Discussion

By Dr Joe Webb on Jan 28, 2009

Electronic mail delivers 24/7/365, as does electronic payments, etc. Yet the postal service does not consider these to be competitors. It's a slow downward spiral they're in, and they are at the point where fixed costs are nearly insurmountable. One hopes for their own sake that the political pressure they have to face to make un-economic decisions (like keeping certain offices open just because it's always been open) will start to crack as their survival is really threatened. I hope they spin them off and make them a real separate business that can stand on its own two feet rather than stay in this nebulous quasi-governmental structure of fixed non-market prices and costs. It would be traumatic at first, but it would be a far better and more responsive organization in the end.

 

By Justin Garten on Jan 28, 2009

Very little mail is time sensitive (and the pieces that are could be better handled by other channels). Rather than dropping a single day, the USPS should be looking at going to a weekly delivery schedule.

 

By Chuck on Jan 29, 2009

I agree with Dr. Joe, downgrading service will make matters worse for the USPS, and accelerate the movement of more content to digital.It is an amazing operation, but it needs a new business focus, and an injection of new thinking and innovation.

 

By Noel Ward on Jan 29, 2009

Dial back delivery. Just because we're accustomed to getting mail 6 days a week doesn't mean we NEED to receive mail 6 days a week. If we can adjust to higher gasoline prices which take money out of our wallets, it seems that not getting mail on Saturdays (for example) should not be a hardship. I don't see this minor reduction in service as making matters worse. Be honest: how will you or your business really be affected if there is no mail on Saturday?

A bigger concern is how the almost certain increase in postage rates that will hit this year will impact companies that send out monthly bills and statements--and by extension the USPS. Companies are cutting costs everyplace they can and postage for the monthly run of statements is a clear target. Many of the service bureaus I talk with tell me their customers (banks, utilities, credit card companies, telcos, etc.) are looking very seriously at all but eliminating paper statements and going to electronic presentment. It won't be a total changeover (yet), but it's going to happen, and some companies have already made the leap. Take a large chunk of first class mail revenue out of the USPS cash flow and the roof is going to fall in on the postal service. Rates for standard mail will have to go up, which may reduce volume, so as Chuck notes, some new thinking and (gasp!) innovation is mission critical.

The USPS has to reinvent itself with a new and pragmatic strategy for doing business. Cut costs, charge rates that can make the operation more sustainable. Look closely at what other countries do, maybe they have some ideas and processes that can be adapted to work here.

 

By Brett on Jan 29, 2009

I'm sure the latest information coming out of the USPS isn't a surprise to anyone. The USPS raises rate year over year, so the customers mail less product. Maybe the USPS should follow in the steps of Walmart (profits based on volume instead of price).

 

By Christopher on Jan 29, 2009

I disagree with Justin, ninety percent of the postal revune is generated through what most consider "junk" mail. These mailings are mostly compiled of automotive, finacial, and newspaper mailings that are extreemly time sensative with projected delivery dates based on their events. As of late the Postmaster General has approached congress with the ideah of cutting out Saturday deliveries. It seems that our congress like in most cases is shooting down yet another great ideah. The post office has been doing an excellent job at cutting "excessive" costs with reducing over seven million work hours,consolidating plants,and implementing the movement of more content to digital like previously stated.

 

By Mark on Jan 29, 2009

Three days a week would be fine, Monday, Wednesday and Friday.

Have the same people that help sort the mail also deliver it, that would work in smaller communities.

 

By Wayne Shipman on Jan 29, 2009

Remember rural electric, universal access to telephones, and the latent push for ubiquitous broadband access? US Mail and the USPS are part of our history and can be in the future. National postal services around the world face some of the same issues- how do you provide universal service? We ask them to be competitive while they remain shackled to their original mission and hobbled by proscriptive legislation and forced to serve competing masters.

Rural service shares the same problem with urban service. The quickest way to slow the cost is to reduce the schedule, say Wednesdays, and allow other work to be done. Reducing labor cost can have an immediate effect. With volumes down due to economic inactivity and small local businesses trying to address their customers, you run the risk of tossing out the baby, bathwater, and tub if you gut the USPS on the sacrificial altar to competitiveness.

Offering a multi-year transition for converting to a 21st century economic model would be much more productive. While I respect Dr. Joe, it’s not purely a ‘play on paper’. The competing services have taken much of the profitable work, and as you recall FedEx began with limited access – they cherry-picked the fat off the business carcass and left the heavy-lifting to USPS, which had no choice and could not effectively compete. USPS has experimented and worked to be customer-focused. They made early attempts to electronically fax mail and deliver faxes to mailboxes, but were too early. Now internet-based services scan mail and allow people access to images of their mail, with options to print, discard, or file that PRINTED MAIL. How whacked is that?

Many sellers on eBay use the USPS effectively. How would they be affected?

And why not ask the subsidized classes of mail to pay fair rates, instead of entertaining the postal commissioners and begging for relief? In for a penny, in for a pound... of mail???

It's not for lack of innovation or knowledge to compete - release the USPS from it's bondage and allow them an equal playing field.

 

By Brian Regan on Jan 29, 2009

Certainly looks like they will be stopping Tuesday deliveries. If they have an estimated 5 billion loss for this year and stopping one day of service saves them 3.5 billion, seems likely stopping two days would but them in the black.

 

By David G Rosenthal on Jan 29, 2009

I could not agree more with Dr Joe Webb.

 

By Michael Josefowicz on Jan 29, 2009

You got that right. It's the same problem as every body else. The technology has made the overhead too high. Then you have to reorganize everything to take advantage of the new better tech.

My read on the whole employment problem, is not driven by getting business to rehire XYZ. The big corporations see tech to drive cost of sales and support to previously unimagined levels.

Meanwhile, the only way they can take advantage of the tech to lower their SG&A to sustainable levels is cause lots of pain and disruption in real people's lives.

That's where government comes in. Not to make old work. But to make the transition to new kinds of work.

Through this lens it's all the "same shit, different day."

 

By Jeff DiPaola on Jan 29, 2009

It is always a mystery to me that "institutions" like the USPS seem to fly under the reality radar for over a decade. There are so many structural issues with their business model that it is laughable.
I would like all the printers out there that could run there business like the Postal Service - and survive, to raise their hands - a small crowd indeed

They have problems with benefits, wages and equipment choices as a start. The kind of bad stuff that represent certain death for most organizations represent the operating norm for this organization.

Here it is - no rate increases because you can (real businesses can not do that). Develop a model and operating structure that makes money based on demand.If the market will tolerate 3 to 5 day a week delivery use that too. Maybe testing the concept in a couple of markets and tracking consumer results would be wise. Frankly, you would think that before you floated this idea before Congress you would have the research done - this is what prudent businessmen do. Hey - but why do it the way us mere mortals have to.

 

By Michael Josefowicz on Jan 29, 2009

The problem is not the direction. The problem is the speed. The world is changing much too fast, they are implementing change much too slow.

 

By Michael Josefowicz on Jan 29, 2009

@ Wayne,
Exactly!

 

By Michael Josefowicz on Jan 29, 2009

It's actually a problem of the organization that "owns" a market. It plays out the same for Xerox, Kodak, and Heidelberg. They are victims of their own success. The USPS is different becuase it has been a legal monopoly. But it is the same because they have been protected from having to respond to market forces.

Heidelberg "owns" over 50% of the sheetfed installations in the States. While Komori has made lots of inroads, no reason to get scared.

Xerox "owns" over 50% of the global MPS market.
Their are upstart players, but no reason to get scared. I don't know much about Kodak, but I'm thinking the story is the same.

The only ones I've seen that keep being scared are Google and Wal Mart and every good printer I've ever met.

Let's face the fact that change and innovation and new business models is very disruptive. And the fact that for most people the motivator to go through that disruption is fear, not greed.

Finally the USPS and every other public institution and all the private institutions are finally getting scared. It's probably a good thing. It gets them to move a little faster.

 

By Jerry Troyer on Jan 29, 2009

Reduced delivery might not seem fair to the older generation without a computer waiting for their prescription to arrive.

 

By Vern on Jan 29, 2009

I agree that the post office should scale back delivery. In fact, I believe mail should only be delivered Monday thru Thursday. Not only would this give the carriers a three day week-end (could still pay them for 40 hrs but work 36) but this would also drastically cut back the amount of fuel used in the vehicles. I see no reason for mail delivery 6 days. If the post office itself wants to stay open to help customers it could scale back as well and stay open one evening longer for those who need it. First class mail is not what is carrying the post office and paying the salaries, it is the magazines and periodicals and they keep raising the postal rates for these which is driving the publisher and catalog people to look closer at the internet and cut back on postage costs.

 

By Vern on Jan 29, 2009

I say cut mail delivery to Monday thru Thursday, same wages and especially fuel. The post office needs to learn to operate like any other business and stop believing that postal increases are the answer. All they are doing is making it more difficult on magazine publishers and catalog retailers to get their product to the consumer. Most people do not realize that it is this market along with the so call junk mail that yields the most revenue to the post office and not first class mail. If you drive these people to the point of not producing their product or driving them to the internet for cost savings, first class postage would be so high people would stop sending letters and everyone would go online to pay their bills and shop.

 

By Michael Josefowicz on Jan 29, 2009

Just because Junk Mail makes some people money doesn't make it the best way to do stuff.

Consider how much money the newspapers made, back in the day.

What you say about first class mail makes sense. But is the way to solve that real problem is more junk mail? Or should someone make the hard decision. Find new jobs for the folks whose work has now become wasteful and reorganize the whole thing in a way that makes first class mail sustainable and affordable.

 

By Noel Ward on Jan 29, 2009

The USPS biz model is to make money on first class mail, but the real heavy lifting---covering costs---is done by standard mail; newspapers, magazines and all those third-class opportunities I throw out without opening. Yet they lose money hand over fist (the spike in fuel costs this year just pushed it off the cliff sooner.)

Since that dog clearly won't hunt, there really needs to be a different model. Reading these posts, there are lots of ideas. I can see skipping Saturday mail and maybe even one weekday. Have daily delivery of critical stuff like medications, etc. This could be a special class that is delivered daily. How about getting out of package delivery altogether? Cut some head office staff in DC. I've been in there and I don't for the life of me know what all those people could possibly be doing that helps the mail actually move.

Raising rates is not the answer, but more efficiency is. The USPS has done a lot in this regard and there's already a lot of automation in the big processing centers. But guaranteeing delivery to every address every day is probably over the top these days. It's a good place to start cutting back.

Another place is developing programs of questionable value, like Intelligent Mail Barcode, and foisting it off on businesses and print/mail service providers. Is the difference it makes really worth the developmental costs and the costs mailers and service bureaus have to pay to implement it?

But we have to be careful. Next we'll see the USPS asking for some bailout money.

 

By Clint Bolte on Jan 29, 2009

There is little doubt that the USPS needs a new business model. And perhaps a lousy economy will be just the incentive. The nationwide meetings held during the due diligence on Postal Reform accomplished little as the overall economy supported the labor cost burden.

The knee jerk reaction might be to privatize the US Postal service. Virtually every Postal Service in the free world has been privatized except ours with no effective models to admire or emulate.

Getting out of the Real Estate business, particularly in the rural parts of the country, is a great idea that has been pushed aside. The small community Post Offices with only a handful of employees could lease square footage under low bid procurement from an existing big box retailer.

The fact that the current USPS Real Estate is worth a fraction of what its on the books for is another excuse for holding on to it.

Giving up the sixth day of delivery is an obvious savings that the postal union has successfully squelched via lobbying to Federal elected officials.

The Postal Reform put an inflationary cap on annual rate hikes. That sounded politically correct until the economies of 2008, 2009, and perhaps longer drive postal volume down and losses shoot through the ceiling. Being the second largest employer in the US, USPS will be a logical candidate for bail out money unfortunately.

The actual postal service in the United States is one of the most effective in the world. While demand will apparently settled out at much lower levels than any current business model being considered by PMG Potter and his staff, this is the time for tough decisions. Labor costs have got to be driven even lower via even more aggressive outsourcing plus reduced service levels.

Keep in mind a leaner and meaner USPS will translate directly to reduced prices by UPS and Fedex. These two private sector delivery sources are lockstep with the USPS in raising prices.

 

By Barry Brown on Jan 30, 2009

I'm surprised that printers haven't commented on how the demise of the post will affect the distribution of, and demand for, printed products.
In our small market (Finland) postal volume has not increased over the last 10 years, even though the volume of communication generally has increased 10-fold. Letters and forms migrated first, invoicing is moving rapidly the same way, and corporations are preferring to distribute annual reports digitally rather than incur the cost of printing and mailing.
The postal service is currently obliged by regulation to deliver mail to remote areas for the same renumeration as in the profitable urban areas; and they are lobbying to change that.
The post service has moved into other businesses(transpromotional contract printing, electronic invoicing, data-mining, etc.), and doesn't really want the costly business of actually physically delivering mail anymore. Rural consumers even get their daily newspapers a day or so later, whenever the delivery service finds it convenient to deliver.
The migration of all types of communication from physical delivery to electronic delivery will mean that the cost of getting printed products (what's left of them) to the consumer will become more and more expensive.
Doesn't that worry anyone?
--Barry--

 

By Michael Josefowicz on Jan 30, 2009

Barry,
Thanks for the view from Finland. As for "worry", printers in the states already have as much worry as they can handle. This just goes on the list.

So suppose the USPS learns from the experience in Finland. And adopts a business model that might work. And goes into or contracts with the Print industry.

Barry said,
"The post service has moved into other businesses(transpromotional contract printing, electronic invoicing, data-mining, etc.), and doesn’t really want the costly business of actually physically delivering mail anymore."

Maybe it's a previously unidentified new market for InfoPrint or Oce ( or the best porviders of their service) + a couple of great data mining outfits + a great designer/marketer?

Sounds perfect for a solution provider who might be able to help provide a solution for USPS.

 

By Michael Josefowicz on Jan 30, 2009

For those who have stopped by at my blog, you probably now that for a couple of years, I've been on my little soapbox saying that advertising is a shrinking market. Take what's left on the table, and find greener pastures.

The greenest pastures are in the EHG space. Education, health government.

I'm sure there are many government, health and education enterprises that have big problems that are just waiting for us to solve.

The pitch:

Dear Senator,Congressman, State Representative, Mayor or fill in the blank.

You have a conference committee meeting on the economic stimulus package. If you could get an appropriation for x million, we can do a pilot project that will both create new high tech jobs in the Print Industry in x city. And is ready to start as soon as we get the money. Once we demonstrate it's success, we are ready to scale for the entire USPS, Dept of Education, Health Dept. (fill in the blank)

Sincerely,
RR.Donnely, Consolidated or the Xerox Corporation or four really really smart people with great connections and the ability to respond on a dime.

Or some combination of the above.

 

By Tom Stodola on Jan 30, 2009

I have two suggestions – first, make the off day of delivery Tuesday. Most retailers want their direct mail to hit the mailbox on Wednesday or Thursday for weekend sales. Second – get rid of door-to-door delivery. Put community mailboxes in every existing neighborhood (I’ll even volunteer the space in front of my house for my street!). This will reduce the wear and tear on their vehicles, not to mention the fuel savings. The letter carriers will save their backs as they can stop the vehicle (and turn off the engine) while they fill a community mailbox and then move on to the next one. I know the boxes are pricey – but what deal could the USPS get if they ordered a million of them? As for rural delivery – P.O. box delivery would be the norm. (it is in the mountain communities in Southern California now).
Just my 2 cents.