• on Oct 16th, 2012 in Strategy & Public Policy | 13 comments
    There has been a surplus in the U.S. Postal Service’s Federal Employees’ Retirement System (FERS) pension program since 1992. Most recently, the FERS surplus was projected to be $11.4 billion, accounting for most of the Postal Service’s total $13.1 billion pension surplus. The Office of Inspector General (OIG) asked Hay Group, an actuarial firm, to examine the causes of the FERS surplus, and a new OIG white paper presents the results of Hay Group’s work. Hay Group found that the main reason for the surplus was differences between the Postal Service and the rest of the federal government. In particular, postal salary growth was lower than the assumptions made in the liability estimates. The surplus grew as actual postal experience replaced the initial assumptions used for the entire FERS population. Hay Group recommends using Postal Service-specific assumptions to provide a more accurate estimate of the liability. When Postal Service-specific assumptions are used to measure the Postal Service’s liability, the surplus increases from $11.4 billion to $24 billion. Given the Postal Service’s current financial health, the existence of the FERS surplus raises some questions. What should be done about the postal FERS surplus? Right now, there is no mechanism to return a FERS surplus once it occurs. Also, what about the contribution rate? The Postal Service currently pays the same FERS contribution rate as other federal agencies, 11.9 percent of payroll for most employees. This contribution rate has increased twice in the past 3 years despite the existence of a surplus for the Postal Service. Should the Postal Service’s contributions be adjusted to reflect its specific characteristics? What do you think? Share your thoughts in the comments below.
  • on Oct 8th, 2012 in Delivery & Collection | 10 comments
    The digital revolution has changed communications, and with it, the operations and finances of the U.S. Postal Service. It also has brought deep changes in the way we design networks and analyze systems. Many organizations rely on mathematical modeling to test ideas before they become operational, conserving money and time. The Postal Service, facing limited capital and resources, has also adopted this practice. It is discovering how important these tools are for assessing strategies for designing the future mail network. The Office of Inspector General has explored some of the main components of the postal supply chain - retail, mail processing and transportation, and delivery – using a systems modeling approach. This approach has allowed the OIG to use objective methods to determine how the network could be redesigned to meet current needs and future demands. This research also helps us to understand some of the challenges in developing information-based decision models for the Postal Service. A primary challenge in any modeling effort is collecting the necessary information. Without this data, the model cannot fully assess the efficiency of the operations it is modeling, and develop an optimal network solution. Postal information systems can be a complex array of the hundreds of highly varied and specialized information systems that are often developed and maintained under separate contracts. Simplifying this landscape also could enable more insightful analyses to better guide decision makers. As the Postal Service considers how it can best serve the public through its products and services, modeling efforts can help it to evaluate different proposals for change. As we develop better efficiency standards with more rich data sources, we can not only better evaluate the efficiency of operations and system design, but we can better explore how operations may be changed to meet the needs of new environments.
  • on Sep 3rd, 2012 in Products & Services | 9 comments
    As the U.S. Postal Service remakes itself into a leaner organization in the face of a communications revolution, it still remains a powerful medium and an important part of the nation’s infrastructure. A smaller Postal Service will still be huge, with more than $60 billion in projected revenue. It will not disappear tomorrow. A lingering concern remains, however, that the Postal Service is becoming less relevant to younger Americans. A recent public opinion poll by The New York Times and CBS supports this conclusion. According to the poll, only 30 percent of people under 45 say they use the mail “all the time.” While daily reliance on the Postal Service is still high for older generations, these poll results raise questions about the organization’s long-term future if physical mail does not play a role in the lives of younger Americans. A Pew Research study shows these younger generations turn to the Internet and smart devices for their news, entertainment, and to connect with friends and family. The Postal Service and traditional hard-copy communication vehicles will find it hard to win customers that have grown up as digital natives. Still, other polls suggest that hard copy and direct mail remain an important part of the media mix, even for those under the age 35. A 2011 survey by Pitney Bowes indicated that marketers under the age of 35 are more likely to use direct mail in their marketing mix than their older counterparts. Package delivery also remains an opportunity for the Postal Service as younger Americans are more likely than older generations to shop online. What do you think is the best way for the Postal Service to serve a younger demographic? Should it attempt to promote its traditional products to younger Americans and tout the benefits of hard copy as a complement or supplement to digital? Should the Postal Service instead focus on expanding its digital offerings? Is there another strategy?

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