Tuesday, February 23, 2010

Postal Service in Triage

Anyone who has ever been in an emergency room has had to deal with a triage nurse.   The triage nurse's job is to conduct an initial assessment of every patient that comes for emergency treatment and prioritize the patients based on the severity of their illness or injury.

Triage gets complicated when there is second door for patients that come in ambulances.   These patients skip the triage nurse and may have their first assessment by the emergency room nurse or physician.  This second door may allow a patient who is less sick than one who is driven to the emergency room to see a physician faster, or at least be placed on a gurney in an emergency room corridor.

Further complications exist in the case of natural disasters, mass-casualty accidents, and suicide bombings all of which may overwhelm the capacity of the medical facilities available.   Then the choices become even more daunting.   Instead of just choosing which patient can wait to be treated, the triage process may have to decide who is too injured to try to save and for those that it can save what organ/limb must be sacrificed for expediency in order to save even more lives given the available resources.   Medical care in Haiti following the earthquake was like this as limited facilities, supplies and medical personnel forced some horrific decisions to amputate limbs that could have been saved in a medical environment that was not so stressed.

The decision by the Postal Service to eliminate one day of delivery is equivalent to a decision that a business in triage makes.  Given the substantial losses, even discounting the retiree issues, the Postal Service had no choice but to find a way to cut costs faster than its current cost cutting efforts had produced.  Specifically, it needed to find a way to cut costs by between $2 and 4 billion above and beyond existing efforts in order to survive.

In its business triage, the Postal Service faced the question, "How can it cut costs in order to save the business without harming the brand and relationships with customers?"  The decision to eliminate one day of delivery is equivalent to an amputation.   It may save the business but it will create new challenges for it going forward.  Decision-makers had confidence in this decision because posts in other countries had made similar changes and their brand and customer relationships survived intact.

In the next year the Postal Regulatory Commission will review whether the Postal Service made the correct decision in its triage process, in the equivalent of a pre-amputation second opinion.   The focus of the PRC will likely be checking to see whether the cost savings projected are realistic and evaluating the likelihood that the impact on customers will be a form of business gangrene or benign.

One of the biggest challenges facing the PRC will be putting the decision to eliminate 5-day a week delivery into context.  The Postal Service made the decision to develop a 5-day a week proposal as part of a business triage process in the fall of 2008 that also generated some additional efforts to cut costs.  These included:
  • Preparing a proposal to offer a Voluntary Early Retirement Offering;
  • Preparing a case to close post offices;  
  • Completing preparations to complete plant consolidation studies;
  • More intensive efforts in carrier route evaluations; and
  • Preparing a proposal for 5-day delivery.
The Voluntary early retirement offer had minimal impact. From this the Postal Service learned that it could not reduce its workforce quickly cost free. Within a few months an offer with financial incentives was introduced.

The PRC's evaluation of post office closures is nearing its end and the list of post offices that will be closed has shrunk from more than 3,000 to less than 200.   The potential cost savings has most likely shrunk as well.  The failure of the Postal Service to eliminate all of the corporate offices that it wanted reflects both the need to continue to provide service in the communities affected and the lack of a ready strategy to replace corporate offices to be closed with contract or franchised offices in those communities.  

Plant consolidation study announcements were publicized in earnest from the spring till fall of 2009.   These consolidations were chosen based on the knowledge and experience of local management.   A national strategy to restructure the bulk mail network was begun and then expedited after the initial efforts both improved service and reduced costs.   Even without PRC review, plant consolidation proposals take a full year to complete the entire process meaning that efforts begun in 2009 could not begin producing savings for a full year.


BM said...

Great post, but you missed one important angle -- the postal service needs to reduce costs, and since 70-80% of its costs are labor related, that means reducing labor.

Unions are of course dead-set against anything that reduces the number of jobs, EXCEPT for 5 day since... it means they don't have to work on Saturday

shamus said...

Hey BM, going to five day will eliminate jobs. Get your facts correct before you run your mouth.

Anonymous said...

Reducing our multiple layers of management would save us approximately $5 Billion easily. We could eliminate 60,000 of the managers who do nothing to move the mail. Service has been cut to the bone already, this is the only logical step to take, reducing our overhead. Unions are not the problem here.

Bleep said...

Great articles being posted on this blog with one "but"! But you keep over looking, eithter unintentiionally or intentionally, the useless layers of a bloated Management structure that sucks the life blood out of the Postal Service.
Please address the Management structure otherwise you are not addressing the whole problem.
With the same Bloated and underperforming Management structure in place, if 5 day delivery is granted then in 5 years we will be looking for 4 day delivery.
One suggestion would be to have an "outside" the Agency (private sector) group make a detailed study with recommendations for addressing the Postal Service Management Structure.

Alan said...

There seems to be a need to eliminate the work force further through another round of early retirement offers. If indeen the USPS goes to 5 day delivery the number of work hours needed would be reduced meaning less employees, both clerk and carriers. Time will tell what is going to happen but the USPS, with all it's faults, is a necessary service this country does require and need..

Jim said...

BM You are absolutely 100% wrong. ALL THREE major labor unions and most management organizations all oppose 5 day delivery. Get your facts correct before you spout off about matters that you are not in touch on. Oh, by the way 70-80% of cost are not LABOR related they are EMPLOYEE related. I rest my case.

happylabor said...

Always hear that 80% of cost is labor related. What you don't here is that that figure includes all labor cost's including mgmt and their salaries and bonuses. It's always those darn unions fault for driving up wages and benefits. What about cost's related to mis-magnagement. Just keep pushing that square peg in the round hole, eventually it will fit. How about a study looking at the exact ratio of Mgmt salaries & benefits vs Labor costs.... So when someone says labor costs we know they mean the people doing the laboring....

Postmarc said...

We don't need the whole "Triage" and ER analogy. We just need a spotlight put on the recent discovery by the OIG that Congress has overbilled the USPS for Civil Service retiree benefits by their calculation (and an independent auditor) as much as $75 BILLION dollars.

We wouldn't need to close offices, or 5-day delivery, or more staff reductions if this money was given back.

Additionally, the PAEA payments (which pre-fund our health care costs for retirees, the only Federal agency that does this) have also been calculated to result in an overpayment by 2016 of nearly $30 Billion dollars.

Is there any wonder why all the financial state of the USPS talk is so dire? It must be a contract-negotiation year!