Japan Post Continues Towards Privatization
One of the biggest events in the logistics industry of Japan is Japan Post's move towards privatization, scheduled for October 2007. This move involves a number of changes, and the postal services division has been undertaking a number of activities aimed at ensuring continuous profitability. These activities are regularly appearing in the Japanese press, as well as elsewhere, and can be divided into three areas: the pursuit of international ventures, domestic restructuring, and the introduction of management systems.
International Ventures
In the area of international ventures, an article from FTB Asia that I grabbed before it entered the subscription archives provides an overview of Japan Post's activities. The article is via Sam Chambers, who reports from Tokyo that:
"It was in April 2006 that Japan Post opened its first overseas office in Beijing in an effort to cash in on the growing cargo scene in mainland China," although "Japan Post originally planned to set up overseas branches in Beijing and Shanghai in autumn 2004, but could not obtain Chinese approval."
With the Beijing office under its wings, Japan Post "continues talks with the Chinese to seek its approval for a Shanghai office."
In terms of operational scope:
"The Beijing branch's operations will be limited to research on the Chinese market and the activities of foreign firms operating in China, for the time being. "We picked China as the first base because it is the market we should pay the highest attention to, " said Japan Post senior managing executive officer Yoshiaki Hompo."
In the meantime, the company is further strengthening its international links via new partnerships that represent a key component of service diversification, seeking to manage and leverage more links in global supply chains. This push is evident in the recent "approval from a government panel dealing with its (Japan Post's) protracted privatisation to invest in an air cargo joint venture to be set up by All Nippon Airways, Nippon Express and Mitsui OSK Lines."
The article articulates this joint venture further:
"The joint venture, ANA & JP Express, will begin operations in August between Japan and China. ANA & JP Express will start flying two cargo planes between Japan and China in August, connecting such Japanese airports as Narita, Kansai and Chubu with Chinese airports in Shanghai, Tianjin and Dalian. The joint venture is planning to add a connection between Chubu and Chicago in or after October. It is also considering launching services to Beijing and Seoul."
In terms of the anticipated volume of services to be provided:
"ANA & JP Express estimates cargo traffic volume will be about 30,000 tons in fiscal 2006, 90,000 tons in fiscal 2007, 125,000 tons in fiscal 2008 and 200,000 tons in fiscal 2009."
As the article also comments, "the move comes after Japan Post and Dutch express operator TNT postponed a JV earlier this year, unable to agree on ownership ratios." The fact that Japan Post eventually decided on a joint-venture with a Japanese firm over TNT in the short-term indicates that perhaps Japan Post's management has yet to undergo the transformation necessary to respond to the full spectrum of business opportunities in the global arena. This is not unexpected, but will be interesting to watch as more and more Japanese companies operating abroad are becoming comfortable with letting go of traditional logistics partners based in Japan in favor of foreign firms with more competitive pricing and service platforms.
Domestic Restructuring
Ever since Japan Post has begun its drive toward sustained profitability, the inefficiencies involved in maintaining its current physical network of postal offices has come under review. Although delivery service companies such as Yamato have gone as far as the Japanese courts in challenging this network as potentially monopolistic in its reach and scale, the truth is that Japan Post cannot remain profitable while maintaining such a network. A number of postal offices are located in rural and suburban areas with such a low utilization rate that they will not survive absent government subsidies. In other cases, the large number of urban postal offices cannibalize each other and create unnecessary redundancies in services provided. It is better to sell off redundant physical property and eliminate or relocate redundant personnel and equipment, while increasing investment in transport assets and "hub" office services.
A recent (June 29) article in Yomiuri Shinbun, "Japan Post to Cut Delivery at 1,000 Offices," describes how this is going to be executed in the initial stages:
"Japan Post will abolish mail and package collection and delivery services at more than 1,000 designated post offices so it may integrate the services ahead of the postal privatization scheduled for October 2007, the public postal corporation announced Wednesday. Under its restructuring plan unveiled Wednesday, the number of post offices handling such services, currently 4,696, will be reduced to 3,648 during the period from September to March 2007.
"The remaining 1,048 post offices will continue other kinds of services, such as accepting mail and packages and handling postal savings, postal insurance. The service to accept mail, packages and registered mail after office hours, which is currently handled at all the designated post offices, also will be abolished at 3,608 offices and integrated into 1,088 offices."
In light of these plans, customers will have to adopt a new way of utilizing services:
"Under the postal delivery system, customers can receive mail and packages that they failed to receive at any of the designated post offices...it is expected that customers will suffer inconvenience if the service is abolished at specific post offices."
Japan Post plans to counter any inconvenience by introducing "a system to deliver all mail and packages, in principle, during times specified by customers beforehand. To avoid the quality of service from deteriorating under the restructuring program, Japan Post will also introduce a system to dispatch officials to customers' homes to accept packages and registered mails."
The antiquated nature of Japan Post's service network is illustrated by a comment from one Japan Post senior official who states:
"Japan has continued to provide the same postal service nationwide on the assumption that officials deliver mail and packages on foot or by bicycle. In light of this, it has failed to promote efficiency without consideration of the advantages of modern society--such as the construction of roads and transportation and the development of communication tools."
Introduction of Management Systems
In May, I had the fortunate opportunity of visiting Japan Post's Koshigaya office to see first-hand their efforts to adopt "JPS:" a spin-off of Toyota's Toyota Production System (TPS) and implemented with Toyota's consultation. Because Japan Post is in the logistics services industry (mail and package delivery), it doesn't necessarily produce anything--however, it has to handle a lot of physical items in the process of getting mail and packages from point A to point B. So, the principles of TPS are what Japan Post focused on.
From their most recent annual report:
Japan Post has been striving to improve productivity and security and provide quality services to customers by reviewing the entire process of operations, from the receipt of mail right through to its delivery, and has also made efforts to eliminate waste, irregularities and irrationalities from the system. To achieve this, we have applied JPS to Koshigaya Post Office in Saitama Prefecture since January 2003, and we have divided 1,001 post offices nationwide that were engaged in postal collection and delivery operations into three groups (A, B and C). Through these measures, we are now working on the following measures:
- Thoroughly implementing a custom of tidying up and cleaning
We will thoroughly implement a custom of tidying up and cleaning, which is the basis of creating a comfortable, safe and efficient working environment. - Measurement of workload: standardization of work
We divided the sorting of mail items and other operations into a certain time period (e.g. 15 minutes) so thatwe can get an idea of the working hours needed when we standardize our working process. (see PowerPoint file below for pictures) - Clarifying deadlines and prioritizing work
We will make efforts to perform appropriate work in time and without errors, by attaching flags on transportation containers for mail items (see the photos below), which indicate the work deadlines, and by attaching plates to mail items to separate them into workload units.
We have achieved the following as a result of implementing the target of Fiscal 2004 “10% increase in productivity for Fiscal 2005 (reduction of working hours year-on-year)”:
We have achieved a 9.1% increase in productivity as a whole (10.4% at Koshigaya Post Office; a cumulative improvement of 29.2% since the start of the measures). (Group A: 10.4% (a cumulative improvement of 21.2% since the start of the measures); Group B: 10.7%; Group C: 8.0%). In terms of service quality, we have increased our efforts to be punctual in our operations for sorting parcels and eliminating misdeliveries by attaching flags to transportation containers that indicate deadlines. As a result, misdeliveries were reduced to 67.8% of the previous year’s levels.
For Fiscal 2005, we have designated 108 post offices in 50 areas as core post offices to further promote JPS. Together with neighboring post offices, these core post offices will make determined efforts to achieve the goal of improving productivity, security and service quality through the individual efforts of participating post offices, based on the know-how they obtained through the experience of participating in JPS.
It is difficult to visualize these efforts without pictures. Fortunately, I have some pictures from my visit to Koshigaya (along with several students from Michigan State University for whom I did interpreting). A few of these pictures are in the PowerPoint file below:
As October 2007 is just over one year from now, it will be interesting to observe the progress Japan Post makes over the next few months. I will try to follow-up with any articles from the Japanese press. Overall, this case study is sure to provide some great lessons learned for other state-owned postal service organizations, such as China Post, to benchmark. In addition, these activities should not be ignored by other logistics services firms, and where TPS principles are concerned, logistics services firms should seriously take notice to enhance their own internally directed improvement activities.
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