Problem When we were visiting the Mong Kok Post Office, the manager told us that the seasonal

demand is the issue that concerns her most. There is significant increase in demand in airmail and air parcel service during the peak season, which between November and December, because of Christmas holiday. This results in understaffing during peak season and overstaffing during the non-peak season. To address the issue, she currently has two effective measures: having additional staffing from the reservation pool of the main office and restricting the staff taking leave during the peak period. From the post office visit, we knew that the airmail service is one of the most key services of Hong Kong Post. Moreover, most of the revenue of Hong Kong Post comes from its mailing service, especially its airmail service, which contributes more than half of its income (i.e. 53% in 2008/2009 financial year). Therefore, we start investigating the performance of Hong Kong Post airmail service. When we look into the whole air mail and air parcel service industry, we find that the competition is keen. FedEx, DHL and UPS are key players in the industry and are known to provide high quality delivery service. S.F. Express is a delivery firm based in Mainland China and recently starts providing airmail and air parcel service in Asia. Hong Kong Post also provides surface mail and surface parcel service. If budget is more of a concern than delivery speed, surface mail can be a better option than Hong kong Post airmail service. In addition, Hong Kong Post provides two kinds of airmail services: Express and Speed post. Since the Speed post service targets at the same market as DHL, FedEx, UPS and S.F. Express, we will only consider the Speed post service in the project and refer it as Hong Kong Post airmail service. Based on the airmail rate tables and calculators from the companies sites, we collect the estimated shipment charges and estimated transit time for several countries. The following tables are our findings for sending 1kg non-document general items (shipping value $100) overseas:
FedEx Service used US Canada Germany UK Australia Korea Malaysia DHL UPS S.F. Express Worldwide Express 249 / / / / 128 128 HK Post Speedpost Surface Mail Surface Mail 87 116 157 152 122 93 99

FedEx DHL UPS International Express Express Priority Worldwide Saver 536 391 114 536 391 483 582 516 583 582 516 583 406 359 379 275 244 281 275 250 281

213 226 233 236 198 129 132

FedEx

DHL

UPS

S.F. Express

HK Post

Surface Mail

US 1 1 1 2-3 2-5 25-40 Canada 1 2 1 / 2-8 30-50 Germany 1 1 1 / 1-2 25-45 UK 1 1 1 / 2-5 30-45 Australia 2 2 2 / 3-4 20-35 Korea 1 1 1 1 1-4 10-45 Malaysia 1 1 1 1-2 2-6 10-30 An efficient frontier diagram is drawn based on the above tables. Responsiveness is the delivery speed while productivity is the price per delivery.

From the above efficient frontier diagram, Hong Kong Post, S.F. Express, UPS, DHL and FedEx are on the same efficiency frontier line while the surface mail service is in another. Therefore, Hong Kong Post airmail service is as competent as the key players and much better than surface mail service. However, Hong Kong Post suffers from serious delays during Christmas in recent years. This leads to great dissatisfactory to the customer. There are two main reasons: the rise of e-trading and new policies introduced. During recent years, e-trading becomes more and more popular to Chinese and Hong Kong people. Online shopping websites, such as eBay, allows Chinese to sell their goods to foreign countries. On the other hand, more and more Hong Kong people buy goods from Chinese online shopping site like Taobao and resell them to foreigners. This contributes significantly to the demand of bulk airmail and air parcel service. Moreover, Hong Kong Post agreed to help China post office to deal with the huge amount of airmail in 2011. As there are more and more mails and parcels from Mainland China shipping to foreign countries passing through Hong Kong, which further increases the arrival rate of the mails and cargos into Hong Kong Post airmail service.

There are two new policies introduced recently affects airmail service significantly. There has beena sharp rise in number of parcels with suspected prohibited items from 38 cases in January to 337 cases in August. Most of them were electronic devices containing lithium batteries and perfume. Hence, a new policy has been introduced requiring all airmail items undergo X-ray screening at the Air Mail Centre. This increases the processing time of the mails and parcels. Since the operating cost increases, especially in staff costs, air conveyance costs and terminal dues payments, it is estimated that the reserve of the Post Office Trading Fund would be depleted after 2015, which will serious affect the operation of Post Office. A price rise was then introduced and was effective on 1st October, 2013. The postal rates have a 20% increase in average. For example, airmail service with 100g was originally priced at $70 and now costs $87, which has about 25% increases.

The above diagram shows that the mentioned events bring great impact on Hongkong Post airmail service.It falls onto the efficiency frontier with surface mail, this indicates a significant drop in service quality. Therefore, in this situation, Hongkong Post cannot compete with other key players in the industry. The situation is worsening and there are severe delays recently: 1. An online trader had several delay notices to his customer about the airmail delays last year Christmas. 2. An online computer accessories trader had a 20-day delay when he shipped his products to Europe this August. 3. A UK customer missed the track of his package for 17 days this September. Hence, the problem is how to reduce the delay of the airmail and air parcels in order to restore the competitiveness.The following diagram is the KPI diagram of Hong Kong Post. The arrows indicate how the events affect each parameter.

Hongkong Post

Local Mail

International Mail Profit

Other Services

Cost

Volume

Price

Fixed - Rent - Equipment

Variable - Salary

Demand

Capacity

Idle time - Air conveyance costs - Terminal dues payments

Process time

Since the cost, demand and price are affected by the incoming events and trends, we should focus on the capacity area, i.e. reduce the process time so as to reduce the delay.

SUGGESTED SOLUTION A description about the top THREE ideas! Empirical support: what do you expect to change! Table comparing the ideas relative to criteria A description of the question that you want to have answered by the experiment! Check list! I have generated at least THREE ideas for improvement! These ideas are focused and actionable! The ideas are grounded on the previous analysis! I have thought about the criteria that I will apply to select the best Improvement idea! I have discussed the ideas with the company In an operation, problems can be divided into three different groups. They can be sorted as waste, variability and inflexibility (Jiheng, p.4, 2013). Hong Kong Post Office have problems in delay in peak times of demand in service and unpaid mail as new postage fee mostly as it is mentioned in problems part. In this report, solutions for delaying in peak times of demand are going to be provided and discussed. There are lots of reasons for delaying in peak times in Hong Kong Post Office due to airmails that includes dangerous materials like perfumery, lighters and lithium batteries or misspelled addresses of recipients. Hence, delay in delivery problem can be split into two groups in terms of solution types. First problem is about the delay due to dangerous materials such as video cameras, walkie talkies/2-way radios, GPS devices, radio-controlled toys, Bluetooth headsets, smart phones/mobiles, laptop computers, shavers, power drills, tablets and DVD players; Liquid beauty products, including fragrances, colognes, lotions, and toner; and items with liquids such as electronic cigarettes and lighters (Tamebay, 2013). There can be possible solutions to make people aware of why these kinds of materials are not allowed. In my opinion, there are possible three ideas that can solve the delaying of airmails in peak times. First of all, it can be created a new form for new customers to fill up in their first times in using Hong Kong Post Office. This additional part of form has to declare that customer is aware of dangerous items, which are not allowed to send via airmail and make airmail process busy due to X-Ray detection controls. The form can be as the image below: I agree that none of my personal sending are not going to include such items like video cameras, walkie talkies/2-way radios, GPS devices, radio-controlled toys, Bluetooth headsets, smart phones/mobiles, laptop computers, shavers, power drills, tablets and DVD players; Liquid beauty products, including fragrances, colognes, lotions, and toner; and items with liquids such as electronic cigarettes and lighters. In case of mails that include such items including materials that are mentioned above, I will be in charge of bill even my mails arent reach the recipients. Name and Surname: . Signature: ..

The sentence that is marked by red is important since we were asking is there any penalty fee for customers who put dangerous materials into airmails and leads to keep delivery process busy and the answer was no! Therefore, in my opinion, the last sentence has to take a place in this form to meet the service needs of Hong Kong Post Office since even the airmail is not delivered there are lots of effort of many employees in this process. Secondly, another solution can be adding new visual messages on daily broad cast streaming on LCD TVs in each Hong Post Branch Offices. These visual video clips and messages should include the results in case of these dangerous materials are going to be sent via airmail by showing demographic figures. In recordings, speaker should talk about the fact that materials including lithium can cause a shortcut and it can lead to fall the flight or fire. These kinds of records are going to help people to figure it out why these kinds of materials are dangerous. This solution is a softer transition policy compare to first one with new form. However, making people to sign this kind of a document are going to make people more awake about dangerous material and this leads to less delaying issues of airmails. Third idea is costly solution compare to others; however, it can turn to a profitable investment in couple of years. Firstly, to talk about flow chart is going to help to figure out the necessity of new idea. All types of mails in variety of sizes arrive to several branches of Hong Kong Post Offices. The mails that should be sent via airmail are collected from all branches. These mails are sent to airmail center. There are bunch of X-Ray machines to detect received mails whether they include dangerous materials or not. Unfortunately, this process is the only reason for delay in airmails since a lot of mails that include dangerous materials make operation more complicated. Therefore, putting X-Ray machines into each branches of Hong Kong Post Office can be a solution for making detecting less complicated. However, this solution is costly, therefore; some additional income is needed to support this idea. Hence, a problem in other process can be a solution of other process. The problem that is about unaddressed or misspelled addressed can be used to get additional capital. This point of view can be a solution for both additional capital and for turning a problem to an advantage. There are bunch of successful examples of it all around the world. For instance, as it happened between Austria Post and Dominos Pizza. In this case study, Dominos Pizza was searching for new customers. They have already tried online and on TV advertisements. However, they could not reach their aim since each market has different pricing structure in advertisement, which make the prices higher. Therefore, they had an agreement with Australia post. Dominos sent their flyers to 80 million unaddressed and one million direct addressed mail pieces per year via Australia Post. As a result, they reached a lot of new customer by using the data of Australia post (How we helped deliver Domino's Pizza direct to your post box, 2013). This cooperation has advantages for both Australia Post Office and Dominos. Dominos has advantage since it gets new customers and Australia Post has advantage as there are profits of serving to Dominos and sharing information of customers with Dominos. When the point comes to the Hong Post Office, they can inspire also from the idea of the same cooperation as Dominos and Australia do as there isnt any additional cost of this service to post offices since they keep doing their services as usual while the other company is paying for cooperation. In this case, additional capital can be received to balance the cost of new X-Ray machines. In other hand, cooperation doesnt give any solution for complains of customers about misspelled addresses. I expect from Hong Kong Post Office to develop to change its policy about customer relations. They have to be based more on customers to get rid of troubles in misspelled addresses. A new database which includes all details about customer such as all information about receipts recently can be a suitable solution; hence they can check the correct addresses from database in case of getting misspelled addresses. Another solution can be instant search on internet which can be completed easily

by employees during queue by checking the address online from internet to be sure whether the address exists or not. If the customer brings mail to box, then the person who collects all mails from box has to check the all addresses of receipts. If the addresses are wrong, they can reach customers via their phone number before the mail has arrived to main office. Hence, the time is going to be saved and only few cases are going to come up due to misspelled addresses. In this point some customer service on calling back to check the right address may be needed according to rates of misspelled addresses issues. All in all, Hong Kong Post Office does not have any problems in offices about queue. When the firm was visited, the first question was about the problems about queues in offices. However, Hong Kong Post Office has a good solution to get rid of queues in offices. Counters can be switched easily according to demand in different kinds of tasks by using digital monitors to manage the instant situation in offices. Therefore, there is any problem about queues at all. RESULTS A short description of how you changed your operations! Improvement in performance (before / after comparison)! Estimated nancial value (extra prots per year) Check list! I have formulated a small experiment to answer a specic question! Based on experiment I propose to change something in the operations! with how to measured the improvement (before and after) The solution we proposed is to change the sequence of the airmail operation process. The former flow chart is simply as follow.

Steps 1 2 3 4 5 6

Jobs Local post office branches collect airmail and packages and send it to major offices Major branches of office collect airmail and packages from local branches and send to airport Air cargo terminal in airport receives airmail Airmail and packages going through security check Dangerous cargo returns to major offices Major offices return to local branches

7 8 9 10 11

Local branches return the cargo Air cargo board plane and send out Destination receive cargo and send to major branches Destination Major branches send to local branches Destination local branches delivers the goods

The delay of goods major happens in step 4 which the air cargo terminal is supposed to check all the airmail and packages of dangerous goods. Many times the efficiency is too low thus the airmail and packages miss the cargo plane therefore cause the delay of service. So we figure out a new flow chart to address this problem so that the cargo can be examined before it arrives at the airport, and thus to reduce the workload at the airport. After the change of operation process, the flow chart changes to follow.

Steps 1 2 3 4 5 6 7 8 9 10 11

Jobs Local post office branches collect airmail and packages and send it to major offices Major branches of office collect airmail and packages from local branches Airmail and packages going through security check Dangerous cargo returns to major offices Local branches return the cargo Major branches send the cargo to the air cargo terminal in airport Air cargo terminal in airport receives airmail Air cargo board plane and send out Destination receive cargo and send to major branches Destination Major branches send to local branches Destination local branches delivers the goods

Basically, we change the single server model which the cargos are examined only at the airport, into multiple server model, which the cargos going through examination at each major branch offices. Furthermore, the branches can do the examination once they receive the cargo, which means the cargos are going through security check before hand. The change from the single server model and doing things beforehand can significantly reduce the waiting time at the airport. There might also be some security issues during the transfer from branches to airport so the airport may also want to do a random check of the cargos, but that would not take much time since it is only spot check.

Assume there are 10 branches and each branch is sending 1000 packages to the airport to go through the security check then send. The average checking time for each package is 10 seconds, and there are 10 X-ray machines at the airport. Thus the rate for step 4 before the improvement would be 360 per hour, thus the total checking time at the airport would be approximately 3 hours. After the improvement, each major office has one X-ray machine and total processing time is about 3 hours. However, we should notice that the cargo cannot be send to the airport before one truck is full, in other word, it cannot be sent to the airport for security check once it is ready, so it has to wait. However, after improvement, the cargo can going through the check while it is waiting thus the waiting time at the airport is reduced to almost zero, which is a significant improvement comparing to 3 hours. Furthermore, we can have more machines in major offices thus to further reduce the processing time. As mentioned above, the cost is hopefully covered by unaddressed mails and financing is not a serious problem. Hopefully, the post office can make some extra profit from the reformation of the unaddressed mail policy. However, the most beneficial part of these improvements is not necessary in financial aspects. The reduction of delay of packages and in-time delivery can improve customer satisfaction and loyalty. The improvement can increase productivity in order for Hong Kong post office to compete with large international logistic companies like DHL and FedEx. We already heard a lot of complaints from individual customers and company customers about the delay of the service. By improving the efficiency and in-time delivery, a larger customer group would be easily established. A stable and large customer group would be very helpful for post offices profit and also the future development.

References: . . Retrieved November 19, 2013, from http://news.h1.hk/dailynews/headline_news_detail_columnist.asp?id= 113061&section_name=wtt&kw=78 FedEx. Rates & Transit Times. Retrieved November 19, 2013, from https://www.fedex.com/ratefinder/ home?cc=hk&language=en DHL. Rate Calculation. Retrieved November 19, 2013, from http://apps.dhl.com.hk/eng_rc/eng_rc_ DefPage.html?Service_Type=WPX DHL. Transit Time. Retrieved November 19, 2013, from http://apps.dhl.com.hk/eng_tt/ UPS. Calculate Time & Cost. Retrieved November 19, 2013, from http://www.ups.com/content/hk/en/ index.jsx S.F. Express. Get Rates. Retrieved November 19, 2013, from http://www.sfexpress.com/hk/en/delivery_step/enquiry/rate_enquiry.html S.F. Express. Get Transit Time. Retrieved November 19, 2013, from: http://www.sfexpress.com/hk/en/delivery_step/enquiry/serviceTime.html Hongkong Post Speedpost. Postage Calculator and Delivery Standard. Retrieved November 19, 2013, from: http://www.speedpost.hk/speedpost/sections/postageCalc/postageCalc.jsf Hongkong Post. Surface Parcel Postage Rates and Supplementary Services. Retrieved November 19, 2013, from: http://www.hongkongpost.hk/eng/postage/overseas/parcel/surface/index.htm Hongkong Post. Postage Rates and Services (December 2012). Retrieved November 19, 2013, from: http://www.hongkongpost.hk/doc/common/pos15_Supplement.pdf The New York Times. Chinas One-Day Shopping Spree Sets Record in Online Sales. Retrieved November 19, 2013, from: http://www.nytimes.com/2013/11/12/.../online-shopping-marathon-zooms-off-theblocks-in-china.html?_r=0 . ebay . Retrieved November 19, 2013, from: http://hk.next.nextmedia.com/article/1217/16981201 (member only) http://cheaptaobao.blogspot.hk/2013/07/taobao-start-your-business.html (redistributed by ) . . Retrieved November 19, 2013, from: http://hk.apple.nextmedia.com/news/art/20110623/15367686 Hongkong Post. Problem addresses delay delivery. Retrieved November 19, 2013, from: http://www.hongkongpost.hk/eng/misc/problemAddress/index.htm

Hongkong Post. Revision of principal postage rates and postal fees. Retrieved November 19, 2013, from: http://www.hongkongpost.hk/eng/publications/news/2013/20130711a/index.htm Hongkong Post. Principal Postage Rates with effect from 1 October 2013. Retrieved November 19, 2013, from: http://www.hongkongpost.hk/eng/publications/news/2013/20130711a/appendix1/index.htm# postageRates DealeXtreme. Update 19 Dec. 2012 Singpost + HK post Delay +Christmas AirMail: Latest Dates of Posting 2012. Retrieved November 19, 2013, from: http://club.dx.com/forums/forums.dx/threadid.1241999 . . Retrieved November 19, 2013, from: http://hk.apple.nextmedia.com/news/art/20131016/18464878 eBay Buyer Central. Has Hong Kong Post been going extremely slow for anyone? Retrieved November 19, 2013, from: http://community.ebay.com/t5/Buyer-Central/Has-Hong-Kong-Post-been-going-extremelyslow-for-anyone/td-p/17532831 Tamebay. Hong Kong Post screening all airmail delays. Retrieved November 19, 2013, from http://tamebay.com/2013/10/hong-kong-post-screening-all-airmail-delays.html Auspost. How we helped deliver Domino's Pizza direct to your post box. Retrieved November 19, 2013, from http://auspost.com.au/media/documents/aus-post-case-study-dominos.PDF Auspost. Mail Marketing. Retrieved November 19, 2013, from http://auspost.com.au/mail-marketingdominos.html Jiheng, Z. IELM 4180 Service Engineering and Management. Project Guide.2. Retrieved November 19, 2013, from http://lmes2.ust.hk/access/content/group/1c8904f5-4a29-4d35-a0a7008a949d85fa/Lectures/ProjectGuide2-5.pdf