Necessary Economic Rationalisation for Sustainable LPOs

For the past 18 months, LPOG has been harbouring a belief that financial salvation for LPOs was just over the horizon, and we would be seeing it coming over the hill any week now. We have seen the departure of many members of the Executive team of Australia Post, and their Board, who seemed totally unaware of the value LPOs bring to the business overall. We all rightly felt that this would provide our much needed relief, and a restoration of a much more equitable payment arrangement for the work we provide for Australia Post. LPOG was invited to participate in the long awaited payment review, and entered this working group with a great deal of anticipation for a successful outcome for our members, and other Licensees who share in the benefits we can extract. While the project is apparently ongoing, it is not looking like the panacea that we needed. Currently it is looking more like a project to shuffle the deck chairs on the Titanic. LPOG will continue to participate in this project, but it seems like it is going to be a long hard slog to achieve what needs to be achieved.

So it is with heavy hearts that we must acknowledge, the July 2018 1.9% CPI increases for the ever diminishing agency payments, combined with the annual 3.5% GRIA increase for our wages, 3-5% rent increases, and utilities and many other cost increases, has highlighted the fast way back to our insolvency issues. We had been so looking forward to putting all that behind us with our new look CEO. 

There has been a lot of robust discussion across the country, about measures that Licensees can undertake to remedy the financial imbalance in our businesses, to help offset our declining revenue streams and look to a more sustainable outcome. As hard as it is to admit, it is not likely we will be seeing anything other than the debt collectors coming over the hill any week now.

Many Licensees who have been around for 8 year or more, have been watching the media stories about the Retail Food Group Franchisees, and numerous other franchise networks, and their sad stories of demise by ignoring their plights for too long. Those stories are just too close to the bone for comfort for Australia Post Licensees. LPOG was born, because as Licensees, we were up ahead of those failing franchise networks in 2013, with hundreds, if not thousands of us, fearing we would not survive much more than a few more months. LPOG was established to lead the charge to recover our funds, and to try and save the LPO network for Australian communities. The Minister and the CEO at the time, thought every man, women and child lived on their smart phones, so we were all but redundant. Every Licensee in the country knows differently, so we fought for our survival. And many of us are still surviving today. But we should never forget that it was our neglect of our plight that led us so close to the cliff. No one else is looking out for our business outcomes, so we must be vigilant, and determined, and we need to meet the micro needs of our changing economics, every single day.

We mostly agree on many aspects of our pain points, and we have discussed openly some effective actions that we might undertake, to pass back some of our unfunded work to the rightful owners of those activities, if we felt we needed to reduce our cost base.

Several activities have been highlighted as being unnecessary financial burdens to LPOs, and most of these activities should be managed by others in the business, or more effectively by LPOs to reduce the financial burdens they impose on the LPO.

Identified activities that could possibly be passed back to the employees funded to perform said activities, or downsized in our LPOs to reduced costs:

  • Deciding not to supply unfunded Lodgement scans for mail left in the retail outlet that does not generate any remuneration for Licensees, and in many cases is the only scan the article receives until a paid delivery scan. A lodgement scan in a retail outlet is not proof the parcel has entered the mail stream. Rather it often generates angry customers searching for missing articles, who are advised by the CCC that the article is still being held at the retail outlet, as no further scans are ever generated. If the lodgement scans had to be performed by the mail side of the business, our parcels business would have far greater transparency, as many more people on the journey would take more responsibility for this tracking service.
  • Deciding not to supply unfunded mail streaming expected to be done in the retail outlet. Mail streaming is a delivery task, the retail outlet is tasked with selling and assessing postage, and the majority of LPOs are paid an outward mail processing fee that stipulates that all articles must be placed in a tub, or a bag, and dispatched to the mail centre for processing. In recent years, Australia Post has made business decisions that reduce their costs, by reducing their mail processing workloads. It would seem that the idea was to push that workload down the line into the retail arm of the business, with no compensating remunerating. This is not covered in the 1993 agreement that we operate under for the outward mail processing fee. The payment for mail sorting is covered under the very lucrative EBA, run by the unions. Employees get paid to do this work, not Licensees, so why are WE doing it?
  • Cheques could be dispatched on a weekly basis instead of the daily dispatch many of us undertake. With the increased compliance of the daily requirements for passport dispatch, it may be necessary to look at the time management issues in our office. There is no additional remuneration for the additional passport dispatch requirements, and when combined with the requirements to be available for passport processing to 5 pm, to meet the new DFAT contract renewal, it is concerning for many Licensees that the additional tasks will increase our staff costs, as we may be needing to pay overtime rates to comply. It may be prudent for Licensees to dispatch the outlet's cheques, weekly instead of daily, during a quiet time while waiting for customers. Possibly the mandatory uneconomic Saturday morning could be an opportune time to perform this service. 
  • Making the best use of the Call Centre and ensuring ALL customer inquiries are directed to the right place. 131318 is the right place, and the best answer to all phone calls, regardless of the query. We could make sure we keep the CCC people busy in their jobs, because they have the resources, and we could help build their skills, instead of us trying to save everyone time and effort by doing it for them.
  • Managing your stock purchases and ensuring you are getting value for money, and making the best use of time management of your credit account.

As an Association, LPOG has an obligation to our members to assist with the ongoing needs of our LPOs. LPOG has had discussions with the ACCC, to seek the best way forward for LPOG members who have consented to the collective bargaining process, to determine if there were remedies available to Licensees, to offset these unnecessary financial burdens under the collective bargaining authority. The ACCC has advised LPOG, that as individual business owners, there is no law that can compel any business owners to supply particular services or products from their business.  As we are individual business owners, it is a business decision of the owner to decide what is the right mix of services and products for their business. The LPO Agreement is quite specific in regard to the work required of a Licensee, and if you choose to supply more than is necessary, for example providing additional streaming of mail, that is an individual choice. Likewise, if you choose not to provide additional streaming, but to comply with the requirements as per your agreement, that is also your choice. Hence we are not in need of any ACCC sanctions or approval, for effective actions taken by individual Licensees, to reduce our unfunded costs.

Licensees must face the realities of our situation. We have a business that is under ever increasing challenges, from the changing market place, and our franchisor. We need to focus on areas of our business that most rewards our efforts, and look to improve our revenue streams. Streaming mail for the delivery arm improves the profit margin of the delivery arm. That improved profit margin for the delivery arm is at a direct cost to Licensees. How is that cost effective for our LPOs?

Licensees should try to address, and offset, the serious economic results arising in our LPOs, as a direct consequence of the business decisions being taken by Australia Post, to the disadvantage of Licensees. Look at areas that will assist your individual business, and refocus your attention to revenue building activities instead. Is your presentation the best it could be? Is your LPO attracting repeat customers? Are you engaged and active in your business? Are you an attractive option for your local customers? Are you looking at the big picture, or overwhelmed by the mountain of unpaid work, that returns not a bean to your bottom line? 

If there are employees in this business paid to perform these activities, why are Licensees doing it for them instead, for no commercial benefit to our LPO? That is just not sustainable for the LPO Network and needs to end now before we all go under, this time for good! It is your business, and your financial investment, and quite possibly your future on the line, you will know best what is best for your business. Don't be afraid to save yourself, because you are entitled to decide what your business can offer in the way of free services for others. No one can compel you to provide more than you want to, or are contracted to provide.

Stand your ground. Save yourself.


Scott Evans's picture

Thank you, tough words to say out loud.
How will this change LPOG focus?

LPOGroup's picture

LPOG will not be changing our focus, we will be proceeding with heating up all the other pokers we have in the fire. This just lets Licensees know that we need to work smarter not harder. As Nick Xenophon said back in the really bad days, the harder we worked, the busier we were, the more money we lost. Our focus is to not follow that path again. So our costs are rising far quicker than our income, so to help stay in the battle we are advising licensees of a number of ways to downsize their costs. All else stays the same, hunting for a weak spot in the brick wall we are banging our heads against. Keep in mind though, seemingly overnight the Berlin Wall came down. We are looking for that moment here!

Thank you LPOG for all the hard work you put into this for ALL LPOs...breaks our hearts to know the uphill battle goes on and on, with minimal light at the end of the tunnel....wonder what AP would do if all the LPO / CPA etc closed for a day (like pension day) as a protest....