Public policy debates about solving the Postal Service’s financial crisis have largely focused on reducing costs by cutting service such as Saturday delivery, transitioning from brick and mortar post offices to alternative retail sales channels, or limiting other functions performed by the Postal Service. There has been less talk about the costs of meeting delivery service standards, which were reviewed following the passage of the Postal Accountability and Enhancement Act of 2006.
Can the Postal Service relax some of its requirements to save money in transportation or processing costs? Right now, its goals are to deliver First-Class Mail in 1 to 3 days and Standard Mail in 3 to 10 days. A slight adjustment of these standards in particular areas might make it possible to save a great deal of costs. Instead of developing the goal first and trying to reach those levels, no matter how costly it is, maybe the Postal Service should closely analyze its infrastructure and develop goals that allow for reaching the greatest efficiencies.
For example, if the service standards for bulk mail from Chicago to Los Angeles were given an additional day the Postal Service could avoid the expense of trucks and instead utilize economical rail transportation. A First-Class Mail package that currently travels by air could be carried by truck if given another day.
By relaxing service standards, the Postal Service can move further towards a hub and spoke network, which could result in substantial savings. Currently, plants may have lots of half-empty, smaller trucks fanning out to a multiplicity of plants only once or twice a day. Under this new strategy, many trucks would go to a mail consolidation facility, which consolidates the mail and ships it on larger, fuller trucks to the destination facilities throughout the day. This design has the additional benefits of network stability and is capable of scaling up or down with changing mail volume.
The bottom line is that the Postal Service and its stakeholders need to decide what service standards are worth the cost. The Postal Service should have an honest and informed discussion about the cost savings that it can pass on to the public by relaxing some of the present delivery service standards.
Do you think the Postal Service should adjust its delivery standards to cut its costs?
This topic is hosted by the OIG’s Risk Analysis Research Center (RARC).