Thursday, July 16, 2009

Saving the 6th Day

The Federal Times recently reported that the Postal Service is now developing plans to reduce delivery to 5 days a week. To do so would require not just the implementation of these plans but also approval of Congress. Further reports from the National League of Postmasters and others indicate that the Postal Service's plan would have the switch to 5 days occur in Fiscal Year 2011.

The reduction of delivery days will clearly reduce postal costs although it is unclear whether it will be able to reduce the postal workforce fast enough to have the needed speedy cost relief given no-lay-off clauses in the Postal Service's union contracts. However it is not clear if eliminating the 6th day of delivery will save the Postal Service from increased competition and the economic downturn that has resulted in a cratering of mail volumes.

Therefore the question: "Can the 6th day be saved?" raises two additional questions.
  • Is eliminating the 6th day of delivery wise?

  • Are there alternatives?

The first question focuses on the issue of what service must the Postal Service offer to thrive. Looking at the service offered by Posts in the industrialized world provide little guidance as to what is required in today's competitive communications environment. Both 5-day and 6-day service offered in different countries and management of the individual Posts argue that the service that they offer is what their customers want.

Countries that have reduced their delivery frequency to 5-days per week, such as Canada Post, did so at time of significant financial crisis similar to what the Postal Service is now experiencing. The reduction in delivery days did allow Canada Post to shed costs quickly when its business was hemorrhaging cash. I do not know the impact on delivery volume but Canada Post made its decision over twenty years ago when competition from the internet did not exist and customers who adjusted only had to think about adjusting their mail production to the new delivery schedule and did not have the opportunity to consider electronic delivery as a means of replacing the mail.

At the same time, Posts with volumes far less than the Postal Service, as measured by pieces per recipient per day, are able to provide 6-day delivery and maintain levels of profitability that are sufficient to maintain the enterprise. There is no evidence yet that other Posts facing a similar increases in competition and the economic slowdown are contemplating reducing delivery frequency to deal with recession related reductions in profits or losses

Given the lack of guidance from other Posts, the question comes back to what does the Postal Service need to offer to compete. While the recipients of mail may not care if they receive 5-day or 6-day delivery, their opinion is less important here than that of the mail sender, for it is the sender that pays the bills. For the sender, the concern is how much does reducing the number of delivery days reduce the value of the mail and the return that they receive by using the mail. To the extent that reducing delivery days could slow bill payment or bill presentment , billers may increase the incentives they offer customers to pay bills electronically, accelerating the already rapid decline in bill payments through the mail and the nascent decline in mail delivered bills. For advertisers the question is simpler, "Does eliminating the 6th day reduce mail's return on investment to the point that sending mail is no longer worthwhile?

While the Postal Service's projections indicate that the cost savings will be greater than the loss in volumes, it is unclear if the projections on volume changes reflect the shock effect that a new delivery schedule would produce. The change to 5-day delivery will be a major news story in both the general and business press. Mail managers at companies that now send mail on a 6-day a week schedule or targeted for the delivery day being eliminated will be prodded by senior management to look at the viability of internet based delivery closely for not just the mail that would have been delivered on the day being eliminated but their entire mailing program.

The second question suggests that there are alternatives. Experience in other countries show that maintianing 6-days of delivery requires a cost structure that can support the service profitably. For the Postal Service, this would a restructuring of its costs to reflect the new reality of the value of mail and parcel delivery by its customers that reflects the ubiquity of internet access. While the Postal Service has done a much better job recently in reducing its costs and workforce in the past few years, the cost restructuring required to save the 6th day would require cooperation from both Congress and labor to make the cathartic changes in operations, operating network and labor-agreements.

The changes required are changes that all foreign postal administrations that both offer 6-days of delivery and are profitable have done. In addition, these are changes that all of the Postal Service's competitors in delivering parcels as well as the businesses that produce and prepare the mail that the Postal Service ultimately delivers have implemented to deal with today's challenging times. These changes include:
  • Implementing mail processing rationalization on an expedited schedule including consolidations that have already been rejected if significant cost savings exist;
  • Implementing retail rationalization on an expedited schedule;
  • Reducing non-union workforce to minimum required levels;
  • Reopening labor contracts with a focus on removing clauses that limit management flexibility including the use of part-time employees and the inability to lay-off employees at facilities experiencing improvements in efficiency and reductions in mail volumes;
  • Implementing wage freezes and if possible wage reductions of non-unionized employees;
  • Reopening labor contracts to implement wage freezes; and
  • Renegotiate and/or rebid all existing supplier contracts to reduce the prices paid for contracted service.
Clearly these are all unpleasant options and in all likelihood all would need to be implemented within a very short time period. Also, additional ones may be required to produce the required cost savings to save the 6th day. However, eliminating one day of delivery is also painful as it will reduce significant number of full time positions as well.

Before closing, two questions remain.
  • Is it possible that the 6th day would have been saved if the alternatives listed above had been implemented in less financially challenging times?

  • Is it possible that the current challenges are so great that both eliminating the 6th day and the alternatives listed above will be necessary to ensure the long-term viability of the Postal Service?


Anonymous said...

Look at the average salary cost per person. It's too high for a non skilled labor force.

Barry Painter said...

As usual the writer omits that the postal service has more layers of useless and unnecessary management than an onion. As usual in some of the alternative offered no where is there mentioned a great reduction in management and administrative personnel unnecessary to the processing and delivery of mail.
Along those same lines no where is it stated there could be accountability in management decisions which has been lacking for over 200 years.

Eric said...

Anonymous is ignorant. Walk in sub-zero temps. 100 + degree days. Pouring rain. Lightning storms. And then get ALL the mail delivered. Not just most....ALL of it! Every day! You can't just finish the day tomorrow. Dogs. Ill tempered customers who blame you for the check that didn't come. Supervisors and postmasters who load more and more and more on you other words....walk a mile in a carriers shoes before you open your mouth.

Anonymous said...

One thing I have learned in my 8.5 years with the Postal Service, when I read/hear people complain, or comment as anonymous did, 90% of them don't have the slightest idea what they are talking about. I might add that 90% of them can't, or won't, do the job that us "non skilled" people do everyday.

streetcar said...

A reduction to five day delivery is just one of many changes that will have to be made in order to salvage an otherwise embattled U.S Postal Service. The new global economy has wrecked havoc on virtually every type of industry in the world. Unfortunately, the U.S. Postal Service is not immune from the despair. Playing the blame game will do nothing to help the situation. All this talk about slugs and useless management hasn't made a single positive contribution in terms of helping us grow and maintain stability.

There are thousands of loyal postal employees nationwide that give their best every day and take every step possible to protect the best interests of their company. If nothing else, we can help by following their example and stepping up to the plate and doing our part to preserve this national treasure we know as the U.S. Mail.

How about it? Is there anybody else out there who is ready to shed the negativity and start projecting a more positive image of "our" company?


Anonymous said...

The postal service should be sold to
walmart and the people should pick up
their mail at the store.
They are open 24/7.

Flatfoot said...

I'm with you in part on the Wal-Mart idea. I placed a posting on Monday's "Brainstorm Ideas Part 2", on July 21 at 12:39 am.
I think that the only way that this is going to happen, is when Wal-Mart or a network of other store chains throws us a 1,2 punch, like the internet did, and we're forced into it.

Anonymous said...

Perhaps Eric can explain why a job posting by the Postal Service draws more applicants than almost any job in the country. Many people must think the jobs are very attractive. Duh!

Anonymous said...

If the customer or business wanted Sat delivery UPS/FedEx would offer it as normal service not a $50 surcharge. If the USPS wants to compete they must follow UPS example with no Sat delivery except Express and Box Sections. Most major firms have a PO Box anyway.No Sat delivery will excess thousands of carriers who will have no where to go but layoffs for those with less than 6 years service. This will push OMB to a buy out offer for those with over 30 who could retire. Resulting in a leaner less costly workforce with Sat/Sun off like normal jobs.
Other govt agencies have had buy outs. USPS had a retirement refund in the late 70's that worked well at reducing workers quickly. Why not? Those layoffs would not happen if an incentive was offered.

Anonymous said...

For me and for many others at the postal service, it is easy to see where the problem lies and how we could save millions and millions of dollars each day/year. It starts with one word. Management.

The post office is bloated with management.

Plainly stated, anyone that does NOT have their hands on the mail on a daily basis should step forward and explain what they do all day at the post office. Are they counting something? watching something/someone? Designing something? What? What are all these managers doing all day long? The time wasting, fraud and mismanagement is rampant in the postal service, even in our small office. We have 2 managers managing 7 carriers.

Anonymous said...

The problem is an overstaffing of unqualified, unnecessary manangement. Supervisor are making $70,000+. Once the carriers leave the office, mgt. is not doing anything of any value. Scratch that. They are not doing anything of value before the carriers leave the office.

mhl said...

Most of the problems are that there are way too many people that are over protected in the postal service. Middle management should have more control over the work force and the people that are in the postal service for the free ride. I have witnessed people who have been removed for coming to work drunk, drinking on the job abusing sick leave fake injuries, unauthorized overtime smashing vehicles, fighting. the list goes on and on. All who have got their jobs back some several times because of their union or because they belong to some special interest group. These people wouldn't last one day in the real job force. Supervisors have to go thru loads of paper work just to try to remove these people and end up loosing all the time. It's a waste. If they could cut all the red tape We wouldn't need so much management to try to control the work force that doesn't want to do their job. There is very little if any accountability at all in this company.

Anonymous said...

The problem with the USPS is that it is incredibly ineffective in capitalizing on the strategic advantages that it does have in the marketplace. One of those advantages, is Saturday delivery. If the USPS had a real retail/business oriented leadership structure, rather than a strictly employee and installation management leadership structure, they would be emphasizing the products and services that they are uniquely positioned to provide and marketing those to grow the business. Instead, all USPS management effectively knows how to do is cut services, eliminate jobs, and load more work onto the backs of already overburdened employees and operations systems. This is, in part, due to the fact that the USPS was not allowed to make money for many years - so the business acumen and creative thinking geared toward revenue growth has never been instilled in the leadership structure. From the top down, management is expected to hit numbers by controlling costs rather than by increasing revenue - it's the way the system is set up. In a recent talk by my station's manager, he described what he thought his duties were - 'to make sure the mail gets out, and operations are run, efficiently'. He talked about all of the things we, as employees, could do to help control costs and work efficiently (most of which we do but many of the things management asks us to do are truly NOT efficient). He only made passing comment regarding any responsibility he had for customer service and said even less about responsibility for increasing revenue. In my station, according to his figures, costs outpaced revenue by about two to one. No amount of cost cutting is going to reverse that without crippling service and further driving down revenue. I suspect that my station is not at all unique. The greatest opportunity for the USPS, which postal management is failing miserably at, is revenue growth. Yet management is doing very little in this area. Services already cut from USPS include second attempts on express mail (the competition currently offers second, even third, attempts for most package deliveries). The postal service already has the most convenient network of locations for sending and picking up mail even though the competion has been trying to catch up. But the USPS is going backwards, eliminating blue collection boxes and consolidating post offices - making using the post office even less convenient for the consumer/mailer. Rather than cutting these things, the USPS ought to be capitalizing on them and making certain people are reminded of what they already know - that the USPS has the most convenient and reliable service. Customers most often do not have to drive far out of their way to mail or pick up a package; they can buy postage at a nearby post office, online; or by mail; and even though package tracking is not as detailed as the competitions, showing more stop points along the way to it's destination, priority mail packages generally make fewer stops and get to their destination faster than the competitions similarly prices services. There's more, but the mailing public and businesses are not constantly reminded of these things by agressive product marketing teams from the USPS (like they are from the competition) and, in many cases, customers do not realize what they are missing until the USPS takes it away (or threatens to), hence the complaints being seen about closures and box removals, etc., accross the country. So, in essence, what the USPS really needs to do is keep it's business infrastructure and services as they are, let it's dedicated employees do the jobs they best know how to do, stop "playing dead" with regard to sales, and restructure management to a leaner and more efficient revenue oriented force that will get off their butts to sell their products to the mailing public.

Anonymous said...

There are way too many layers of redundant management for one thing.
We recently had a function four in our office and there were four (4) managers watching two (2) clerks work. Can you say HUGE WASTE OF MONEY boys and girls.

Anonymous said...

Author Robinson is surely not that familiar with the USPS. The positive side of the story is our management team will designate Tuesday as the Non-delivery day. Why everbody assumes Saturday delivery as unnecessary is beyond me. You work for the USPS they don't change procedure for your benefit, it's all about the numbers. This plan is to cut postal workers, not management. To hell with the positive sales pitch, this organization is going in the wrong direction for all the wrong reasons. Self-centered management trying to change the mistakes of the past. Flat rate parcels - good. 5 day delivery - sucks!

Anonymous said...

We all know that management is over bloated, and their the ones running the show, this will never change even as we go down in flames.THIER EVEN STARTING TO PAD THEIR RANKS WITH TE'S( obvious job protection strategy). They need to cut management in half. Those of you reading this who know the Postal Governers, please get this point through to them. Until this point gets accross, keep your life boats handy Postal workers.

Anonymous said...

MHL said "I have witnessed people who have been removed for coming to work drunk, drinking on the job abusing sick leave fake injuries, unauthorized overtime smashing vehicles, fighting. the list goes on and on. All who have got their jobs back some several times because of their union or because they belong to some special interest group" Where do you work that you have personally witnessed all of that? I find that hard to believe. The Union can't just get your job back. That's another false statement. They can fight to get your job back. Ultimately the PO has to agree that they were wrong in removing you or an arbitrator has to agree that the PO has wrongly removed you in order to get your job back.

Anonymous said...

I am sick and tried of postmasters coming to work early in the morning so they can get there 7 or 8 hrs. in so they can leave at lunch time or shortly there after so they can have the afternoon off. What ever happened to the 8 till 430 postmaster. They keep cutting the clerks hrs. so they can look good.

Anonymous said...

In response to Mr. Painter: Three words..."The Hawthorne Effect"

It is true that there is no need for the multiple layers of management in the USPS. Lazy union employees who only work when there is somebody watching them should not throw stones at a house that they built, however. If entitlement oriented UAW employees couldn't figure out that they were sending their company into bankruptcy, I don't expect non-skilled, ultra-entitled APWU members to figure it out either. Start working on your Wal-Mart applications. They are done online now, so you all may want to take a class in comput... well a class in literacy would be a good start.

Anonymous said...

Dump the sixth day, it's just a cash cow for the Union.