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Ofcom Royal Mail fines of £1.6m for delivery failures

By Chris Dawson July 12, 2020 - 2:37 pm

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.

  • James
    1 month ago

    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.

    • Stephen clifford
      4 weeks ago

      Totally wrong. We, the workforce are adaptable to change and indeed agreed a four pillars plan to take us forward over 4 years, it was costed independently and agreed on. Rico came in and tried to ride roughshod over a legally binding agreement. New tech etc was all covered, including changing work patterns.
      We could start by reclaiming the letters side that we were instructed to give away. In the meantime there are many things even I can see that would save money now and in the long run. Also we are building new sites, but it takes time, you can’t build in 24hrs.
      So STOP blaming the workforce.

    • James
      4 weeks ago

      @Stephen clifford

      I disagree with you here. The four pillars plan was an agreement made in duress. Your union through threats of strikes and non compliance effectively forced Royal Mail to offer you a plan that was detrimental to the long term health of the company to the benefit of the union and the workers.

      The union and the workforce are not committed to anything beyond enriching yourselves. You want more pay for less work. The postal market is rapidly changing.

      The union is driving the company you work for into the ground. Those who are actually knowledgeable on the issue, the financiers, the investors, the analysts etc. all think the unionised workforce is one of the greatest problems facing Royal Mail. The only people who don’t think this is the case are the union and the workforce.

    • Nick
      4 weeks ago

      @Stephen Clifford – This is not TOTALLY WRONG!

      James’ facts stand up:

      – “LIFO model” has been proven by many sellers having their deliveries delayed by 4-6 weeks, when others seem to get delivered more quickly from the same day.

      – “The losses and delays during this COVID period was the final straw” – for us too, and you can see others have indicated the same. We’ve stopped using Royal Mail for all parcels since this happened. Amazon Shipping now deliver these for £2.76 up to 15KG – far better than Royal Mail, fully tracked, and fully insured.

      – “It is apparent Royal Mail are a poorly run organisation, lacking in decent technology and lumbered with a unionised workforce”. Strikes attempted over the Christmas peak every time cripples us businesses who depended on Royal Mail when it matters most. The LIFO model only satisfies targets and not its customers, especially when Royal Mail are struggling to cope for weeks and months – the oldest in the backlog never gets touched until the rest is cleared.

      – “Parcel force have been awful as well.” – yes I agree. I am still waiting for a parcel to be delivered 12 days after it was dispatched on a 24h service – it has been sat in a depot for over a week without moving!

      – “Have started shifting parcels to alternatives and accelerated the shift to FBA”. Same – we now sell most products by FBA (Amazon fulfillment) and those we sell on eBay are sent using Amazon Shipping. No more Royal Mail for most of our shipments. I can’t wait to move away completely – it doesn’t seem long now, as Amazon Shipping are also providing fully tracked and insured large letters for close to the price of a 1st class stamp.

      – “I’m sure many other businesses in my boat.” – yes in the same boat although we’re not quite as big as this.

      The only thing you might say could be wrong is “workforce who are unwilling to let the company modernise” – but from what we see, Royal Mail is the only company that still runs outdated services, has regular strikes, and has such massively poor standards when it comes to delivering late parcels (due to LIFO). Other carriers are growing and filling this void, providing a better service, now for similar or less cost than Royal Mail. All the STRIKES and DELAYED DELIVERIES are killing your customers until they jump ship to other carriers. They now exist and are doing a good job. It is only a matter of time now before Royal Mail is forced to change or break up/close down. It is not sustainable to have unions fighting every step of the way and workforce bitterly disagreeing with management – I don’t care to apportion blame to either side – the end result is what is killing off Royal Mail by killing off its customers or forcing customers to switch to other more reliable delivery services.

      When all of our 160+ packages sent on 1 day takes 4-6 weeks to arrive due to an apparent LIFO policy, how can this be defended in any way, especially when there are no announcements to warn the public that such significant delays are expected. These delays are so serious, everyone in the country should be warned, but no, there are no posters up in the post offices, or tv or radio adverts etc. but Royal Mail is happy to continue accepting our money and our packages for services it cannot provide.

      As a result, Royal Mail’s customers are having to deal with masses of complaints, and resend or refund so many orders to do damage limitation, as every poor delivery experience is a potential nail in our coffin – when customers receive a poor delivery experience, they give bad reviews to the seller, even though it is Royal Mail’s fault. Enough of these and our businesses will collapse through no fault of our own.

      So NO, this is NOT “TOTALLY WRONG”!!

    • BallsyG
      4 weeks ago

      The scandal goes on with managers in N.Yorks region marking all tracked parcels as delivered before the cut off despite these parcels failing to be delivered or even processed. Also take into account that over 50% of the priority service packets are now made up of cheap chinese imports that are used to inflate figures and dont earn anywhere near what they cost to process or deliver. To many dirty unethical characters in our management. Royal mail is dead on its feet. The crown on our uniform stands for nothing now. If this is still Her Majesty’s postal service she should be embarrassed.

  • Dave
    4 weeks ago

    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.

  • Nick
    4 weeks ago

    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.

  • Diane Hunter
    4 weeks ago

    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.

  • 4 weeks ago

    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.

  • I posted a birthday gift to Baltimore usa 1st class on 30/5.It took 4wks to arrive therfore my family missed out on my surprise…very dissapointing.

    • victor
      4 weeks ago

      postal workers have my gratitude and sympathy,
      especially suffering comments as above,
      delivery at all during a pandemic , is to be admired

    • Did you complain to the US postal service or are you only complaining about Royal Mail?

    • Nick
      4 weeks ago

      @victor

      “delivery at all during a pandemic , is to be admired”

      Any company operating in these times still need to set expectations and operate in a sensible way.

      NOWHERE have I seen Royal Mail indicate packages will take 4-6 weeks to be delivered. Nowhere does it state if they fail to complete a delivery on time, your packages will go to the back of the queue, not to be picked up for several weeks, while the next day’s packages are picked up and processed.

      If Royal Mail only sorted out this LIFO model to be FIFO, AND advertise expected delivery delays, then we can point customers to this, and prepare ourselves for delays.

      Instead, Royal Mail will not tell their customers anything other than “delivery guarantees” are lifted, so when a 1-2 day service guarantee is lifted – how can you expect this to mean 4-6 weeks, when a customer receives something from another seller the next day, and says “you’re a liar!” as though we didn’t post the item.

      I even challenged my RM account manager several times, and not once did he explain the extent of the issues, or the fact they are using a LIFO model. We had to work this out for ourselves.

      It is all about lack of communication, and operating fairly. How does it make it right to shove packages to the back of the queue if you failed to meet a target and move onto the next batch? Each package if treated fairly should be delivered in the order they were received.

      I agree that we should expect some delay due to challenging conditions, but I’m afraid Royal Mail royally mess us all up every time there is more post than they can handle in order to meet targets.

      This is not just to do with COVID, but it happens on EVERY BANK HOLIDAY.

      We are all trying to do our best and having to work during this pandemic – that is not the preserve of Royal Mail workers, and we are grateful to them continuing to work to deliver the post. But to be let down because packages are sat in storage with no communication for 4-6 weeks is just unacceptable, especially when it is because of the clearly intentional decisions to use LIFO to improve their targets (once late who cares how late eh?). As a result, we are moving with our feet and using other delivery services who do not behave like this.

    • victor
      4 weeks ago

      @nick
      were still grateful
      because of royal mail ,hermes, dpd, ups , and others
      we still have a business ,our bills are paid , our staff have a job

  • Marc
    4 weeks ago

    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

  • Andy
    4 weeks ago

    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.

  • AndyC
    4 weeks ago

    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.

  • Julie
    4 weeks ago

    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.

  • Julie
    4 weeks ago

    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!!!

  • Graham Wharton
    4 weeks ago

    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.

  • NorthCrystal
    4 weeks ago

    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…..

  • NorthCrystal
    4 weeks ago

    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.

  • Natalie
    4 weeks ago

    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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