on Jul 25th, 2011 in Finances: Cost & Revenue | 43 comments
 
The past few years have been tumultuous for the U.S. Postal Service. Mail volume has dropped 20 percent to 171 billion pieces from its peak in 2006, and over the last four years experienced unprecedented financial losses totaling $20 billion. In 2010 alone, the Postal Service experienced its largest 1-year net loss of $8.5 billion. Our Risk Analysis Research Center has published The Cost Structure of the Postal Service: Facts, Trends, and Policy Implications, which reviews the major components of the Postal Service’s 2010 cost structure and presents insights to the ongoing policy debate about the future of the Postal Service. Below are some of the paper’s key findings: 1.The mail business is labor intensive, and labor makes up 80 percent of Postal Service expenses. This means that in order to achieve real cost savings, the Postal Service has to cut labor costs. While ideally labor costs could be cut to match declines in volume, this is challenging because the Postal Service’s delivery network has significant fixed costs. 2.Since 1972, the total cost of benefits to the Postal Service has risen an astounding 448 percent above inflation, while the real amount spent on wages has declined by nearly 3 percent. This extraordinary increase in benefit costs is due to three factors: a general trend of higher benefit costs that has affected most U.S. companies, the gradual transfer of postal retiree benefit costs from the federal government to the Postal Service, and repeated overcharges for these retiree benefit costs. 3.Since 2000, cumulative unit costs for three of the four market dominant mail classes (Periodicals, Standard Mail, and Package Services) have far outpaced increases in the Consumer Price Index (CPI-U). 4.A continuing freeze in capital investment, while saving the Postal Service in the short term, may paradoxically lead to higher costs in the future. In particular, investing in rightsizing the physical network to meet decreasing demand is vital to the future viability of the Postal Service. We invite you to review the white paper and share your thoughts on reducing costs and the impact those cost reductions might have on the Postal Service here on our blog. This blog is hosted by the OIG’s Risk Analysis Research Center.

43 Comments


Congress wants the USPS to save money, yet evertime the USPS wants to close a facility the citizens as well as the conressman dislike the plan. Maybe we need an idea such as an added property tax similar to the tax portion that funds the public school system. That way, the citizens get their beloved post office and everyone pays a small share.

that is the best idea i've heard in a long time!

Yeah I like your idea my2cents . It is simple,effective and fair ;)

In this time of economic turmoil the USPS should look for the most efficient way to deliver the mail. That being said, they are not. With the implementation of FSS flats the most efficient and cost effective way to handle this new product would be to case it with the DPS and other non-sequenced mail.

How much money did the government or USPS spend on these flat sorting machines? I have a pretty good idea, and you always here about how much the PO is losing money. What about the GPS tracking devices they are talking about putting in the LLV's? That would be another waste of money. And some of these branch managers make as much as our major makes!!!! Where is the logic in that??? The PO needs to look at were they are wasting money first, then look at cost efficiency strategies.

I found the options in the blog to be a bit leading. Look at this language: essentially it blames anyone and everyone for the problem. However it doesn't look for new revenue streams. But that's not the focus. Meanwhile, I saw the article about offices under review, but couldn't find the list of offices. I'm concerned because I live in one of those small rural areas that is hugely dependent upon a local post office and rural carriers. It's perhaps more important to us than it is in cities. Or perhaps not... but we are 70 miles from the nearest population center of 15000 - and there are four small towns in our enormous county. Where is the list of offices? I saw that comments could be sought from users in the news article, but there's no list of offices to be reviewed with that article (not your fault) - but it's also hard to find via search or on the main site or this one. It would be nice to have it be handier. Our local post office is a community hub, and our population includes many disabled folks who if our office was closed would have to take a once a day bus to the next town to get their mail, and wait most of a day to get home. Rural is not "less significant." Close a larger office in a town with more resources if you must. Or... better yet... don't close it at all, and look for revenue streams - not efficiency. BTW, the PO in the town of 15000 is one where one of the employees shot another - and from what I hear from several folks who work for USPS, assembly line efficiency may be getting in the way if there are service problems. USPS is a deadly workplace from what I hear, which may be exactly what needs to be remedied.

Meeting its retiree health and pension obligations.
Reducing labor costs.
Operating under an increasingly challenging price cap structure.
Rightsizing its physical infrastructure.
Continuously increasing operational efficiency .
Other. (Please describe in the comment section below.)

I recently placed an order online and it went from Fed Ex to Postal service. I tracked on computer. It was delivered within 60 miles of my residence - {USPS}then went to Cincinnati,Ohio - where it laid for 3 days - from there to Warrendale,Pa and from there to Allen Park, Michigan - then back to Ohio to my residence. Is it any wonder Postal service is low on money - look at all the wasted gas!!! What a joke. This is about the 3rd time this has happened for me.

You are one of the VERY few that has had this happen 3 x's. You have to keep in mind the PO handles millions of pieces of mail a day, and thousands of parcels a day. I would say 3x's to a couple of thousand is not a bad ratio. Everyone needs to remember that human error is always a factor!
I have been carrying mail for 10 years, and I have only had a problem with the loss of a package once! it was recovered, but again, it was human error!

The USPS is having budget problems. Here is a cost cutting idea; change the regulation that requires you to deliver to the wrong address after a permanent 90 forward expires.

When John Doe moves, he can leave a 90 day forwarding address, but at the end of 90 days, the forward expires, even though the move is permanent.
Consequently, on the 91st day, knowing that it is the old address, the PO has to revert to sending Mr. Doe’s mail to whatever is written on the envelope, delivering to the wrong address.
Once the envelope is delivered and returned to the PO, it can be labeled MLNFA, and returned to sender, but in the meantime, it has cost the USPS money in gas and delivery time, and double processing (pre-delivery & post-delivery).

On the forward form, include a check box that authorizes the USPO, to notify first class mailers of an expired permanent forward, starting day 91. Contracts for non-first class mail should say that unless sender agrees to pay first class return, after 90 days, second class mail will be recycled without being returned.

Create a post 90 day db field that pulls information from the permanent 90 day forward, and adds that information to the labels printed for MLNFA. When returning John Doe’s first class mail to sender, telling the sender to contact the recipient to update their records.

For repeat failures to correct the mailing address, enter large volume senders in a database. If you send them multiple notices, and they continue to mail to known expired addresses, contact the PO of origin, to look at the rate paid, to see if it is discounted. If so, notify the mailer that future notices will result in postage surcharges, based on the number of mislabeled envelopes.

Setting up the check box, and returning expired forward 1st class mail without delivery eliminates the cost of gas to deliver to an address you know to be erroneous, and cuts handling from 2 steps to 1 step.

If you make it cheaper to correct addresses than to pay penalties for the thousands of pieces of MLNFA mail, perhaps you can get mass mailings that now clog your systems to reflect their actual cost.

Rentals receive 1st class mail for tenants who have not lived there for a decade and more. Some weeks there is a stack of 2 – 3 inches of mis-directed mail. I mark it MLNFA, and dump it back at the post office, but it has eaten up carrier time, and distribution time, and gas money. Mail has come through from pension plans, universities, and medical/ dental offices. It might be important, it might be sensitive, on day 90, you knew was permanently expired, on day 91, it shouldn’t be delivered to an address that you know is wrong.

Another VERY GOOD idea, to add to that, managers, or whoever handles the bulk business mailings, need to keep the mailing list, (vacancy list) up to date. Carriers, (26 years with PO) have been losing there jobs for tossing 4th class bulk mailings in the UBBM, then management goes out checks if the particular address is vacant, no vacant card, then they get there walking papers!!!!!!!! No investigative interview, no warning, NOTHING, JUST WALKING PAPERS! Whom is held accountable for not keeping these mailings lists current?

I was puzzled by your post. I am a carrier and have always wondered why CFS labels say temp fwd exp, deliver to old address. If the person has actually moved and not just been temporarily away, I always hold for 10 days for a permanent order and if none comes I turn in a MLNA order. Of course you don't deliver it to the old address where there are usually new people by this time.

Stop wasting time and money controverting injured employee claims. You know the environment is filled with hazards that are swept under the rug, so stop aggravating us and let us recover!

How about segmenting each city or town, etc., in half.
Deliver mail to one half on Mon, Wed, and Fri. Deliver mail to the other half on Tue, Thu and Sat.
How much will this save?
Who cannot live with this?

Exactly what I have been thinking. You can cut your carrier labor in half. Any Next Day packages can be handled by a special carrier for the addresses not receiving mail that day.

I stoped to get mail at po # 61734 I had a note to go to counter as a item was too large to fit. well I am working 40 miles from home the po office is open at 9 am i stoped at 7:45 knock on door as I have for 28 years to get a item the clerk yelled through door i open at 9 I replied I just need to get A item that is too big she replys open at 9 i am buzzy she will not give my under 18 daughter mail as she is too young all this over a phone book? well I know know why the PO is loosing you people (some of you) do not know what custmer service is or care change before you are gone. ps maybe if you watch merical on 34 street the old post office ways were not too bad

Keep Closed PO Name and ZIP...
In regard to the closing of small post offices -- I understand the need to close some very small POs and to consolidate others. In fact, I would favor it. However, I live in a very rural area and use one of those small post offices, which very well may close in the near future. My main concern is that I do not want to change my mailing address. I've had the same address for all of my 64 years, and my family had the same address long before I was born. In our situation, there is a second small PO nearby which will remain open and where most of the customers at my PO will likely go. I believe that our PO's name and zip code should be continued and our mail simply delivered to a new location at the nearby PO. That way, the least-used unit can close and thereby save some costs, but those of us at the closed unit can keep our longstanding mailing addresses. I expect that a bureauracy like the Postal System is unlikely to consider such practical solution to a customer problem but it should be easy to impliment and make many customers more likely to accept the changes that are likely to come.

Congress wants the USPS to save money, yet evertime the USPS wants to close a facility the citizens as well as the conressman dislike the plan. Maybe we need an idea such as an added property tax similar to the tax portion that funds the public school system.

Thanks everyone for your opinions and advice. We will take your comments under consideration in our future work.

A suggestion to eliminate waste in USPS services and processes could financially turn cartwheels. Through Villanova University I studied Lean Sigma and Six Sigma. These simple
systems can make processes simpler, with less repetitive steps. It can save huge amounts of
manhours and efforts. The emphasis is not to point finger at people but at process so that best results are mapped most efficiently. I'm a Lean Sigma Analyst and know the change in employee morale with the improements gained from a lean analysis can be incredibly positive also to save time and money. Some companies can afford new capital equipment after savings from using Lean Sigma. The US Postal System is too wonderful to let go. I intend to send fax to Postmaster General P.R. Donohoe and maybe B. Rapoza of US National Association of Postmasters. God Bless the Post Office! My brother is a postal employee and works triple hard to deliver best results. I believe Lean Sigma can greatly advantage the US Postal System if done right. By that I mean not just for status but for getting the real everyday results that count and can be counted. God Bless America.

I have been thinking as an ex CEO of a large company about the USPS budget. I make the following recommendations:
1. Cut the TV and other advertising in half 2. Paper products are very high- cut all the extra things that are printed on a receipt when I buy/purchase item to no more than having on the receipt: name of post office, date, clerk's name
items purchased, total ot purchase, method of payment( check, debit or cred card or cash. End of receipt. I don't need the other 12 inches of info that is always printed on the receipt. 3. Why not have a drive in window from 7am -6pm (split shifts) for stamps or money orders only (no packages). It works for banks, why no the post office. Thank you.

I was in a post office last week and noticed that the sales counter closed at 4:30pm. The post office needs to be able to hire sales clerks at a rate that other retail outlets do so they can afford to have longer hours, thus bringing in additional revenue.

Why can't the USPS just go back to some of it's old ways?In the old day's they had a contract with local public transportation and carriers would get to thier routes via bus.His mail would be already waiting in those old green relay boxes on the corners.They only needed a few 2ton trucks to send out the relays and then went back for parcel delivery.I'm just wondering on a nationwide plan how many millions of dollars a day this could save in fuel costs and vehicle upkeep alon,not to mention the cost of having tu purchase the vehicle.

Reducing delivery days to three days per week would problably solve these issues. Major reduction in salary,benefits,vehicles,miles,fuel,maintenance on the vehicle. Major increase in number of pieces per delivery. I would volunteer to get my mail cut to 3 days per week instead of 6. I get maybe 10 bills a month and everything else is junk mail. This could very easily start as a volunteer program to the general public than if results occur without many complications it could be mandated to more rural areas like where i live. Continue to deliver to buisnesses 6 days as they need it.Bottom line these profit numbers are only going to get worse.

The search for cost cutting ignores income stream.

VAST QUANTITIES OF 3rd and 4th CLASS MAIL, UNWANTED BY RECIPIENTS, IS SENT AT UNREALISTICALLY LOW COST BY BIG COMMERCIAL MAILERS. BOOST THEIR RATES~!! BOOST THEIR RATES~!!

Everyone else is paying exponentially higher rates, driving us to email rather than send paper correspondence. Postal rates have increased at about 1.5 times the rate of inflation since WWII.
At the same time, service declines (as by making residents on a city block go to pick up mail at one common set of curbside boxes).
Forwarding has become a nightmare of confusion and inefficiencyh.

This is a very good strategy. This post is very informative I actually learn something from reading this blog post thanks for sharing.

What people dont know is what the PO is doing to destroy itself and blame it on decreases in volume.
1. Route changes every 6 months nationwide cost each PO a fortune in a vain attempt to make perfect 8 hour days
2. Mail is still walked to houses even after the OIG report that localized units save billions that can be used for other costs. We dont want to anger the cusotmer by asking them to place their mailbox on the street (but we clse their PO's)
3.No charge services like vacation hold and forwarding.
4. We could do without all the workers and there would be no overtime, if we stopped all the low cost junk mail. OIG showed where it cost the PO to deliver many of the bulk mailings we receive.
5 We are beholden to the business sender and will do anything for them, including consolidating post offices and then driving 20 miles per route per day out of the way. (and hold the PO on the lease that is still in effect until it expires)

This is just some of the stupid things upper management is doing to kill the Post Office.

While lower mail volumes is certainly a challenge the USPS, I'd say the USPS has a much larger challenge in their operational management.

My example: I live 12 miles from a postal facility (Woodland Park, CO). The postal address for my entire neighborhood is Sedalia, CO (and mail is delivered from here). Sedalia is well over an hour drive each way from my location (1 hour is optimistic as these mountain roads are particularly treacherous in the winter). That means the USPS has a driver burning up >2 hours of gas, vehicle wear/tear, and worker wages daily on a delivery that could be done in 15 minutes by the local facility in Woodland Park.

I've asked both postal facilities multiple times why they don't put this neighborhood in the closer postal district. Nobody can explain it. Worse, nobody wants to do anything about it.

I suspect my case above is just one of many nationwide where the USPS could be saving millions of dollars if they would just employ common sense in their operational management.

HAVE PARTNERING WITH HOMELAND SECURITY, STATE/LOCAL POLICE, HOME SECURITY COMPANIES, OR EVEN GOOLE EARTH'S "STREET VIEW". TO SUPPLY VIDEO SERVICES FROM YOUR DELIVERY VEHICLES.

Sorry for the re-post.
I heard a person on the ed schultz radio show on tue the 9th. I did not catch his name. It had to do with the Wi. unions. What is his name? He said that the USPS makes money, but 75 years advanced pension funding was the drain on the USPS. Also any line budgets that bring in more money get doled out to other agencies and not to USPS. This is very interesting to me. I am a conservative and believe the USPS should not be privatized and stay with in the Gov. Can anybody help me. Thanks

I don't see the logic why the management controlling the hours of part time clerk, mail handler & even the TE's. They only work less than 36 hours. But carrier can have overtime just to do the job of clerk & mail handler. Management do some math please!!!

In My town there are 2 small villages, and therefore 2 postoffices, that are a mile apart, couldn't those be combined for some savings? Sandy Creek and Lacona,NY villages.

I suggest expanding the USPS services to avoid thousands of postal workers lay-offs. For instance, distributing fresh produce from local farmers directly to their communities, delivering dairy products or meat to customers from dairy & meat producers, in other words, becoming the logistics company of any small enterprise or local manufacturing outfit, etc. Nowadays there is a new global commerce trend paradigm where people are buying retail directly from small manufacturers located in South East Asia, bypassing large corporations such as Walmart. I wonder if the same operations can be implemented locally but for farmers, ranchers and small manufacturing companies using the USPS as their main logistics supplier. The USPS has a huge infrastructure capable of delivering millions of goods efficiently to customers, which at the present time is being underutilized.

by reinventing ourselves into serving the new market demands for delivery services to continue to be the World's First Class Postal Service, rather than the best and most efficient buggy whip company.

Maybe the post office should WAKE up and find out why Fed Ex and UPS have been so successful in the few short years that they have come along and taken the bulk of the profitable business away from the USPO. I can help you with an answer. BETTER service and better people. Their rates are higher than USPO but we don't mind paying for BETTER service. Years ago I worked Chicago and had to ship and receive packages via the postal service. Every nite I went to the O'Hare PO to pick up the days packages. The men working there were the WORST people I have ever dealt with in my entire life. After that I switched to UPS and later used Fed Ex. Is ANYONE awake at the POST OFFICE?????

Do you think anyone at the post office will read my last message??? I doubt it! Thats the reason that they have such BIG problems. Its funny how organizations that have a monopoly don't change till its TOO LATE. All they had left was First Class mail and now ..here we are on E-mail. 80% of their income goes for wages! And I bet that most of them are retired. Wake up America!

Comment

Nice try on that one. Did you know that the Post Office delivers parcels given to them by UPS and Fedex, to deliver to residences. WHY? The Post Office delivers packages to homes better and cheaper than Fedex and UPS. That's why they contract with us-we do it better, and at a lower cost. Better do your homework next time

I think we just need to stop cutting the cost of labor. We're going to end up like china where labor is virtually worthless. People need to get paid and feed their families. What we need to do is stop using china so much for our labor. They wonder why no one can find a job these days, well I think it's because we are giving all our labor to china because it's so cheap for businesses to use that but they don't realize we are destroying our country by doing so. They say only a little bit of money and labor is giving to china but it's all lies and inaccurate results so nobody looks bad. Every thing is made in china these days when it could be made here.

Other- we had an operating profit of $800 million dollars over the last 4 years. We had to pay $5.5 billion dollars per year to an already overfunded Retiree Health Care trust for the last 4 years. Name ONE BUSINESS in the US that does that. COngress did this to us in 2006. Our "loss" in the last 4 years was $20 billion dollars- exaclty the amount of the pre-funding. We don't have a financial problem- we have a Congress problem. We were supposed to pay, according to the GAO, $800 million per year for 75 years, until the uneducated lawyers of Congress stuck their noses where they don't belong.

Couldn't an amazing amount of money be raised by selling advertising on stamps?
If done right they could retain the collectible factor.
I would think Starbucks, Target, Campbell Soup etc. would love it!

Just a thought.

Lash

Most commentary on the Post Office's financial situation misses the big point. I'm just a consumer but it's clear that stamp prices have not kept up with inflation and that reduced mail volume affects revenue. The privatization forces offer a disastrous alternative. See http://nogginstrain.blogspot.com/2011/09/that-terrible-inefficient-boondoggle.html

Just like any private business if are in the red you need to cut costs and make up revenue. One way is to raise prices and have fundraisers.

I don't think many people would complain if the postal service didn't deliver mail monday through friday. (if its in a residential area) Especially on Fridays. It may be an issue of "beefing up" accounting and business practices.

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