It's a good question in this logistics-laden season: Faced with ongoing losses, can the United States Postal Service be rescued?
The USPS has a fierce tradition that the mail must always get through. Today, though, the organization, which has been around in some form since 1775, faces two tough pressures.
First, costs are preventing that fast service — it's usually two or three days instead of one. To be fair, much more mail comes from out of town today compared with the 99 percent local mail of the first postal services.
Second, there is no monopoly for mail delivery. FedEx and UPS got their start because the USPS took its eye off the ball and let delivery and service slide badly in the 90s. For a while, the only way to guarantee delivery was not to use USPS!
Now, USPS has fixed most of its problems and offers economical guaranteed delivery, as well as pickup and tracking services. It is fundamentally cost effective in comparison with its competitors in these areas. So why is it losing big money?
There are two levels at issue. One, which creates much of the deficit, is a requirement laid on it by Congress to pre-fund its pension plan way out into the future. That's unnatural and is the cause of most of the stories of red ink.
In addition, there is a fundamental and systemic trend in business. The issue lies in the oldest service — posting letters. Escalating fuel prices have hit hard, but the fundamental issue is labor cost. Staffing to sort and deliver six days a week is expensive. Another problem that really hurts is that the volume of mail is dropping, due to the explosion of electronic transactions and email over the last decade. The fundamentals of decreasing letter count and increasing costs is a vicious spiral.
The mail service decided long ago to augment payload by having a bulk-rate service for flyers and such. Unfortunately, this is a subsidized service, and the increased revenue doesn't offset the costs of handling the wide variety of paper. In fact, the only thing saving that service from oblivion is that the flyers are local so transportation and handling costs are low.
The answer lies in embracing the technological challenges and reinventing the mission a bit. Computer and phone transactions will continue to erode the billing mail business. The USPS should accept that and retool for the loss of income. How about delivery every other day, for starters? That would allow mail deliverers to each cover twice as much territory. The reduction in staff would be substantial.
Second, the USPS is uniquely positioned to act as a package pickup point for online retailers selling the electronic gadgets and gizmos that consumers love (as well as other goods). The mail offices are designed for the job, and there are more than enough of them already in place to give coverage. The service is something the post office already supports, with the twist that a counter will need to be open late into the evening. The retailers would consider this an extremely valuable service, especially as home delivery is an almost seamless option for USPS to add (for a fee, of course). They are looking at companies like 7/11 to do the job for them, and surely USPS is better! In fact, USPS just started doing Sunday deliveries for Amazon.
Online retailers would like to expand into perishable goods like groceries. There is currently no economic model for delivery. Again, who makes delivery calls every couple of days? This concept would need to be tuned to make sure that someone is home to accept delivery.
More leading-edge thoughts address the various business segment mission statements. Delivering bulk mail isn't a winning proposition. The USPS could consider taking a channel on cable TV and delivering the flyers electronically. And if it can deliver the groceries, turn that channel into an interactive catalogue and open up an online ordering service, too. Or it could get Amazon to do it and just make delivery!
The Postal Service has to get over a protectionist labor environment, higher-than-average pay scale, and restrictions by Congress. At the same time, it needs to adjust to modern times, or it will become irrelevant and will be closed down. That would be a real pity, especially as there are real signs of vitality in its business thinking.
We've got some bright lights in the EBN community. What advice would you offer to the USPS? What ideas should it be borrowing from the electronics supply chain?