on Mar 30th, 2009 in Finances: Cost & Revenue | 15 comments
 
As Pushing the Envelope noted 8 weeks ago, the Postal Service is facing a severe financial challenge. There are concerns the Postal Service could end this year without enough cash to pay all of its bills. The Postal Service attributes its problems to two major factors: (1) the long-term erosion of high-margin First-Class Mail volume because of electronic diversion and (2) drastic volume losses due to the current recession. The Postal Service has asked Congress to
  • Allow for a slower rate of funding of its retiree health benefits.
  • Give the Board of Governors the flexibility to move from 6-day to 5-day delivery.

Other options for the Postal Service include

  • Raising the Postal Service’s debt limits — The law currently prevents the Postal Service from ending the year with more than $3 billion in additional debt. Moreover, the Postal Service’s total borrowing is limited to $15 billion. These debt limits were last raised in the early 1990s. If they were raised, the Postal Service could borrow additional money at very low interest rates from the Federal Financing Bank. If volumes continue to fall, however, would the Postal Service be able to pay back its debt in the future?
  • Raising rates — The Postal Accountability and Enhancement Act capped rates for most mail classes at inflation as measured by the Consumer Price Index. The Postal Service could file a special “exigency” rate case at the Postal Regulatory Commission to permit additional rate increases beyond the cap. Can the Postal Service raise sufficient additional revenue by raising rates or would higher rates simply accelerate volume loss and cause total revenue to decline even further?
  • Cutting costs — The Postal Service has undertaken to cut $5.9 billion in costs in FY 2009, yet some cost cutting measures such as closing post offices or consolidating facilities face political opposition. To what degree can the Postal Service cut costs without reducing service? Some private sector companies have started laying off workers, but many Postal Service employees are protected from layoffs under collective bargaining agreements.
  • Appropriations — Congress could provide the Postal Service with additional revenue to carry it through this difficult period, yet the federal budget deficit is rapidly expanding. There may be limited public appetite for providing the Postal Service with additional funds.

What do you think? What are the best options for the Postal Service to meet its current financial challenge?

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15 Comments


Another obvious option is to venture into non-traditional products and services that leverage the brand, trust, assets and resources of the Postal Service in addressing business challenges faced by the Administration and other federal agencies.

Innovation leading to increased productivity is the fundamental source of increasing wealth in an economy.

Let's not limit our options. How about any or all of the following?
-Close all POs level 11 and smaller, and all 13s and 15s that are within 15 miles of a larger PO.
-Go to evaluated city routes, eliminating a meaningful number of carriers at least half of the existing number of delivery supervisors.
-Close all the BMCs.
-Move all city deliveries and many rural deliveries to cluster boxes or their equivalent.
-Allow crossing craft in reasonable circumstances.
-Go after the revenue cheats.
-Require annual recertification for all Business Mail Acceptance employees (craft and management) or they lose their bid.
-Consolidate processing facilities within 50 miles of each other.
-Consolidate service centers, eliminating redundencies.
-Consolidate data centers, eliminating redundencies.
-Etc.!

Pursue Neighborhood Mail.

Closing small offices is definitely not the answer. The small post office has been around for years and not all of the 13s are losing large amounts of money. I think it would be better to close the Level 11 offices that do not have many post office boxes rented. If a post office has 100 or more boxes rented, it should stay open. I prefer that none of the small post offices close. They are part of the communities history and postal customers will go to UPS or another competitor to do their business if the postal service starts closing small community post offices.

The USPS has lost its way because it is confused as to what its purpose is.

The Post Office historically and the USPS currently were the constitutionally charged manifestations of the Federal Governement's obligation to provide a universal delivery platform for all residents of the United States.

The current administration of the present configuration of the Post Office has forgotten this premise for the reason of their institutional existence. The Postal Service does not exist to be a component of the Mailing Industry.

The very maintenance of the universal delivery platform is in danger. The acute cause of the danger is the current postage rate structure which has FULLY PAID FIRST CLASS mail paying for the maintenance of the overhead costs while the PRE SORT FIRST CLASS and other PRE SORT MAIL RATES pay only thier respective processing and distribution costs.

The chronic problems are a processing network that is still aligned to an extinct railroad distribution system. the inability of the top bureaucrats to identify what redundant capacity the Postal Service needs to meet its Federal Government obligations, i.e. uninterrupted mail delivery service to all residents of the United States under all conditions.

Until this is addressed ,more effort, more money, more institutional resources will be wasted on a system that has lost its way.

The goal of the USPs is not to be a component of the Mailing Industry but as a government service provided to all residents of the United States as required by the contitution. It should be run in a business like manner but its reason for existence is not profit driven.

The distribution networks,the mail processing system need to be critically examined as to their overall fit into a new system. A large part of the problem of the current structure is that a parallel mail processing system has arisen through the subsidies provided by the pre sort discounts which divert the revenue needed to maintain the overall postal system.

Another vast portion of the problem is corporate psychology of the USPS towards its employees. The administration of employees is abysmal. The incorporation of ergonomic measure to alleviate and lessen employee injuries i.e. such as task rotation, equipment design, facility design, equipment and facility maintenance, the humane and civil and efficient processing of injured or ill employees, the training of employees; all take second seat to the greatest current goal of making it look cheaper right now. --- The postal version of quarterly profit pressure.

The current personnel of the administration architecture and the corporate structure's purpose must be trained anew, or replaced, to arrive at a Postal Service which will function as a universal delivery platform.

The greatest need now is to re adjust the rate structures to raise the revenue needed to maintain the overhead structure and platform by the allocation of the true costs of maintenance proportional to each mail class, subject of course to the public review by Congress.

Cost cutting, personnel retructuring(reduction of employee numbers and encouragement of retirement eligible attrition so that younger and less expensive employees can be brought in)and a change in the corporate pshychology of the executive and management structure are also demanded.

The greatest need is to change the psychology of the management and executive structure so that the USPS or its evolved entity can survive.

In my area, we have two trucks coming in the AM and two trucks coming in the PM. If mail volumn has dropped, why can't we eliminate duplicate transportation. Also, we spend most of our time on reports instead of moving the mail or seeing to it that our customers have been served right. We need to consolidate reports. Also, having good service is great, but we need to consider the costs of extra trips to bring in mail. Logistics needs to be scheduled better. Crossing crafts so we can have more flexability without OT would help and closing all small offices and maybe opening them for a couple of hours a day for that community would save alot. I think we can do alot of things instead of cutting out a day of delivery. The Postal Service has been good to me, and I would hate to see it fail, but I think we have made alot of bad decisions. Upping the rate of stamps, is not going to make us viable. More people will find another source to send mail when we keep going up. We need to cut costs. Some managers from headquarter on down don't think twice about spending. Some offices have so many supplies that they will never use. In my office, I have forms that are yellow they are so old. If we had cut back when we were doing good, we might not be in this shape. I think headquarters should ask the employees how to save money. Unions need to change their ways or bend a little on their rules. They will not have any members if the USPS doesn't need employees. The rate we ae going, we will not need employees.

wow what a question

one thing i would do is to listen to the people that mail, like it or not these people whether companies or the public are who pays the bills, and lets not forget the employees that actually work the mail everyday, not the pencil pushers who try to save their jobs by suggesting dumb ideas

it seems that the usps refuses to listen to anyone and just keep going on this path to being extinct. the naps president is one to listen to, even though the usps doesnt want to listen, getting rid of these jobs that people create for their friends and have huge salaries are one problem, stop training 204b's, this is a waste, we need them to work the mail!! if you are cutting supervisors why keep training these people? not only that but at my plant i am called in for overtime and i see 2 204b's standing around on higher level bs'ing with a supervisor, so not only are they on higher level but your paying 2 or 3 people time and a half, whats wrong with this picture?

the naps president also says that if correctly implemented the paea could create mail volume that not only rivals but exceeds the record volume we saw in 2006 which while it seems crazy is not beyond what could really happen if the top people could stop pursuing time wasting ways to cut costs (read service)

hello the number one reason stop going to the post office? read any comments on any public news site about the post office and you will see long lines and bad service at the window....not being able to buy stamps without standing in line....and what does management do? lets take out all stamp vending machines!!! in our 2013 vision plan lets cut window jobs, and window hours!! lets forget about the real people that pay the bills and support us!! get a club, stop cutting hours and jobs on the window, people dont want to stand in line for hours, not only that but we are not fedex or ups that dont need people at a window because so much business is from major mailers.... they dont need people to serve millions of people a day, but we do, cut the pencil pushers and stop cutting the people that actually do the mail!!!

stop tricking yourself into thinking that people will take an e/o esp the 2nd time around with no reason to leave, i mean what are you thinking? csrs are costing the post office billions a year and you refuse to offer them a reason to leave, people at my plant will be damned if they leave, they dont care if they stay there until they are 80, if nothing else pay the csrs people to leave, wake up.... not only that but you cut tour 2, which ends up excessing and possibly losing the junior people to quitting because they dont want to move and you end up with keeping all the csrs people that are now making more money because they are moved to tour 1 or 3 making even more because of night and sunday premium, which costs you up to 7 or 8 thousand a person a year more, all because you are too stubborn to give a little to save a lot...

wake up post office!

One of the biggest mistakes the Postal Service can make in its quest to reduce expenses is to cut service to a point where it’s so reduced that it drives away customers. It is obvious changes need to be made in the way we are doing business, but are we saving ourselves into extinction? Service to our customers and customer loyalty are the building blocks that have made the Postal Service one of the government’s most trusted entities. With that thought in mind, how could postal management reduce hours at one of the nation’s busiest Post Offices – Merrifield, VA? Merrifield is open 7 days a week and regardless of when you go there to do business, the lobby is crowded and the windows are busy. They used to be open until 11 or 12 o’clock on weeknights and also had extended hours on weekends. Now they have cut back their hours to 9 am - 8 pm M-F and 9-5 on Saturday and Sunday.

Tax Day – April 15 –has traditionally been one of the busiest days of the year, with tax filers getting their returns to Merrifield right before midnight, with postal clerks there to accept them. Cars line up, people stand in line and the media is there in full-force. But probably not this year. Merrifield is closing at 8:00 p.m. Imagine the customer who shows up every year at the midnight hour, only to find this year the doors are locked. I’m sure some money will be saved by not having the lobby open for those extra 4 hours that night. But is it worth the cost of losing customer loyalty?

Is the Postal Service taking too much “service” out of the Postal Service?

I see that some people are quick to mention closing small offices, but do not realize the effects of proposing such actions. I am guessing that they have only spent time working in the large city office and have not seen things from all points of view.

First of all, the cost savings by closing most small offices is minimal. Do you know how many you would have to close to save a million dollars? A lot more than you realize. You would actually save more money by consolidating larger offices. Second, there will be many cases where the local residents will fight the closings, which will result in legal fees and expenses that are greater than the expense of keeping the office open.

If you want to save money, and I have said this before, allow customers to have a free PO Box in a small office in lieu of rural delivery. Yes, you will not earn the revenue from the PO Box, but you will be saving over $100 on the expense side from each potential delivery point. If 1 million delivery points were converted this way, USPS would save OVER $100 MILLION. The red book system can be enhanced to ensure that customers do not receive multiple deliveries, and to allocate the addresses properly. Doing this will still comply with the universal service obligation.

If the switch were to be made to 5 day delivery, I would still like to see the non delivery offices receive PO Box mail 6 days. Since PO Box delivery is supposedly a "Premium Service" This would make it live up to that premium. Also, thee are still a lot of businesses that need 6 day delivery, so this can be seen as an opportunity to rent out more PO Boxes.

Most replies addressing the cutting of costs in the USPS refer to closing offices and cutting services; I sincerely hope the USPS will investigate and clean up the services they have. My example is, I have packages that occasionally must be forwarded to me but those packages will make at least two trips across the US before being delivered. Priority mail takes at least two weeks of traveling back and forth to finally get to me.
Figure the expense of being handled two or three times at the same facility and the cost of fuel for the trips back and forth....staggering how much extra cost one package can accrue. IF that package was handled properly, it would make one trip in four days and reach it's forwarded destination.
Multiply this by 100 packages, nation-wide, and you will find the cost staggering.
Cutting or restricting services is not the answer, cleaning up the efficiency of existing services, however, is.

Push for President Obama to repeal the postal Accountablity and Enhancement Act.
The post office should be a government agency (non-profit) with universal service. Franklin's vision was the unity and service of the country not profit.

Eliminatate PCES positions ; no one should make over $100,00. Hire & promote within-there are thousands of postal workers with college and graduaute degrees. Select non-partisan panel to pick the best-not the best connected.

Stop all outside contractors, especially all former retired postal employees. The temptation for unfair gain is too high, let's replace greed and profit with
service and honor. Let's get back to what President Kenndey described as the willingness to serve others not ourselves.

Hire & promote within-there are thousands of postal workers with college and graduaute degrees. Select non-partisan panel to pick the best-not the best connected.

The postal service will not be in this mess if they had selected non-partisan panel to hire the best educated and with needed skills for the jobs instead of well connected. The jobs are given to one with less qualifications but best known to higher ups. I had considered that improving education would give me opportunity to serve my organization better but I guess they don't need that.

I've read some of the comments, but not all. Going after the revenue cheats sounds good to me. That goes on in our PO. Sweet heart counts are alive and well..meanwhile, I work my tail off for more work, less money than a couple of others whose route is evaluated higher. Padded of course. Makes a person feel real good. Not! I've suggested money making ideas and I have not heard a word.

In my office, I say go after the boss who is not working 8 hours a day. Leaves early at least 4 days a week.
This is not fair pay and does not look good to the clerk who is told " clerk hours are only 6.50 hours a day".
Ya, I say to myself, why do you leave early all the time!

USPS is critically behind than competitor like UPS and FED EX.

I recommend all the upper management to go their and learn from them from the scratch.

maybe it is good idea to go as a regular worker as undercover is a good start.

for example, the fed ex headquater located at memphis tennesse.

I believe they are using most of electiricity for the entire plant from solar panel installed on the top of roof.

I will say the postal service should do the same thing starting from OIG building first which is gets most of the solar energy from the nevada sun.

that will set an example for the whole entire nation.

second, the scanning technology is far behind than fed ex or ups.

I will say 50 yrs behind!

The customer wants to know where the package at in time and precisely !!!!!!!!!

third, alternative vehicle use, this is something the ferderal government should step in and make a strong regulation.

like "all federal vehicles must be replace with electric or hybrid by such ..date"

I think the transpotaion cost for the any delivery service is critical point after the labor cost.

and fed gov and usps far behind for this option.

fourth, if the PMG wants the smart and lean organization, he should consider cut the chief more than indians.

the postal service is the only organization 1 out of 7 employee is the supervisor and headquarter employee which is upper managemnet who gets more than $200k plus has been increase 28 % while they were cutting the worker who touch the mail.

fifth,if they knew they will consolidate mail processing facilities more than a half, why they spend the money to update the facilties and close down after all?

let's say the facilties will be close by such date 5 yrs from now, why postal service have a contract to install fiber optic cable-1 million , install a new dock for 5 million, install the new restroom $500,000 and so on...

that is called put the money down to the drain.

with that kind of money the postal service could get more better
scanner ,better fuel efficient vehicle,or solar panel for the hub facilities already.

my point is postal service should look at the doing better for the long run not a shortfall fix because the economy is slowing down.

thanks for reading my article.

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