Driving down hire costs

Every year, we hire additional vehicles to supplement our own fleet – especially during the end-of-year Peak season when mail traffic volumes are far higher than usual.

The cost of this process to the business is substantial, but well worth the investment. However, we are also billed recharges by the vehicle providers – these are additional costs for a variety of items such as fuel replenishment, vehicles not being ready for collection and vehicle damages. For the latter, we’re billed for repairing the damage (typically £1,500 per vehicle) as well as damage claim handling fees (£30 per claim). During 2019, recharges for repairing damaged hire vehicles amounted to an additional cost to the business of £4.3m.

We’re introducing an initiative to reduce Royal Mail Group’s exposure to these excessive damage hire charges this Peak. As in previous years, all units with hired vehicles are asked to conduct various checks prior to Off Hire. But this year, where new damage is identified, we will use our repair partners to carry out a mobile repair at a significantly lower average repair cost of £550 per vehicle – that’s an average saving of £950 per repair plus a saving of £30 per repair on damage claim handling fees. We’re expecting to achieve a total minimum benefit of £887k.

Given that hire vehicle repair recharges are cross-charged to the operational sites where the damage occurred, the savings achieved will benefit the operational units’ individual performance as well as that of the business.

By working together to deliver this initiative, we will not only contain costs in the short-term but also contribute to the longer-term sustainability of Royal Mail Group.