Microsoft Dynamics AX ensures Russian Post remains a pillar of strength

Lindsay James finds out how a single environment helps 9,000 employees can manage over 80 million money transfers a year

Lindsay James
Lindsay James
By Lindsay James on 14 April 2014
Microsoft Dynamics AX ensures Russian Post remains a pillar of strength

​This article was first published in the Spring 2014 issue of Touch

With its foundations laid in the 18th century during the reforms of Peter the Great, Russian Post has evolved into one of the most complex enterprises in Russia today. Processing more than 1.7 billion letters, 54 million parcels and approximately 80 million money transfers a year, the public sector organisation employs in excess of 390,000 people, has over 42,000 post offices and houses an extensive management infrastructure which is split across 86 branches and headquartered in Moscow. 

Striving to become a more modern and effective business, the organisation has begun a comprehensive restructuring programme which will see it progress from a subsidised postal operator model into a self-sustaining postal business by 2018. This restructuring involves an extensive overhaul of its infrastructure in order to reduce costs, make it more efficient and provide a better experience for its customers. 

Part of this overhaul involved creating a single environment through which it can automate planning, accounting, control and analysis of all core business operations across the enterprise. This unified environment is quite apart from Russian Post’s previous technology systems, which held the organisation back for a significant number of years. 

“At central office level we had treasury management processes in place, but they were simply processes; they weren’t automated,” explains Sergey Emelchenkov, Russian Post’s CEO. “The processes were passed on unofficially, in verbal form. At the branch level, there were no such processes. They weren’t able to manage a significant number of payments and money remained in branches.”

With this in mind, Russian Post decided to change its treasury management policy in order to introduce cash pooling, which would ensure better cash management throughout the branch network and an accumulation of funds at the executive office. “The dynamic management of the company’s entire cash flow was necessary to ensure that money did not sit in the branches, but instead could be used effectively,” Emelchenkov explains.

Investing in technology

There was no doubt that this required an investment in technology, but choosing the right system proved to be a challenge. “The automation tools that existed at that time would not allow us to solve our problems,” says Emelchenkov. “We lacked understanding about what class of software products we should consider. There are so many layers and processes involved because it was a distributed system. What’s more, we realised it was necessary to build up end-to-end treasury processes at the executive office and branch level, but we didn’t know where to start. Should global best practices be sought and applied? Should we try to accumulate and analyse our own experience?”

The company started by looking at specialised banking systems with money management functionality. “Unfortunately we had so many processes that it became clear that we had to go further than just banking functions,” says Emelchenkov. “We needed a powerful, integrated solution that would take into account the specifics of the postal treasury operations. We needed a tool that was flexible and sufficiently autonomous – and one that could integrate well with other systems. We were against custom developments. We needed a mass-market platform that would facilitate the deployment of our processes.”

After a long and arduous search, Russian Post turned to Microsoft. “The selection process took a long period of time, and many of our competitors were evaluated, both locally and further afield,” explains Aliona Geckler, Microsoft’s business solutions lead for Russia. “It was finally decided that Microsoft Dynamics AX best fit Russian Post’s needs. It provides great flexibility without being complicated, unlike some other big enterprise resource planning systems.”

Russian Post was already using a number of Microsoft technologies, so a move towards Dynamics AX seemed like a perfect fit. “We were already using  a reporting system to monitor the use of personal identification cards by our customers which is based on Microsoft business intelligence (BI) technology,” says Emelchenkov. “Data is exported to the corporate portal based on SharePoint.”

Microsoft worked hard to understand Russian Post’s unique requirements. “From the very beginning, we understood that the scale of this project would require support from the business management and the development management at the highest level,” says Geckler. “We received this support for sure: on numerous occasions our executive vice president Kirill Tatarinov met with Russian Post representatives in person, studied their requests and guaranteed the capabilities and support of the project at an executive level.”

Meeting Russian Posts' unique needs

There are a number of reasons why Microsoft Dynamics AX is suited to a large organisation like Russian Post. “The first is its ability to operate in organisations with a broad coverage, with a large number of transactions and users working concurrently. This has been proven in practice in Russia,” says Geckler. “We have gained such experience since the early 2000s when implementing the system in the largest distributed centres of retail networks and telecommunications companies of a federal scale.

“The second factor is the depth and breadth of the Microsoft Partner Network. Today, our partners are able to create implementation projects of any scale and level of complexity, thanks to a strong pool of experts. The third factor relates to the strategy governing development of the product itself. Dynamics AX has been designed to meet the requirements of major distributed holdings.”

The solution also meets Russian Post’s more specific needs. One of the main requirements was the consolidation of treasury data into a single information space from a large number of previously used systems on a level of structural divisions. Dynamics AX’s architecture is ideal for centralised expansion and the connection of territorial divisions to a common database. 

Once the solution was chosen, work started on one of the largest deployments of treasury systems in Russia to date. “In accordance with our common procedure for IT projects, we first created a prototype of an integrated automation solution for the treasury,” explains Emelchenkov. “GMCS, a local contractor, helped us to solve this problem. The whole process took only six months: from the development of the solution architecture through to the choice of the required hardware and software, development of implementation methodologies and instructions for staff. For the purposes of developing the system requirements, Russian postal and payment legislation was taken into account, as well as the international postal legislation, including the Universal Postal Convention.”

Enabling an enterprise-wide deployment

By the time the replication was due to start, Russian Post had a clear action plan. The replication itself was carried out in stages. Deployment had been conducted at the central office and all the branches obtained online access. “Among the major challenges was the large number of specific activities that had to be taken into account,” says Emelchenkov. “Moreover, we were using a large number of software solutions, so integration with more than 100 different systems was performed.”

A project of this scale required adequate training, which isn’t usually straightforward with 9,000 users. “We created a video training programme which was very effective,” Emelchenkov explains. The project covered all divisions of Russian Post – from the executive office to each individual post office. This became the first centralised business application to be deployed throughout the entire branch network. “At the moment, the system automates unique processes including cash pooling, the implementation of social programmes such as pensions and benefits, interaction with foreign postal administrations, collection of agency fees and payments to the Federal Treasury such as taxes, fees and fines,” says Emelchenkov. “Functionality for automatic mutual settlements between divisions of Russian Post was also implemented. Thanks to all of this, we have managed to reduce the labour costs associated with manual processing several times over.”

“Microsoft Dynamics AX has succeeded in providing a common information space, instantaneous access to up-to-date and reliable information at every level of management, and a significant reduction of the time required for approval and document processing,” adds Geckler. “9,000 employees at Russian Post now use Microsoft Dynamics AX for treasury processes across all of its units. Some users work directly with the system, while others access it via the Microsoft SharePoint platform. People enjoy the reduced time and effort required to complete their daily tasks.”

The solution has also allowed Russian Post to better meet stringent regulatory requirements. “We can now transfer data on the payments received by Russian Post to the Federal Treasury,” says Emelchenkov. “This is a requirement of Federal Law 210-FZ which states that data on payments should be transferred not as a summary, but for each individual transaction in accordance with the ‘one payment – one payment document’ principle. Without this solution, we would be unable to meet the requirements of the federal law in the given time frame.” 

An alliance built for the future

Geckler believes that Microsoft Russia and Russian Post have forged a strong relationship which will take the two businesses long into the future. “We will continue to work in close cooperation with Russian Post,” she says. “For example, my enterprise business team lead, Yulia Barabanova, meets them almost every week on steering committees.  All Russian Post team members – Pavel Sidorov, Olga Matveeva and others – keep their control on the implementation project, are involved in business development and engage in many of Microsoft’s relevant programmes and events, including the Dynamics Marquee Program and Convergence.”

Over the next four years, Russian Post is confident that the implementation of Microsoft Dynamics AX will bring a number of benefits, especially as the post offices complete their journey to becoming multi-service centres, offering a full range of traditional and modern postal, information, communication, financial and other services. The organisation is also taking steps to expand its use of Microsoft technology, both now and in the future. “In the near future, we will implement an interface to transfer data to the electronic postage system and a system for protecting income when using franking machines,” Emelchenkov says. “We also plan to include functions for enhanced management of accounts receivable and accounts payable.”

At the post office level, Russian Post has begun a project to develop unified accounting software. This means in the future, information from post offices will be sent to branches and forecasts related to the movement of money supply in the sales office will be much more accurate. All these measures will have a significant economic effect. 

“We will obtain a complete system that will help to reduce recovery expenses and optimise a number of other functions. But we need at least three years to implement this project,” Emelchenkov concludes. 

“Looking even further ahead, we plan to build on our Microsoft BI solution and build a financial management system as well as a single data warehouse,” Emelchenkov continues. “As part of this project, we have analysed worldwide experience and have created a joint working group with the postal service of Italy. Our peers in Italy implemented a system for strategic and operational monitoring, which allows them to manage the entire enterprise from one room. They can obtain information on various areas of activity for a given period, as well as on commercial services related to various postal items and the entire process of handling of these items: from collection of letters to their handling in the automated processing centre. Exactly the same information is provided for financial and managerial activities. We want to deploy a data warehouse, which will allow us to host a similar monitoring system and a situation room. It’s a very exciting prospect.”

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