on Jun 17th, 2013 in Strategy & Public Policy | 11 comments
 

A recent study from a Washington think tank argues the U.S. Postal Service should provide only last-mile delivery of mail and open all other aspects of the mail system to competition. The report from the non-partisan Information Technology and Innovation Foundation came to a similar conclusion as an earlier proposal from a group of four mailing industry leaders who released a concept paper that also proposed a public-private partnership with the Postal Service focusing on final delivery. Those authors envisioned that this so-called hybrid model would encourage innovation and efficiency.

A panel of fellows from the National Academy of Public Administrators (NAPA), a nonprofit and non-partisan organization providing expert advice to government leaders, reviewed the earlier paper and concluded that many of the ideas represent expansions of current public-private partnerships already employed by the Postal Service, i.e., worksharing. The panel recommended further study around a host of related areas, including financial, labor-related, operational integration and regulatory issues – all of which could pose a range of new challenges.

Critics note a number of shortcomings with these hybrid model proposals. First, the papers don’t provide a full cost-benefit analysis of privatizing parts of the system. Revenue could be lost if service were reduced, which could occur with numerous service providers involved in mail transportation and processing. Further, the papers don’t indicate what would become of the Postal Service’s infrastructure of buildings and equipment.

Papers and studies proposing new business models for the Postal Service are nothing new. Think tanks and academic conferences regularly churned out suggestions for rethinking the Postal Service model, ranging from a return to an appropriated government agency to privatization. Last year, the Postal Service put forward its own business plan for returning to solvency, which it called its Plan to Profitability. Recently, the Board of Governors asked the Postal Service to accelerate many of the action items in that plan.

The Postal Service’s 5-year plan requires a number of legislative actions from Congress and does not effectively change the current governance model. That is, the Postal Service would remain a self-supporting government entity funded through its own revenues. The plan calls for some greater freedoms around offering new products, greater control of its healthcare costs, and closing facilities but it does not abandon its public service or universal service roles.

We would like to hear your thoughts. Do you think a hybrid model, like the one considered in the recent papers, has merit? Would such a model add efficiencies or would it merely shift work away from postal workers, as some have claimed? In an era of shrinking mail volume and changing communications, what business model would work best for the Postal Service? How does the Postal Service continue to support its universal service obligation under a new model?

11 Comments

I’ve had small packages from UPS sent through the USPS and I can tell you that process adds a week to the delivery time. It gets to my town in 2 days and then takes a week to cross town through the USPS. That part of the system needs to be addressed with hybrid services.
I do love the USPS, and I hope you can work it out!

I don’t believe that….at our Post Office they are delivered the day UPS drops them off on our loading dock…at worst…if they drop them off later in the day they are then delivered the next day.

One problem is the way UPS and Fedex show when the package gets to us. We have seen packages that customers call about and UPS/Fedex show that we have them, only to see them show up on a pallet from them two or three days later.
If the packages get to us in the morning we take them out that day. If they come in after the carriers have left on their routes, the packages will go out the next day.

These proposals fall short in one key area: the mailing industry is a dying business. What private sector company would make any investment to enter this market? Where the private sector already operates — in upstream activities through worksharing — the margins are extremely thin. The consolidation within the printing industry illustrates what a shrinking industry this is.

The current proposals aren’t new and they aren’t particularly innovative; the ideology has been around for years. One might add that the only reason the proposals don’t advocate also privatizing delivery is that the current delivery infrastructure doesn’t readily add itself to that – yet. Give it a couple of years and delivery will be included in the package.
None of these proposals acknowledge much less address the value of public goods or the necessity for maintaining neutral infrastructure. Privatizing the postal system would likely lead to monopoly or semi-monopoly control of the postal network with many of the same problems we’re currently seeing in telecommunications. I’ve written extensively on this subject including this recent post at STPO:http://www.savethepostoffice.com/betrayal-without-remedy-unwinding-postal-service

Is it such a crazy thing to just freeze payments to the PAEA(Medical Benefits Pre-fund)and freeze payments to CSRS and FERS till the overages have been corrected?

This is not good for the American public. If this model is adopted the American public will have to pay for that last model as the most unprofitable part of the business. Why sell off the profitable pieces and keep the most expensive piece the delivery which has the least volume variable costs if you have to delivery to every house every day. Why is no one looking at the Postal Service as a fundamental service of government supported by appropriations of taxpayer money to support universal service at a low cost. Look at the privatized posts in other countries and the rates that their citizens pay. It is obvious that with privatization the costs for everyone will rise and a few individuals will make large profits. That concept is not in the best interest of the American Public.

Unfortunately, our nation’s policymakers do not look strategically at reform of the Postal Service. It seems to me that we should be debating and deciding what universal service means in this current age of digital communications. Once we have decided this, reforming and shaping the Postal service to meet that obligation would make more sense than keeping a bloated infrastructure in place because we can’t let go of what the USPS used to be and provide. Do we really need physical delivery to the door six days a week when so much communication occurs digitally? Maybe it is time to allow the Postal Service to relax its delivery standards. It is competing with “instantaneous” messaging, and it simply can’t win on speed even with overnight delivery of first class mail. Maybe value is where it excels — and if that is the case, perhaps 50 or 60 cents for a stamp is still a good deal. It is time to revise today’s “understood” meaning of universal service and make it more relevant and realistic for the world we now live in.

Workshare discounts have already created a hybrid postal service. Parcel select, EDDM, ECR, and presort discounts, as well as the contracting out of most of the mail transportation has created this hybrid model.
It has helped costs in some areas but increased it in others…
For example many presort discounts far exceed the cost savings to the USPS to do this same work with its current equipment. The elimination of this daytime/evening work has resulted in lower equipment utilization rates as many machines now only run between the hours of 10PM and 6AM. This has resulted in increased costs per letter for DPS processing. Most of the utilization rate declines are because of a higher share of presort volume rather than actual mail volume declines.
ECR mail (which is designed and given discounts for avoiding the mail processing network) actually often costs more to deliver than the combined costs of processing it into the DPS stream at the plant and delivering it. That is why significant amounts of this “last mile” mail arrives at the station and is sent upstream to the plant to be DPS processed and sent back the next day.
More hybridization of the USPS model will result in a less efficient last mile and will increase overall costs rather than decrease them.
The final plant in the system is vital to maintaining the current efficiency of our “last mile” delivery network. Anyone advocating bypassing this part of the network for letter processing is ignorant of actual delivery and processing costs and efficiency.

If this system can get private workers who are afraid of termination to actually do the job and deliver mail then I'm 100% for it. As a USPS "Customer" (I have to use that term extremely lightly, in order to really be a customer one must first be served) I'm blown away at the antics I see at my local post office branch. Non-Delivery with claims that items have indeed been delivered, "Cluster-boxes" getting mowed down around some Federal Holidays in a configuration that would be exceptionally improbable for a single driver to have caused the issue on "accident", particularly since everyone is terrified to drive near the boxes for fear they'll be accused of knocking down all 3 stands of them in a configuration that places 2 on one side of a dead-end road, and the other on the other side of the same road, with a little paper sign that says something to the effect of "Attempting to repair the damage could lead to the charges of mail theft", always on the same day they're mowed down and not repaired for weeks (in which the mail simply isn't delivered, as the mailboxes are on the ground). Yes, if there is a private business with employees that have the chance to be removed from their jobs for pulling such nonsense, count me in 100%. It may be something that can restore my "faith" that USPS delivers anything but insults to their "Customers".

My experience with hybrid mail is nothing short of awful. Deliveries that were supposed to arrive in 2 days took more than a week, items marked delivered never made it to the local post office let alone my house--I have never had so many late and lost deliveries in my life as I have had in the past month, and they've all been hybrid deliveries.

I now make it a point to ensure my packages are delivered direct and not through hybrid services.

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