• on Apr 19th, 2010 in Delivery & Collection | 152 comments
    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).
  • on Dec 12th, 2008 in Mail Processing & Transportation | 21 comments

    In 1970, the Postal Service delivered fewer than 85 billion pieces of mail. Thirty years later, mail volume had more than doubled to nearly 208 billion pieces of mail — average growth of about 3 percent per year. The Postal Service relied upon this dependable growth in mail volume to finance the expansion of its network. The traditional business model worked.

    Then, mail volume entered the new century. Each year from 2000 through 2003, total mail volume decreased. In 2005, the volume of Standard Mail surpassed the volume of the Postal Service’s flagship product First-Class Mail for the first time, with First-Class Mail volume actually falling below its 1995 level. Total mail volume growth averaged an anemic 0.3 percent per year from 2000 through 2007, and when the Postal Service’s 2008 fiscal year ended on September 30, volume had declined in nearly all categories. The total decline in 2008 was 4.5 percent to 202.7 billion pieces.  The Postal Service is forecasting continued volume decline to 194.5 billion pieces in 2009.

    Mail Volume

    Do these recent trends portend a fundamental change to mail volumes? Or are they mostly a symptom of the current adverse economic conditions? What are the long-term consequences of electronic substitution? How have other factors such as value of competitors’ products, new technologies, and complementary services affected mail volumes?

    The Postal Service touches everyone, everywhere, nearly every day and is the cornerstone of the $1.2 trillion mailing industry. The Postal Service’s traditional business model is threatened. But, with every threat, comes opportunity. Which products and services may rebound and grow?