Five tips for avoiding bankruptcy/bailout.
It’s pretty big news, every once in a while, that the U.S. Postal Service (USPS) — which is not funded by tax dollars — is on the verge of going broke. Then they raise rates by a few pennies and the hubbub dies down.
Until next time.
I think the big problem with the USPS is that it’s unable to keep up with changes in technology that make its core business model nearly obsolete. After all, the main business of the post office is to provide mail delivery service. In the past, this included personal and business letters, bills and bill payments by check, postcards, and other bits of correspondence. Letters have been mostly replaced by fax and email. Bills and bill payments are being replaced by online billing and bill payments. And who sends postcards in the age of smartphones when you can share vacation pictures as you take them via MMS or email?
As technology moves on, the USPS’s services are less and less needed. But does that mean they’re not needed at all? Of course not. (Not yet, anyway.)
Bad management and spending practices by the USPS are what’s putting it in peril these days. Simply said, the USPS needs to cut costs and raise revenues. Here’s what I propose:
- Raise prices on bulk mail. It’s widely known that the USPS gives huge discounts to big customers — the same people who fill your mail box with what most of us consider “junk mail.” Not only is this extremely wasteful, but the USPS isn’t making nearly as much money delivering it as it could. I propose that they raise the rates on bulk mail — possibly even making it just as costly as first class mail. The result: fewer organizations will find it cost effective to mail their marketing materials to people who likely don’t want it anyway. The USPS will carry less of this material, thus reducing its costs. And for the remaining organizations that continue to utilize the service, the USPS will likely generate the same (or more?) revenue.
- Stop trying to compete with FedEx or UPS. Let’s face it: for sending something overnight, FedEx is not only the best deal, but it’s got the most reliable service. Not long ago, the USPS couldn’t even guarantee overnight delivery from Wickenburg, AZ to a major city like Berkeley. FedEx could. As for shipping parcels, I recently shipped a 33-pound computer that I sold on eBay; UPS was half the price of USPS. Yet every time I go into the post office, I see advertisements pushing their services. The USPS should focus on what it does best: deliver small pieces of mail quickly and efficiently throughout the US. That means concentrating on its affordable Media Mail, First Class, and Priority Mail services.
- Stop advertising. Come on — we all know that the post office exists. We all know what it does. You don’t need massive advertising campaigns to get customers. If I have to mail a letter or document and it doesn’t need to get there overnight, I’ll use USPS. And about those big color posters in the post office pushing your overnight services — see my previous point.
- Stop giving away free packing materials. I’m talking about those priority mail envelopes and boxes. I know someone who used USPS priority mail boxes to pack when she moved. And no, I’m not kidding. She kept going to the post office and taking boxes. Not a single thing was mailed. I’m not saying that the USPS should stop providing them; I’m saying that they should charge a fee — even something small, like 50¢. It’s worth the money to customers — I’d definitely pay it — and it will generate more revenue while reducing waste.
- Reduce mail delivery to three times a week. This is the ultimate in cost cutting measures. Unfortunately, it also causes job losses. But guess what? Real companies reduce their workforce to save money; why shouldn’t the USPS? The way I see it, they could deliver to business and commercial addresses on Monday, Wednesday, and Friday and use the same carriers to deliver to homes and residential addresses on Tuesday, Thursday, and Saturday. People who think they really need daily mail delivery can get a post office box, which would receive mail every day as it’s sorted at the post office. Not only does this reduce the cost of delivery, but it could increase revenues from post office box rentals.
So that’s five tips that will help reduce costs while increasing revenues. Why can’t the USPS utilize some combination of these? I think the results will make a huge difference in the continued operation of the USPS as a solvent business.
Comments? Have your say.
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As a retired postal worker, I took great interest in your ideas to reform the USPS. There are two bills being considered this year concerning postal reform (HR 2309 and S 1789). Unfortunately, neither bill goes far enough in giving the Postal Service a modern business model. One bill, advocated for by the Unions, addresses one aspect of the reason for the current debt crisis and that is the requirement to pre-fund retirement pensions at 100%; something no other business or government agency is forced to do. If just this one thing were changed the budget would be in the black. The other bill is essentially gutting the agency, cutting service and, in effect, giving competitors even more of an advantage. The past and present postmasters have advocated ending Saturday delivery, yet Congress says Saturday delivery must continue for at least 2 more years. It’s a ridiculous and outdated way to do business. I think all of your suggestions are worth considering, but how can they ever be implemented with a government that moves at a snail mail pace? Finally, there is a perception that cutting jobs is the answer; however, they have already cut 103,000 and plan to cut more. I thank you for your thoughts regarding this topic.
As someone who worked in a government bureaucracy for more than 5 years, I can confirm that the government works at a snail’s pace and has absolutely no concept of the need to stop wasteful spending. The post office is just another casualty. It should be operated like a private sector business without any support of the government. That’ll keep it profitable.
As for Saturday delivery: I don’t need it. 90% of what arrives in my mailbox is trash that gets recycled. If I got delivery just once a week, it wouldn’t bother me in the least. Hell, all my postal mail goes to an address I don’t visit more often than that anyway.
Maria,I have served as a letter carrier for 15 years (full disclosure). You make the argument in your article that nobody uses the USPS anymore for communication purposes. You may not, I may not very frequently but there are 100 million Americans that do not have internet. They do rely on the USPS for communication. Those 100 million tend to be elderly, rural, and/or poor or any combination of the above. They are Americans who are marginalized every day of their lives simply by their status or place in society. We shouldn’t seek to marginalize and isolate them even more. Small town post offices may not turn a profit but they do provide a valuable and necessary role in those American communities. To quote the late Sen. Jennings Randolph, “When the post office closes, the flag goes down”.
Another point you make is that delivery should be cut to three days a week. This flies in the face of my experience, which is that of working ten hours a day, six days a week delivering the volume that supposedly no longer exists. Staffing has been cut to the bone and even deeper in many cases. Oddly, the USPS has increased the number of managers in most areas. We have lost over 250,000 employees to attrition over the last decade and it has been five years since any career employees have been hired in my office (in a town of 90,000). Over-staffing, at least on the delivery side, is a myth. It is the same in most areas of the country.
The USPS has been hamstrung by the unique and crippling legal requirement to pre-fund future retiree health care at a rate of $5.5 billion a year for ten years, to fund a 75 year liability. That represents 9% of our yearly gross revenue to fund something that is already funded on a pay as you go basis. This makes no sense under the best of circumstances and even less under our present circumstances. USPS has also overpaid billions into both CSRS and FERS retirement systems. We have no access to those over payments.
Elimination of Saturday delivery is estimated to save the USPS around $1.7 a year (a little over 2% of yearly revenue) but would eliminate 17% of the service we provide and would drive even more mailers away. Again, closing plants and small offices offers a minimal savings and further serves to drive business away.
UPS and Fed-Ex are now among our biggest customers. We handle ever increasing amounts of their “last mile” deliveries. Our unparalleled network makes this a winning proposition for all business. USPS can also ship most things cheaper and as effectively as both competitor/partner companies.
Having worked at UPS for four years in the 90’s, I know just how haphazardly merchandise is handled and how much breakage occurs there.
Let’s not throw millions of Americans and thousands of communities under the bus because of their circumstances or where they happen to live or not live.
I take as much pride in my work as any fire-fighter, police officer, or other public servant. I look after my elderly customers and watch the children who live on my route grow into productive adults. I take pride in that. The USPS has been in existence longer than the USA has existed and given an updated business model (I agree with your comments about bulk mail) we can continue to be the Nation’s most trusted government agency. Thank you for your article!