve used Event Manager technology to develop the next generation of track-and-trace,”” tuned to meet the specific requirements of the postal and courier industries, he says. Now the hope is to sell the solution internationally. “”They’re at the point now where they can take more of a holistic look at how the technology can work for them,”” he says.


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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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