USPS Transformation is Necessary for Survival: What Does This Mean?

Postmaster General Pat Donahoe recently addressed the financial difficulties of the USPS^®, outlining a broad wish list of things he’d like to see done to combat its slide toward bankruptcy. Some of these items can be executed immediately, such as facility adjustments and the removal of positions due to natural attrition. Some would require congressional action and others would require support from the president. US Rep. Darrell Issa, chair of the Postal Affairs Committee, would like to remove the Postal Regulatory Committee Commission (PRC) and withhold some of the postmaster general’s duties, replacing these with a ten-member oversight panel. President Obama advocates a reduction to five-day delivery and repayment of the prefunded healthcare fund over a two-year period. Despite their differences, each of these strategies were proposed with the survival of the Postal Service^™ in mind.

What needs to be done, and what will these proposals accomplish?

The fact is the Postal Service needs to reduce its workforce by about 200,000. 100,000 to 120,000 of these can be eliminated by offering retirement to eligible employees. What else needs to be done? What makes the most sense? I believe the frontrunners are five-day delivery and the restructuring of the distribution network, making sure the impact that these changes will have on the industry is fully understood.

Five day delivery. For quite some time now it has been one of the most popular options for reducing the Postal Service’s debt. Many organizations are supporting it. While it isn’t popular across the board (Sen. Susan Collins and Postal Regulatory Committee Chair Ruth Goldway believe that it represents a cut in service), we need to consider it. Moving to a five-day delivery schedule can result in significant cost savings – savings estimated at 3.1 – 3.2 billion dollars per year. I can see this as being a rapid transition. I estimate that it would only take between two to four months to fully transition to a five-day delivery schedule across the board.

The other popular solution is the restructuring of the distribution network, specifically reducing the number of facilities from 508 to 175. This is a rather audacious goal, but one that Vice President of Delivery Network Dave Williams believes can be accomplished by the end of 2012. Regardless of how implausible a goal such as this seems to me, the fact remains that the USPS estimates that it loses an average of ten million dollars per day. The current delivery network is outdated and underutilized for today’s mail volumes. It’s obvious that something needs to be done, but a reduction like this will have quite an impact on the industry overall. Changing the delivery network means removal of predictable overnight delivery of First-Class Mail^®, which hurts the mail class’ main selling point. It is the effect this restructuring would have on Standard Mail^™ that concerns me most. This class is still showing growth, innovation, and opportunities, and we need to be aware of the impact on Standard Mail delivery predictability that this restructuring would have.

Whatever the USPS decides to do, the changes are most assuredly going to be significant. Selecting, planning, and initiating these changes needs to be a collaborative effort between the Postal Service and MTAC. Members of MTAC are technology providers and industry insiders who have unique insight into and understanding of the numerous changes that will be involved and the impact that these changes will have on the industry. For example, legal concerns will have to be taken into account. Some mailers are required by contract to print mailings on a specific day of the week. If five-day delivery and/or distribution network restructuring were to take effect contracts would need to be renegotiated. Together, the USPS and the members of MTAC will have to make decisions with true visibility, oversight, and transparency, ensuring that the cost-cutting decisions made are in the best interest of those who use the USPS' services on a day-to-day basis.

While these changes seem intimidating to printers and mailers, technology providers will be there to help compensate for them. Although mailpieces will take longer to reach their destination, making delivery times more difficult for mailers to predict, mailpiece tracking services such as Bell and Howell’s Track N Trace^® will help overcome this problem. By leveraging the Intelligent Mail^® barcode, these services give mailers full visibility into the USPS mailstream, showing the progress of each mailpiece step by step throughout the delivery chain. This will allow mailers to develop a precise point-to-point delivery schedule window. And whereas postage rates will likely rise as a result of changes in zones and induction points, technology providers can, through collaborative efforts and strategic workshare initiatives, make adjustments to mailing software that will help mailers take advantage of cost-cutting opportunities like never before.

We need to transform the Postal Service’s transformation plan. It’s a new day, a new playbook, and it’s a white sheet of paper. We can write the story together..

Chris Lien

President