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USPS Considers Five Day Mail Delivery

Menlo Park, California, January 20, 2010


With no signs of economic recovery in sight, the U.S. Postal Service have taken action in response to its ongoing financial crisis and reached out to its key partnerships. Howard Lee, InfoIMAGE CEO was invited to an exclusive meeting with Postmaster General Jack Potter.  Among the group corporate presidents and CEOs from FedEx, Amazon, Costco and Williams-Sonoma were in attendance.


The Postmaster General raised key concerns which he also addressed with the U.S. Senate subcommittee that economic conditions may make it necessary to “temporarily reduce mail delivery to only five days a week.”


Total mail volume was 202 billion items last year, over 9 billion less than the year before, the largest single volume drop in history. And, despite annual rate increases, Potter said 2009 was the first year since 1946 that the actual amount of money collected by the post office declines.

Last year, USPS reported a $2.8 billion loss last year. The forecast is gloomy, Potter said. “If current trends continue,” Potter said, “USPS could experience a net loss of $6 billion or more this fiscal year.” And that’s a significant problem for the USPS. Namely, because federal laws dictate that the USPS can only absorb $5 billion worth of debt.


Early in January 2009, the Postal Service announced it would be closing six of its 80 district offices, eliminating positions across the country and offering another early retirement opportunity. These actions are expected to save the Postal Service more than $100 million annually. Nationwide, the USPS has cut from 750,000 employees to just 600,000 employees.  But that is still not enough and that leaves few options. In the past year, Potter noted very aggressive cost-cutting actions, already taken or under way, including:

 

•  Cutting 50 million work hours;
•  Halting construction of new postal facilities;
•  Negotiating an agreement with the National Association of Letter Carriers that adjusts letter carrier routes to reflect diminished volume;
•  Freezing salaries of all Postal Service officers and executives;
•  Reducing authorized staffing levels at postal headquarters and area offices by at least 15 percent;
•  Selling unused and under-utilized postal facilities;
•  Instituting a nationwide hiring freeze;
•  Adjusting Post Office hours to better reflect customer use; and,
•  Consolidating mail processing operations.


The post office's problem is twofold, Potter explained. "A revolution in the way people communicate has structurally changed the way America uses the mail," with a shift from first-class letters to the Internet for personal communications, billings, payments, statements and business correspondence. To some extent that was made up for my growth in standard mail—largely advertising—but the economic meltdown has resulted in a drop there also.


Delivery is one of the most labor-intensive activities. Unlike mail processing, it does not lend itself to technological substitution. Nor does it lend itself to staffing adjustments based on mail flow peaks and valleys or to fluctuating levels of customer demand during the course of a single day, a single week, seasonally, or over longer periods of time. Delivery remains their largest, single cost center. And with revenue per delivery continuing to decline — due to fewer pieces per address and a change in the mail mix to lower-cost products — their overall delivery costs grow proportionately larger. In effect, they are financing a level of service that exceeds a declining demand.


Recent independent polling suggests that our customers are generally amenable to a five-day delivery week. A USA Today/Gallup survey found that 57 percent of respondents see this as a preferred solution to the Postal Service’s financial difficulties. Similarly, a Rasmussen Reports survey found that 69 percent of Americans indicated that they would prefer five-day-a-week service to other alternatives. The U.S. Postal Service is the only carrier that offers regular Saturday service — and at regular prices.


Reducing delivery by one day per week could reduce costs by $3.5 billion annually. This offers a significantly higher cost benefit than any other single option for operational cost reductions.
"We are in uncharted waters," Potter said. "But we do know that mail volume and revenue—and with them the health of the mail system—are dependent on the length and depth of the current economic recession."


Source: PMG Potter’s Testimony to House Subcommittee


About InfoIMAGE, Inc.
InfoIMAGE is a leading provider of printing, mailing, and online document delivery solutions for financial institutions across the United States. InfoIMAGE processes, prints, and mails financial statement and notices; electronically archives statement, notices, and other types of documents for online delivery and research. Learn more about InfoIMAGE at www.infoimageinc.com.