Friday, October 30, 2009

President Burrus's Dilemma

In August, APWU President William Burrus was asked by Democratic Senator Claire McCaskill to identify "the substantial steps the APWU is willing to take to assist the Postal Service in weathering its severe financial crisis? In crafting a response, he was faced with a dilemma: how does the APWU appear responsive without proposing anything that will affect upcoming contract negotiations with the Postal Service?

He could not offer any response that required changes in contract provisions as that would put the APWU in a weakened bargaining position even before negotiations have started. Instead he repeated his challenge to mailers and the Postal Service: "The American Postal Workers Union has challenged the postmaster general to discontinue the excessive discounts the USPS offers to large mailers, and instead to compensate postal employees for processing letters and flats at a cheaper per-piece rate. This would reduce the Postal Service’s costs; improve efficiency, and make better use of underutilized equipment and employees. As an added incentive, we propose to process parcels at no charge." (Answer to question 1, third paragraph) Unfortunately for the APWU, President Burrus's response will not appear to be responsive to Congress.

The Dead Tree Edition has clearly laid out the case that Postal Customers will make in refuting President Burrus's proposal in its post, "Mathematically Challenged Burrus Proposal Doesn't Add Up For USPS." Mailers look at President Burrus's proposal only as a significant increase in rates. The greatest increase would be born by those mailers that currently can sort mail while they print. These mailers are mostly likely now paying on average 35.1 cents for First Class mail. For these mailers, President Burrus's proposal represents a 25% increase in postage prices without changing the work that either the Postal Service or the mailer performs. Even the least business savvy member of Congress will understand that raising postage prices by 25% for a major group of customers will drive business away and make the current financial difficulties even worse.

President Burrus's proposal does provide the framework for developing postal products that will both make mail more attractive to some customers and provide jobs for unionized postal workers. These products would serve those customers that cannot sort mail while they print, or cannot sort mail while they print with sufficient density to pay the lowest postage rate the Postal Service offers. His proposal states suggests that the APWU would support the development of products for mailers that produce mail in quantity that requires physical sortation prior to delivery sequencing at rates less than the full letter rate of $0.44. Given that his first proposal of 43.9 cents is unlikely to have any takers among postal customers, President Burrus and his staff at the APWU has to come up with a more realistic price to sort mail currently physically sorted by private sector firms.

In a previous post, "Could the USPS Turn a Jobless Recovery into a Job Full Recovery?", this blog laid out the basic parameters of such a product. If the APWU, or for that matter any other postal union, is serious about competing for the physical sortation of mail now sorted in the private sector, they could contact me at the e-mail listed on this page and I would be glad to assist them in putting together a proposal that they can take to the Postal Service and eventually the Postal Regulatory Commission that would secure more jobs for postal union members.

This post created some consternation among postal stakeholders. A subsequent post, Pricing Volume Mail, clarifies the challenge of developing a product to compete with private sector sortation of mail.

1 comment:

Anonymous said...

Good article.

Finally someone understands that the USPS (and APWU) have something to offer mailers who print but cannot sort. Those mailers rely on presort houses which charge a fee.

If the USPS restructured the postage discount, raising the postage by less than what is charged by the presort house, the mailer (printer) would have an incentive to come directly to the USPS for sorting.

For example: A mailer gets a 10 cent discount, but pays 5 cents to the presort house. The net savings to the mailer is 5 cents.

The USPS should offer a 6 cent discount to the mailer, if they come directly to the USPS. Result? The USPS gets an additonal 4 cents in revenue and the mailer realizes 1 cent more in savings over the presort discount.

Business 101 - Eliminate the middle man