Ofcom Royal Mail fines of £1.6m for delivery failures

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You can’t be a commercial company and fail to deliver the service you promise without penalties, and that’s why Ofcom Royal Mail fines totalling £1.6m have just been imposed.

Ofcom Royal Mail fines for missing 1st Class delivery target

£1.5m of the fines were for failing to delivery First Class letters on time in the 2018-2019 financial year. Only 91.5% of First Class letters were delivered on time against a target of 93%. Ofcom state that Royal Mail didn’t provide a satisfactory explanation for this, and didn’t take sufficient steps to get back on track during the year.

Royal Mail say that “We accept and understand Ofcom’s decision”. They go on to say that during the 2019-2020 year which they’ve recently reported on they tried harder but the Coronavirus pandemic made them fall at the final hurdle – For the full year Royal Mail delivered 92.6% the next working day, but up until the 15th of March they were meeting the First Class target for the full year with a performance of 93.0%.

“We are pleased that Ofcom has taken into account the unprecedented impact of the coronavirus pandemic on our operation when assessing our 2019/20 First Class Quality of Service performance. We worked hard to restore our service quality in 2019-20 and, were it not for the pandemic and its impact on our business in the latter half of March, we were on course to deliver the requisite First Class regulated Quality of Service target (93 per cent). Despite our best endeavours, some areas of the UK experienced a reduction in service levels during March. Relevant factors included high levels of coronavirus-related absences and necessary social distancing measures.”
– Royal Mail

Ofcom Royal Mail fines for overcharging

The remaining £100k of the Ofcom Royal Mail fines was for overcharging for the price of a Second Class stamp between the 25th of March and the 1st of April 2019. The price cap set back in 2012 was due to rise on the 1st of April but Royal Mail’s new pricing put them 1p over the price cap for the week before.

Royal Mail tried to make amends by apologising and donating the £60k additional income they estimate they would have received to charity but Ofcom fined them anyway.

“Given the harm caused and failure in its processes to stick to the price cap, we have decided to fine Royal Mail £100,000. It has since made changes to its processes that it says will prevent this error from happening again.”
– Ofcom

“Many people depend on postal services, and our rules are there to ensure they get a good service, at an affordable price. Royal Mail let its customers down, and these fines should serve as a reminder that we’ll take action when companies fall short.”
– Gaucho Rasmussen, Director of Investigations and Enforcement, Ofcom

Will future Ofcom Royal Mail fines be avoided?

It’s hard to argue with the Ofcom Royal Mail fines and indeed in terms of Royal Mail’s budget they are almost insignificant. Royal Mail have put aside £150m for redundancy payments and Rico Back who recently left as CEO picked up £5.8m in 2017 and walked away with £480,000, £50,000 to cover legal costs and up to £25,000 for ‘outplacement support’. The real question is how do they revitalise the business and avoid them in the future.

With Keith Williams as interim Executive Chair of Royal Mail Group, Stuart Simpson as interim CEO of Royal Mail UKPIL (UK Parcels, International and Letters), and Nick Landon acting as Chief Commercial Officer for Royal Mail UKPIL and Parcelforce, the only real difference to Royal Mail currently is that Rico Back has gone. Can Royal Mail turn around with existing officers stepping up to take over or will these executives carry on down the same agenda of the past few years?

Accepting that letters business is declining and parcels growing, Royal Mail are doing little to stem the flow of competitors such as the newly launched Amazon Shipping hoovering up what would in the past have been their profitable business. With the same people doing the same things, trying to prop up the organisation with the same fixes, it would be little surprise if the results didn’t end up being similar.

There is a strong argument that Royal Mail needs something more drastic than cutting 2,000 senior leader and management roles (half of Royal Mail’s senior leaders and most senior managers are to lose their jobs). Spinning off GLS, if that’s what’s decided, won’t help as that will leave UKPIL and Parcelforce weaker than ever – GLS is where they’re hoping the profit will come from.

It’s time to stop worrying about the next couple of years and a couple of Ofcom Royal Mail fines as they are irrelevant if the 5 Century old institution collapses and is sold for parts at the end of the decade. What’s needed at Royal Mail is a permanent Chair and permanent CEO brave enough to bring a new vision to take Royal Mail forward not for the next five years but for the next century.

23 Responses

  1. I’d be surprised if Royal Mail was around in its current form for anything more than 5 years. It’ll probably be purchased on the cheap at some point and broken up.

    For us, the losses and delays during this Covid period was the final straw. They are using a LIFO model to protect their service targets and it is extremely expensive to deal with as a seller. Whilst I understand this is a unique situation, it is apparent Royal Mail are a poorly run organisation, lacking in decent technology and lumbered with a unionised workforce who are unwilling to let the company modernise.

    Parcel force have been awful as well.

    Have started shifting parcels to alternatives and accelerated the shift to FBA. We spend circa £12k a week with Royal Mail / Parcelforce and growing quickly. Small but not insignificant. I’m sure many other businesses in my boat.

  2. Yes, the Royal Mail will be hampered somewhat by “legacy” issues, ie the highly unionised workforce……more the reps and agitators than the actual staff I think, and years of under investment. Sadly what people fail to realise is the value for money their services do offer, which for a good chunk of the time are okay and acceptable. I shop around for shipping services, and yes the likes of Hermes can undercut even the “near bulletproof” RM small parcel rate……but you have to wait in all day for a collection which offsets and savings from Hermes unless you have a drop off nearby. Any break up of the Royal Mail will ultimately lead to increased costs for everyone, and the loss of a major market price holder. If the RM’s prices were not there as often the lowest / cheapest, all the other players are no longer anchored and their prices will rise. For example, RM £2.95, Hermes £3.75, UPS £7.80……take RM away and Hermes can go to £5 or £6 and still beat UPS. So folks, even if you don’t use RM anymore, they still help keep prices down for everyone.

  3. I too realised Royal Mail use a LIFO model to protect their targets, leaving our packages taking 3-4 weeks to be delivered for anything collected straight after a bank holiday.

    Now we won’t dispatch anything by Royal Mail on the day following a bank holiday, as it will be quicker to dispatch it later in the week! This is not even just during the pandemic – we had similar issues in peak time last year too, but it is now worse due to COVID.

    We no longer use Royal Mail for small parcels, as Amazon Shipping has already hoovered up all of that business from Royal Mail, as they have done so for all but the largest of parcels from Parcelforce too.

    It is shocking even now, when we send a parcel by Parcelforce 24, that 11 days later we are still waiting for Parcelforce to send it out for delivery.

    With Royal Mail lack of tracking (only delivery confirmation when it works) it is very difficult to advise customers whether their packages are lost or just delayed, and with 3-4 week delivery times, due to Royal Mail’s LIFO model, it pushes the burden on to us sellers to deal with unprecedented numbers of customer complaints , resending packages and refunding orders unnecessarily, whereas if they did FIFO, all packages would be delivered in a more reasonable time, but Royal Mail would miss all their targets.

    Targets are great aren’t they?! They just induce bad behaviour to try and artificially meet targets by causing much worse performance where they are not directly measured. What good is delivering some packages on-time when many more are taking 3-4 weeks, where they could all have been delivered a couple of days longer and everyone experience a similar level of service and be more understanding…

    So Royal Mail only now have Large Letter business from us, and even then Amazon Shipping are creaming from the top of that.

    I wouldn’t say Amazon Shipping are perfect, but their prices are low, and when they make a mistake they quickly and easily reimburse us for the full value of the package without any issues, even if the item is delivered to a doorstep and the customer confirms they never received it. Amazon Shipping takes responsibility and reimburses us for this so we can refund or replace to our customers without losing out. Royal Mail don’t compensate us for anything. Parcelforce makes us fill out a very long and complex form, and wait a month before we get any compensation, discouraging us from trying.

    If Royal Mail Group continues like this, they won’t last much longer in its current form.

  4. I have been very disappointed even taking into account the virus, to take a week for a 1st class signed for package whether it be parcel or letter is disgraceful.
    I complained in writing 3 times and got the same response. It is really hurting our small business reputation.
    We sell stuff for funerals and to miss a deadline for a funeral is just too late isn’t it but a few days should be long enough.

  5. Very much a mixed bag with Royal Mail at the moment.

    The LIFO model is terrible, particularly when they can fail to deal with some of those sacks at the very back for weeks on end. I’ve seen plenty of large letters and parcels finally arrive up to 6 weeks after they were dispatched. It should be impossible to be that bad.

    But in complete contrast to that, this month I’ve had 2 parcels come to me via 2nd class post that arrived in just 1 day, as if they were 1st class.

  6. Royal Mail have been prioritising parcels over mail through this pandemic and postmen being told to leave mail as there is more bonus for managers in parcels , I know this for a fact

  7. LIFO is the biggest problem with Royal Mail, as instead of everything just taking a few days longer, we randomly get 1000s of items sent out on the same day taking weeks to arrive if they missed their target but everything sent after arriving on time.

    Trying to explain this to frustrated customers doesn’t help as they (understandably) just want their item.

    As mentioned previously, we no longer send out the first day back after a bank holiday due to this. It’s just too risky with so many items potentially missing this target and then being sent to the back of the que.

  8. Fact RM prioritise Tracked pkts, parcels, Special Delivery, 24/48 HR pkts and then letters. Despite covid19 we are around 10 staff short – NO new recruits, saves money for shareholders/ hedge fund leeches. RM make around £150 million profit every year but it’s never enough. Us postie’s arent happy when hospital letters, birthday cards are delayed, we are just the last in a long line.

  9. I’ve had 2 parcels apparently delivered an signed for, but because of COVID no one can sign for anything, so the postmen/women are signing for it, so I never received them.

    I don’t feel that this should be allowed to happen, because we are not been compensated for lost/ or so called delivered items!!!

    These weren’t cheap items either that’s the worse thing.

  10. Also forgot to say, that the postmen/women are leaving parcel on the doorstep once they have knocked the door, and before you can get there, like myself as I’m disabled, they are gone an the parcel/s are left to be stolen!!!

  11. My posty confirmed the LIFO thing. When they don’t have enough time to process all bags in the DO/SO they dump what’s left in a cage and put to one side. Future mail is processed on-time to meet targets and the cage is only revisited when they have time to spare on future days. My 2nd class parcels take either 2-3 days or 2-3 weeks. Having a parcel delivered after 3 weeks is a pain as I’ve normally sent a replacement by then and the customer ends up with 2 items and I end up down. RM won’t care as most PPI mail does not have any form of compensation.

  12. 3% of our RM48 Tracked are LOST in June. The tracking either stopped at “its due to be delivered today”, or shows some weird messages like “we could not retrieve tracking information”. That’s a new record of some kind.

    I’m going to claim for all those lost tracked parcels, however the form is long and complex and takes approx 20mins per claim.

    Once claim is completed, then they reserve 30 days to reply(!). Meanwhile the customers wants their item/money.

    Royal Mail is so 1995…..

  13. ParcelForce?? They’re like from the 1970s…..

    We import from Taiwan by air, and our supplier used their national parcel company so when it reached the UK it was ParcelFarce for the last leg. Always, always the parcel had sat doing nothing at customs for 8-10 days. Then PF would send as 2nd class letter asking to pay import charges!! Joke all the way.

    We currently use UPS and happy as little bunny. 2-3 days delivery time, our account is billed automatically all the import taxes. This is how you do business, PF.

  14. I’m a Royal Mail shareholder, my grandad was a night supervisor at Mount Pleasant sorting office, so I approach this sympathetic to the workers. There are some bad eggs but most I believe do their job. The fault lies with management & the unions. And I agree the LIFO system is unacceptable. Backlogs should always be prioritised within their category, so a backlog of 1st class post should be dealt with before the 2nd class backlog, and both should be cleared before the new intake mail. The powers that be don’t need to make such heavy weather of what should be a simple process.


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