• on Jul 30th, 2012 in Finances: Cost & Revenue | 2 comments
    The U.S. Postal Service is one of the largest real estate owners in the United States with more than 8,600 facilities and 950 million square feet of land. (The Postal Service leases another 24,600 facilities.) It also has about 357 unused land parcels with no structures on them, which have a book value of $128 million. The lands’ assessed values are likely to be significantly higher. The Postal Service has contracted with real estate company C.B. Richard Ellis to sell its surplus real estate, which includes both buildings and land. You can find the properties on the following website, http://www.uspspropertiesforsale.com/. The sale of properties would generate cash flow for the financially strapped organization. It would also contribute to streamlining its physical footprint as the Postal Service aligns itself to be a leaner, faster, and more market-responsive organization. However, the sale of real estate assets would not produce recurring revenues. Should the Postal Service consider leasing unused land parcels to developers so they can be used in a creative way to generate alternative sources of revenue? Or is this the right time for the Postal Service to sell its unused land parcels as it shapes itself into a leaner infrastructure? Or does it make sense for the Postal Service to hold these properties now and try selling them once the current real estate market regains some stability?
  • on Apr 30th, 2012 in Finances: Cost & Revenue | 9 comments
    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.
  • on Oct 10th, 2011 in Finances: Cost & Revenue | 57 comments
    Much emphasis has been placed on reducing the Postal Service’s costs in response to its financial crisis. Yet financial viability could come in the form of a balanced approach that both reduces costs and increases revenue. How would a smart business respond to declines in its major products? Would it raise prices where possible in stagnant areas and invest the proceeds into existing or new growth areas? Would it selectively discount products to grow volume in price sensitive segments? Disruptive innovation, such as that underway in the communications sphere, requires change to ensure the Postal Service has what it needs to move beyond the critical crossroad it faces today. The Office of Inspector General Risk Analysis Research Center’s new paper Postal Service Revenue: Structures, Facts, and Future Possibilities (Report Number RARC-WP-12-002) addresses the major components of the Postal Service’s revenue structure in Fiscal Year (FY) 2010, assesses existing opportunities permissible under the current framework, and discusses future options and policy considerations in a new era. Click here to read the Postal Service Revenue: Structures, Facts, and Future Possibilities white paper. How would you approach the revenue issue to make sure the Postal Service continues to provide self-funded universal service to the American people? This blog is hosted by the OIG’s Risk Analysis Research Center.

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