• on Nov 16th, 2009 in Strategy & Public Policy | 19 comments
    How can companies harness hidden knowledge located throughout the enterprise? Supporters of prediction markets claim they offer a way. Prediction markets resemble financial trading sites, but instead of buying and selling stocks, traders buy and sell predictions. A company that wants to operate a prediction market can provide their employees virtual cash to trade and give those who do well over time small prizes.

    So how do prediction markets work? Let’s say a shoe company with an active prediction market is rolling out a new style of boots. Employees at the shoe company could buy a prediction that the boots will hit stores on time. If the project succeeds and meets its schedule, the prediction pays $1. If there are delays, the prediction will pay nothing. Conversely, skeptical employees could bet against the boots arriving on time. They would receive $1 only if the boots fail to arrive on time. The price of the prediction signals how likely the entire market thinks the event will happen. If everyone believes the boots are on schedule, the price of predicting the project will be on time might be high — 80 cents or so. However, if fears grow that the boots will be late — perhaps a key supplier is having production problems — the price of the on-time prediction will start falling. The falling price is a sign that all is not well on the project.

    A prominent example of a political prediction market is the Iowa Electronic Market run by the University of Iowa, which allows participant to predict the outcomes of various elections. You can check it out at www.biz.uiowa.edu/iem/.

    The advantage of prediction markets is that they add up the opinions and estimates of a wide range of employees. Thus, they are more likely to pick up on potential problems that management may not be aware of. Furthermore, the betting component forces people to “put their (virtual) money where their mouth is.”

    If this sounds farfetched, it is not. Corporations like GE, Best Buy, and Hewlett-Packard are already using prediction markets to increase innovation and improve forecasting and decision making. Many more are testing the feasibility of this idea in pilot projects.

    The Postal Service has a large, widely dispersed workforce that knows a lot about how things are going on the ground. A prediction market might help uncover this hidden knowledge. For example, if the Postal Service wanted to find out more about whether bulk mail volume would pick up, it could run a prediction market for BMEU employees who might know about customers’ plans. Or if the Postal Service were rolling out a new piece of equipment, it could run a prediction market on how successful the equipment would be. There is one thing, however, that could limit the use of prediction markets at the Postal Service: many employees do not have access to the Internet at work.

    What do you think? Could prediction markets be a potentially useful tool for the Postal Service? Would lack of Internet access limit its use? If the Postal Service did implement prediction markets, what sorts of questions should it ask?

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

  • on Nov 9th, 2009 in Delivery & Collection | 65 comments
    News about disappearing collection boxes is everywhere these days. Even BBC News ran a story on the decline of the blue collection box in the United States.

    The Postal Service argues that picking up mail from collection boxes is expensive. Removing underused boxes is a cost savings move and a reasonable response to the economic crisis. The Postal Service is removing boxes with less than 25 stamped mail pieces per day.

    Critics wonder if there is adequate analysis to support the 25-piece minimum and whether one reason for removing collection boxes — in addition to the minimal cost savings — is that the Postal Service does not want to be criticized for poor service. Fewer boxes mean fewer opportunities to miss a collection or to pick up mail too early.

    Is the Postal Service thinking too narrowly and missing some of the value of collection boxes? The ubiquitous presence of the boxes is free advertising for the ailing agency. How much would a private sector company pay to be allowed to put a collection box anywhere it wanted to in the country? Millions? Billions?

    What do you think? Is removing collection boxes a reasonable cost-cutting move or a strategic mistake that the Postal Service will later regret?

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

  • on Oct 31st, 2009 in Delivery & Collection | 65 comments

    In these challenging times, reducing the cost of delivery operations — one of the Postal Service’s largest expenses — could save millions. One option the Postal Service is considering is to discontinue Saturday city and rural delivery and collection services.

    Saturday is said to be one of the lowest mail volume days. It’s also a day when many businesses are closed. The September/October 2009 digital issue of Mailing Systems Technology included a survey of managers working in the mailing industry. Of those surveyed, 98 percent said changing to 5-day delivery would not require a change in staffing. The survey results also indicated that most managers surveyed (81 percent) preferred Saturday as the day of the week that the Postal Service would stop delivering mail. An additional 62 percent of the managers surveyed felt that once implemented, there should be no exceptions to 5-day deliveries such as for holiday weeks or high-volume mailing periods.

    Gallup also conducted polls on ways to help the Postal Service solve its financial problems. They found that 66 percent of Americans supported reducing mail delivery days from 6 to 5 days, and 66 percent also supported reducing the number of days the Post Office is open from 6 to 5 days.

    The Postal Service is currently studying the reduction of mail delivery from 6 days to 5 days. Should the Postal Service consider eliminating delivery, collections, retail, and remittance services only for delivery units with low mail volume? Should the Postal Service eliminate these services for all delivery units nationwide?

    This blog is hosted by the OIG's Delivery directorate.

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