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.
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?