As the Postal Service struggles to survive, it needs to take a good look at the financial health of its products. However, ascertaining the financial health of a product line requires an accurate estimate of the cost of providing that product. The Postal Service is moving into an increasingly data-driven future; thus, the timeliness and accuracy of cost measurement will continue to grow in importance. The Postal Service has not changed its cost system fundamentally in many years, though it updates significant inputs annually. There have been calls for an examination of the accuracy and relevance of the system and implementation of specific changes. In order to inform the dialogue and debate, the OIG published A Primer on Postal Costing Issues, a discussion of postal costing, including the most salient of the concerns the Postal Service and its customers have raised.

As discussed in the paper, the main issues that have been raised are whether the Postal Service:

1. Should use fully-distributed costing to evaluate the financial performance of products?

2. Should adapt the system to reflect the excess capacity currently present in the postal network? If so, how?

3. Should measure bottom-up costs?

4. Should use the new postal data sources in the costing system to improve accuracy and reduce costs?

5. Can improve the timeliness of cost studies and, if so, how?

As the postal market changes, the Postal Service will need new and/or different cost data to support its decisions, including pricing decisions. Many of the suggested changes and improvements would require a significant expenditure of resources at a time when the Postal Service is under substantial fiscal stress. But the Postal Service needs the right cost data to make the right decisions..

What do you think – should the Postal Service be spending money to improve its cost systems? If so, what do you think are the most important changes needed?

This blog is sponsored by RARC.

Comments (9)

  • anon

    I actually think the post office does a good job most of the time, but their business model must have been designed by a dimwit. What profitable business gives away merchandise for its competitors to use? Ever see how many eBay items are shipped via UPS but packaged in a FREE USPS box? How dopey can you get. The USPS should charge for its boxes, ALL of them!

    Jun 19, 2012
  • anon

    "The US Post Office can eliminate the deficits simply by raising the first class stamp to 0.62 cents. This measure would increase revenue and also this will allow them to keep the mass mailer programs the same and of course the parcel service too. This program would benefit the consumer because it would free precious capital which can be deployed in other social areas."

    May 18, 2012
  • anon

    Here's an idea: I have searched high and low for an iPad App or Mac/PC application that would enabled me to write a personal letter on my iPad (or Mac) and then have it sent via the USPS (aka snail mail). There are lots of postcard and card apps, but no letter apps. This seems like something the PO could offer. There are machines that print fold and stuff envelopes. Bulk mailers use them. Why could these not be used by the USPS? It seems like it would cut down on some of the physical delivery costs. I would happily pay for this service. Postcard apps charge from $2 to $5 per card. Even Apple has a card app.

    May 17, 2012
  • anon

    Janet.... It's actually the 13 ounce rule is FAA Regulations not USPS. If USPS doesn't enforce them it's BIG trouble. Also, The FAA does test mailings to see if the PO pulls the mail out of the mail stream and returns it to the customer.

    May 15, 2012
  • anon

    Here's an idea--Provide better service!! We are a publishing business located on a legitimate street with a huge number on front of the building. Yet none of the online USPS services recognize that address. Can't event leave a comment on the customer service page!!! So this is being left here to inform the USPS that we will now be sending most of our business mail via the UPS. The reason is that our mail carrier is here very early in morning so anything we need to send that business day needs to be taken to the mailbox in our complex - or left in maildrop in our building for next day. There is NO convenient post office anywhere near our business! To add insult to injury, two of our Flat Rate Mailing Envelopes with stamps were returned this week as they are over 13oz and not taken to post office. This rule is SO ridiculous and ineffective! Harmful materials can't weigh 12oz or less??? Someone sending harmful materials would put a mailing label with return address - that SHOULD be known by the local post office??? - on their envelope??? Anyway, I'm glad the U.S. postal service is doing so well that they can drive customers over to their competitors.

    May 11, 2012
  • anon

    I totally agree Janet. Better and more reliable service is needed. I live near two post offices. Since December of last year the one post office has been totally unreliable. Me and my family went to the office to priority mail several pieces of mail only to be notified by intended receiver that they never got it. Me and my mother are both tax preparers and the mail is a big part of our business. Since last December I cant even count the number of returns that had to be reprinted and resent. One such return was even my own tax return. The only reason I found out it never made it to the I.R.S. was several phone calls to them to find out if my return even made it to them. I don't even know who to go to to register a formal complaint. If I go to the office in question all I get is we don't know or a stupid look and we can't find it. Yet this is what we pay for. Quite frankly I am tired of shelling out money for poor service. Believe me when I say that if I go to a place of business and got the poor service I get from the post office I wouldn't be returning to that business. Yet with this business we don't seem to have much choice.

    May 11, 2012
  • anon

    Please do not spend money to improve costing systems as the dynamic will change before you can get the system in place. Instead, price to market. Penny increases in the 1st Class rate probably cost more to implement than they return. But it does not matter. Just make the rate $.50 and that should hold you for a few years and speed along the paradigm shift. There are too many rates now and we do not need a study to confirm that. Simplify. No need to advertise or sponsor anything, just focus on actually delivering the mail and providing high quality SERVICE as your name implies.

    May 02, 2012
  • anon

    Here's a better business model for this modern age when every bulk mailer has computers. Each address falls into one of 5 buckets, for example the last digit of the 11 digit zip could be used to bucket 0,1 to Monday, 2,3 to Tuesday, etc. For each recipient, bulk mailer software provided by USPS calculates the day of the week to mail to a given 11-digit zip so that all bulk mail to that address arrives on the day of the week calculated as the bucket for that address. Bulk mail not mailed this way incurs a higher rate. The letter carrier delivers lowest-rate bulk mail to an address only on the calculated day of the week for that address. All other mail is delivered when it arrives at the PO, as now. The customer or the mailer can pay extra for Saturday delivery. Adjust the rates so that the system pays. Please have someone in a position to evaluate this proposal cll me. 650 988 9883.

    May 01, 2012
  • anon

    I agree with you! Get rid of Saturday delivery. Keith Gilabert

    May 15, 2012

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