on Sep 29th, 2010 in Strategy & Public Policy | 7 comments
 
The U.S. Postal Service is used to delivering large amounts of mail. Last year, it delivered more than 177 billion pieces. More mail pieces are sent per person in the United States than almost anywhere else in the world. But mail volume has been declining. How will the Postal Service change if volumes continue to fall? Is the Postal Service even financially sustainable at lower volume levels? The Office of Inspector General (OIG) asked the George Mason University School of Public Policy (GMU) to find out. The results of GMU’s work appear in a paper released today on our website. GMU researchers looked at how mail volumes of 150, 125, 100, and 75 billion would affect the Postal Service’s financial position and cost structure. Their results are encouraging. They found that the Postal Service is financially sustainable at volume levels down to 100 billion pieces per year, although price increases above inflation would be needed. The cost structure of the Postal Service would also change at lower volume levels. For example, delivery would account for a much larger share of total costs. GMU researchers also looked at the effect of various cost reduction initiatives and how they would impact the price increases necessary to break even. The paper describes their results and a description of the model they used for their analysis. What do you think? What are the biggest challenges for the Postal Service at lower volume levels? This topic is hosted by the OIG’s Risk Analysis Research Center (RARC).

7 Comments

VERY well written paper. Keep it up!

It's not just about volume. There is a huge market out there just waiting to be tapped. Currently, Fed Ex and UPS are delivering high revenue packages by ground and overnight. The Postal Service has the infrastructure, outstanding on-time delivery statistics, and low prices for the same services. This is about perception. If the public sees the value and dependability the Postal Service offers for these services, then revenue could go through the roof. "If it fits, it ships," is great, but why isn't the Postal Service doing more to increase market share? It's hard to send a package or a 50 page overnight document by email. This is where an incredible solution and opportunity lies to increase revenue and save jobs, but I don't see any activity to take advantage of it.

It's clearly a given that letter volume will not come back to previous levels. But like the previous poster said, the package market has a ton of untapped potential. I think one way to tap this is to start setting up "Shop and Ship" kiosks at many retail stores (Walmart, Target, etc.) during the Christmas season. Customers can do their shopping just like they normally do, and once they are done they can swing by the kiosk and send out their gifts. Or another option is to have them do their shopping at one of these kiosks, and let the warehouses ship them out directly, provided that they use USPS to ship them out. This can get the people who are leary of online shopping, or do not have computer access to use our services.

Putting offices in supermarkets makes little sense, who is going to ship out groceries? And you can get stamps anywhere. Set them up in discount retailers and you will get more for your money.

I agree, cancel that retirement package and give them a 401k. Then up the rates to comparable with fedex and the other ones.

Well......................... I can't really identify
what the challenges of lower volume are?
They would appear pretty obvious.

But, let's just take a brief look at the web-streaming(1) numbers from NETFLIX. In lieu of a CD delivered via the mail.

(1) This means that the "content", or movie being
played by the rental customer, is being piped to their home video screen via/the internet, instead of a
TV service.
BTW (By The Way) it can be wireless as well.

This can be interpreted as the end user does not have cable TV, rather they have just an I-Phone or a
wireless computer connection.

You guys can do the arithmetic on the Urban area
postal footprint.

Source NetFlix website.
CHART OF THE DAY: Netflix Streaming Up 145% In A Year
4 million to 11 million.

That's a brilliant idea, Eddie. Sending a Christmas card would only cost about $12.00.

"increases above inflation would be needed"? Is that for the over paid union workers?

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