Postal service operations and the Australia Post: The impact of service quality standards subject to fixed price

Together with the influx competition in postal services worldwide, technological change has altered the way that many postal services conduct business. Additionally, the seperation of postal services from telecommunications services has provided increased incentive for postal services to determine efficient operating policies so as to recover costs while maintaining a sufficiently large consumer base. The Australia Post (AP), currently embedded in the implementation phase of new and efficient capital intensive technology, is highly representative of many postal systems worldwide. The continued development and implementation of new forms of technology (barcode readers, optical character recognition systems, video encoding centers) will allow AP, as well as other similarly structured postal services, to provide higher quality service while maintaining competitive prices. The effort postal services expend on incorporating these technologies into their operations and uncovering efficiency gains through timely, reliable service together with equitable pricing schemes will inherently determine the success they will have withstanding the ever growing threat of international and national competition. This paper considers this analysis by developing optimal capacity and postal service reliabilities under conditions of stochastic demand subject to a constraint on service quality and fixed price.