Tuesday, August 19, 2008

The Challenge of Cutting Costs

The Postal Service has begun a all-hands-on-deck effort to work its way through its financial challenges caused by the economic downturn. Nearly every day there is another story about how the Postal Service is changing operations in one community or another to reduce work hours. These changes have resulted in later mail delivery, elimination of Saturday mail holds for businesses and transfer of mail processing operations from one plant to another. Accompanying these articles, there are the expected quotes from local labor leaders about how the changes will reduce jobs in the community and weaken service quality.

As more of these articles appear, I believe that the postal community will see an important trend in postal management that bodes well for the health of the organization. These articles suggest that the Postal Service is beginning to take greater public relations risks in finding ways to reduce costs. By making changes that will generate some vocal individuals, businesses or organizations to use old and new media to draw attention to the potential downside of the change, the Postal Service indicates now that it has little choice but to take the heat that significant cost reduction will create.

The articles also suggest that the Postal Service is giving local managers significant flexibility to choose which cost reduction options they implement. In doing so, the Postal Service will have a wide range of cost reduction options implemented with just as wide a range of efforts made to minimize service disruptions and changes in customer satisfaction for each option implemented. The Postal Service has a significant learning opportunity if it chooses to use the actions of each local manager as a teaching opportunity with a focus on one question: "what could have been done better to ensure that service changes minimize the impact on consistent service quality, labor-management relations, public perception of the Postal Service, and customer satisfaction?" Compiling answers to that question after every cost reduction effort and making that information available to the next location thinking about implementing a similar effort on an ongoing basis through a wiki or internal operations improvement blog, while the changes are being implemented, will ensure that all others implementing a similar change or about to begin implementing a similar change will be able to continuously improve the implementation of operational change.

These articles also illustrate a challenge for postal labor as they begin dealing the numerous operating changes that will come in the near term. Even though the economy is weak, the Postal Service's financial difficulties may be sufficient to counter traditional arguments and political efforts to save jobs. Labor leaders may need to look for different approaches to help their members deal with the transition that is occurring. For example:
  • Given that the Postal Service will likely want to reduce head counts at a higher rate in the rust belt then in the rest of the country, unions may want to begin developing programs with management that encourage or assist workers in transferring to faster growing regions.
  • Labor leaders should also talk to their Canadian colleagues in the Canadian Union of Postal Workers (CUPW) about their efforts to develop proposal to compete with management efforts to outsource activities in order to develop work rules and other contract provisions that would allow the the Postal Service to cut costs by bringing work back in house.
  • Labor leaders should also use their knowledge of postal operations to look at what what types of work processes, work rules, or wage levels would be needed for the Postal Service to profitably provide services that pre-sorters and other firms collecting, preparing, and transporting currently do. Then labor should work with management to both implement those changes and support introduction of the new higher revenue products that would compete with firms now doing these activities.
Finally, these articles illustrate a challenge now facing the mailing community. If the mailing community wants to keep mail affordable, then it must reinforce the Postal Service's efforts to explain its financial difficulties to mailers, local media, and local politicians so that the Postal Service can make the changes necessary to control costs.. This effort will need to explain why simple solutions, such as eliminating one day of delivery, will not meet the needs of either senders or recipients. The mailing community will also need to expand its focus on service quality and in particular service quality at the local level. The Postal Service will be implementing numerous changes to cut costs that will differ across the country. Mailer communication will be critical in identifying those changes that work and those that need to be reversed.

If all of these stakeholders, management, labor, and mailers become active participants in the transition to a more efficient, more consistent Postal Service, all can end up as winners. A focus by all stakeholders on both costs and service consistency, could improve the Postal Service's competitive position as the premier, measurable-impact, communication method. The future of the Postal Service depends on it.


Anonymous said...

The USPS should stop spending the millions that they do on EXFC. They are measuring service on 1st class mail that is now over 97%, commendable. However, 1st class mail is a declining product and will eventually go away almost entirely and there is nothing they can do to stop that, it is "creative destruction" as Alan Greenspan would say. The USPS would save millions through the elimination of the contract, not to mention the resources that are chasing the number with fanaticism and personnel running around the country doing "audits". If service SCORES were to reach a 100% this product would keep diminishing.....can anyone say: "waste of time and $$$$"?

Anonymous said...

The USPS is wasting millions chasing EXFC. I say wasting, because they are using an expensive measurement system on a product that is diminishing and will continue to do so, in spite of their efforts to improve service. The EXFC "score" could reach 100% and the product will still evaporate. It is the victim of "creative destruction" as Alan Greenspan would say. The USPS needs to wake up and aggresively advertise the package product pricing difference and advantage it has on a product that will not go away. First class mail is gone guys get with it.

Anonymous said...

Isn't it about time that the USPS started eliminating the large discounts given for customer barcoded mail? They can barcode any piece of first class mail in a fraction of a second themselves at very little cost. First class discounts of almost a dime each are eating into any chance a getting close to breaking even in this bad economy. If the discounts were "phased out" over about five years, the USPS could gain back some of the lost revenue and the companies would have ample warning of the increased costs they will have to start paying.

Anonymous said...

The current revenue base of the Postal Service has been intentionally constructed to not provide enough revenue to cover costs. This is due to political and policy decisions made to foster the perception that the postal service is a failing business when operated as a government service.