• on Apr 13th, 2009 in Strategy & Public Policy | 12 comments
    The Postal Service spends approximately $13 billion each year with contractors, most of whom are also customers of the Postal Service. Meanwhile, the Postal Service has experienced the most significant mail decline in its history. Mail volume fell by 9.5 billion pieces in fiscal year (FY) 2008. The economic stress of current times is a major factor in this decline, and additional Postal Service revenue is lost when major businesses merge and combine their customer mail base.

    In March 2007, U.S. Postal Service officials developed Supply Management’s 3 Year Strategic Plan. One of the goals of the plan was to develop revenue generating opportunities. The plan mentioned that Supply Management should look further to identify additional opportunities to generate revenue. To meet its goal, Supply Management will focus on revenue generating opportunities that include partnering with Marketing and other business partners to identify revenue generating opportunities, increasing the use of volume rebates, and increasing licensing of its intellectual property (for example, cluster box unit delivery equipment). Royalty payments from various mail automation technology purchased through contracts will also increase revenue. The Postal Service is also considering advertising opportunities in its contracted transportation program.

    The Office of Inspector General has efforts underway to analyze Postal Service efforts to leverage its significant buying power to create revenue generating opportunities. We would like to solicit the knowledge and opinions of Postal Service employees and the mailing community. Our question is: How can the Postal Service best leverage its buying power to generate revenue and what opportunities may it currently be missing to do so?

  • on Apr 6th, 2009 in Mail Processing & Transportation | 14 comments

    Two families trade in their vehicles for more fuel-efficient ones. If both travel the same amount each year, which will save more fuel by making the change?

    • Family 1 decides to trade in their 4-wheel drive Jeep Patriot (25.5 avg. MPG) for a Civic Hybrid (42.5 avg. MPG).
    • Family 2 decides to trade in their 4-wheel drive Chevy Trailblazer (14 avg. MPG) for a 4-wheel drive Jeep Patriot (25.5 avg. MPG).

    Please vote before continuing if you don’t want to cheat.

    Did most of you think Family 1?

    Well . . . that is wrong by a long shot. In fact, Family 2 will save more than twice as much fuel as Family 1! The problem here, however, is not you – it is the poor metric of MPG (miles per gallon).

    If you don’t believe us, let’s do the math. Assume both families drive 10,000 miles per year.

    Family 1 goes from buying 392 gallons of gas per year (10,000 miles / 25.5 MPG) to buying 235 gallons of gas per year (10,000 miles / 42.5 MPG) — resulting in an annual fuel savings of 157 gallons.

    Family 2 goes from buying 714 gallons of gas per year (10,000 miles / 14 MPG) to buying 392 gallons of gas per year (10,000 miles / 25.5 MPG) — resulting in annual fuel savings of 322 gallons – or more than twice as many gallons as Family 1.

    What does this mean to the Postal Service? The best way the Postal Service (or any organization for that matter) can save fuel is to find the least efficient vehicles and replace them with modestly fuel efficient vehicles. Small changes can mean incredible savings. Use the math above to prove to yourself that raising a truck from 5 to 6 MPG will save more fuel than raising a car from 20 to 50 MPG! Also, prove to yourself that raising that truck from 5 to 10 MPG will save more than twice as much fuel as making a 20 MPG vehicle use no fuel whatsoever!!!

    Do you have any ideas about how the Postal Service can use fuel more efficiently?

  • on Mar 30th, 2009 in Finances: Cost & Revenue | 15 comments
    As Pushing the Envelope noted 8 weeks ago, the Postal Service is facing a severe financial challenge. There are concerns the Postal Service could end this year without enough cash to pay all of its bills. The Postal Service attributes its problems to two major factors: (1) the long-term erosion of high-margin First-Class Mail volume because of electronic diversion and (2) drastic volume losses due to the current recession. The Postal Service has asked Congress to
    • Allow for a slower rate of funding of its retiree health benefits.
    • Give the Board of Governors the flexibility to move from 6-day to 5-day delivery.

    Other options for the Postal Service include

    • Raising the Postal Service’s debt limits — The law currently prevents the Postal Service from ending the year with more than $3 billion in additional debt. Moreover, the Postal Service’s total borrowing is limited to $15 billion. These debt limits were last raised in the early 1990s. If they were raised, the Postal Service could borrow additional money at very low interest rates from the Federal Financing Bank. If volumes continue to fall, however, would the Postal Service be able to pay back its debt in the future?
    • Raising rates — The Postal Accountability and Enhancement Act capped rates for most mail classes at inflation as measured by the Consumer Price Index. The Postal Service could file a special “exigency” rate case at the Postal Regulatory Commission to permit additional rate increases beyond the cap. Can the Postal Service raise sufficient additional revenue by raising rates or would higher rates simply accelerate volume loss and cause total revenue to decline even further?
    • Cutting costs — The Postal Service has undertaken to cut $5.9 billion in costs in FY 2009, yet some cost cutting measures such as closing post offices or consolidating facilities face political opposition. To what degree can the Postal Service cut costs without reducing service? Some private sector companies have started laying off workers, but many Postal Service employees are protected from layoffs under collective bargaining agreements.
    • Appropriations — Congress could provide the Postal Service with additional revenue to carry it through this difficult period, yet the federal budget deficit is rapidly expanding. There may be limited public appetite for providing the Postal Service with additional funds.

    What do you think? What are the best options for the Postal Service to meet its current financial challenge?

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