on Dec 28th, 2009 in Mail Processing & Transportation | 14 comments
 
When people try to discover whether the Postal Service is operating more efficiently or not, they often talk about TFP. What is TFP? TFP stands for Total Factor Productivity. It measures the ratio of the Postal Service’s outputs to its inputs, in other words, how much output the Postal Service produces with the inputs it uses.

The useful thing about TFP is that it measures only the quantity of items produced and used — not their price. Why is this important in a productivity measure? It measures solely how efficiently the output is produced. As an example, consider a painting business. If the price of the paint the company must buy falls, the business will be more profitable, but its total factor productivity has not changed. If the business finds a new painting method that only uses half as much paint, it also becomes more profitable. However, in this instance, it is also producing the same output with fewer inputs, and its TFP has increased.

For the Postal Service, inputs are labor, materials, and capital. Outputs include mail volume and special services. Since the Postal Service is a network industry, the total number of delivery points is included in the final workload measure.

The table below shows the Postal Service’s input, workload, TFP growth rates, and net income from 2000 to 2009. TFP increases do not always result in positive net income, because profitability is affected by other items like the price of inputs. Although TFP increased from 2000 to 2007, TFP declined in 2008 and 2009. As the table shows, the Postal Service cut inputs significantly in 2008 and 2009, but it was not able to cut them enough to offset the declines in workload.

chart showing input growth, workload growth, tfp growth, and net income from 2000 to 2009

If the decline in mail volume moderates, will the Postal Service be able to return to TFP growth? Also, what is your opinion of the TFP measure? Business Mailers Review recently reported that there are discussions at the Postal Service about whether to move away from TFP and use another productivity measure such as deliveries per hour. What do you think? Are there other productivity measures that you believe would be more appropriate for the Postal Service?

This topic is hosted by the OIG's Risk Analysis Research Center (RARC).

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14 Comments

Just because the measurement system does not yield favorable results, does not mean the measurement system should change or is inappropriate. I would question the Postal Service if it chose to change its measurement system due to unfavorable results. I am more courious to know what the results mean. For example, although the number of employees has decreased, have labor costs increased and what is the impact of decreased mail volumes? A 10-year trend analysis would also be interesting to me.

So if the Service cut way back on management positions that don't do anything to add to the TFP outcome then the Total Factor Productivity would improve tremendously. Since there is little evidence that despite the huge drop in craft positions little desire has been shone to reduce excess management my prediction is there will be little to no chance of improving the TFP numbers.

How come we have more then 50,000 supervisors with cuts of over 100,000 craft employees in the last 6-7 years.Also what company hands out bonuses and allows follish spending (on houses,food and parties ect)while the USPS is loseing billions.If you cant see where the savings is i will spell it out for you.Cut out all bonuses,USPS is a goverment agency if management isnt doing thier job give them a letter of removal.Job cuts and cosolidation.There is no need to have a Post Master for station with 12 or less routes.Mandate Post Masters need to have at least 20 plus routes to manage(in some cases 2 or 3 offices).Cutting and consolidating Post Masters and supervisors nation as well as suspending or terminating bonuses would help save the USPS BILLIONS.The craft employees have given back and continue to do so.While doing so, continued a high level of customer servive as well as meeting projections.

What is the factor for a public school? Their only product is service. Why is it that even the PO doesn't produce anything but service, we are held to a standard that does not reflect our main product. If you want to gage our service, how about asking the customers. I don't think you will like the result. So we use data that doesn't take into account how we are viewed in the eyes of those we serve.

I have to concur with the others. There is way too much management for the number of clerks and carriers. If you eliminate many of the pointless reports, programs and logs that are filled out everyday, you will have even less need for those useless management jobs (and save a lot of paper). You can eliminate them, and save millions, and in turn improve your TFP.

Also, get rid of POOMS. They no longer serve a puropose except to fulfill their egos by micromanaging. All offices are computerized now, and all of the information that needs to be disseminated can be done at area level.

So why is it that there are far fewer craft positions, yet the same number of management positions?

Anyway to factor in the costs of NON productivity of unnecessary redundant Management? Until you stop using the age old technique of using managements salary cost as (overhead), stop beating that stupid cost saving factor of eliminating craft employees as the only way to save the Postal Service.

Hello, I am posting here in the hopes that someone will help me or offer a suggestion as to what is going on. I am a business owner and ship USPS regularly - I purchase $3000 postage/month.

My problem is with the international priority mail shipments. It takes 8-10 days for the package to reach from where I reside, to the LAX dispatch center (it usually gets there the same day, or 24 hours) This has been happening since the last 3 months. The delay is increasing every week. I don't understand how a package takes 8-10 days to get somewhere, when that place is 80 miles away. Because of this delay, there is an increased chance of packages getting lose (in fact, 2 are already lost)

Can someone explain what in the world the problem is? Could it be the sorting center between my post office and LAX? USPS Customer service has been of no assistance, and USPS Inspection service will not handle my complaint. I have completely stopped selling to international customers now (they can't afford fedex/ups) Thanks

What about the vaunted value added factor. can usps reinvent itself? can it morf into a new industry?

HAH! Complaining to the Postal OIG about poor management is like complaining to the Gestapo about the SS. They serve at the pleasure of the PMG and BOG and are only interested in demonstrating how useless the rank and file are and how the USPS would be better served by an all temp workforce. OIG reports about theivery and lying among managers is eyewash. None of these people ever get removed. The OIG functions as a beard so the PMG can put up the facade to Congress that he can police the service. If productivity is indeed dropping, it is because of a demoralized workforce exacerbated by a complete lack of integrity among managers who are in a slash-and-burn mode.

Congratulations everyone. We are about to handle the biggest mailing in history. The Census 2010. We will handle this like everything else. All counted. Get it done.

Ah yes, the census mailing. We can sure use the added volume. Anybody taking bets yet as to whether we will have another stupid log to fill out to record and count the pieces of this mailing?

when will tfp be use to measure the actual worth of supervisors in mail processing and in the AOs.

it would result in very interesting results that might force the PFP program to be disbanded.

Once again: Theory is excellent.
Practice leaves something to be desired.

How about 'The Freakonomics Postulate'? We already have walk-sequenced flats.

http://www.youtube.com/watch?v=OSNVKC8DtvU

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