Friday, April 16, 2010

Insights from the DMA's Jerry Cerasale and Nonprofit Mailers's Tony Conway

In the most recent Postcom Radio podcast, Gene Del Polito covered a wide range of current topics with Jerry Cerasale, V.P. of Government Relations for the Direct Marketing Association and Tony Conway, Executive Director of the Alliance of Nonprofit Mailers.  Their discussion was quite useful for stakeholders trying to understand possible changes in the postal market.  The following is a quick summary of the ideas and issues raised in the Podcast.

Improving the Business Relationship

The discussion focused on two ideas that would put the relationship between the postal service and its customers in line with how mailers deal with all other vendors.

  • Electronic Manifests - Electronic manifests would allow postal customers to pay postage and complete much of the acceptance documentation electronically.  Electronic manifests would mean that the USPS and each customer would easily know the volume sent over any period making it easier to develop contract rates and document volumes required by regulation for sales.  Most importantly, electronic manifests, if integrated into the Postal Service's work force and transportation models could allow it to manage its resources more efficiently.  Electronic manifests have been used in trucking, rail, air cargo, and ocean cargo for nearly twenty years.  The question is why have they not been employed by the Postal Service?

  • Standard Payment Terms - Standard payment terms are usually payment within thirty or 60 days.   The Postal Service pays its vendors using standard payment terms but requires its customers to pay when service is being rendered.   Implementing standard payment terms has two issues that prevent the Postal Service from accepting the idea.   First, giving up payment terms that require payment when the service is rendered would create a short term cash flow issue that the Postal Service can ill afford right now.  The Postal Service would have to borrow to cover the delay in payments.  Its borrowing costs could be reduced if payment terms were eased in over time.   Second, the Postal Service would have to cover the costs of services for customers that do not pay their bills.  This would come from either higher rates or in an idea suggested by Jerry Cerasale, a payment bond to cover potential losses.

  • The Postal Service's Action Plan

    The discussion on the action plan noted that most of the actions that the Postal Service wants to take require action by Congress.  Neither Jerry Cerasale nor Tony Conway expects Congress to act swiftly on what the Postal Service presented.  They concluded that the Postal Service is left with two options.

  • An exigent rate case - An exigent rate case is a proceeding under which rates can be "adjusted on an expedited basis due to either extraordinary or exceptional circumstances, provided that the Commission determines, after notice and opportunity for a public hearing and comment, and within 90 days after any request by the Postal Service, that such adjustment is reasonable and equitable and necessary to enable the Postal Service, under best practices of honest, efficient, and economical management, to maintain and continue the development of postal services of the kind and quality adapted to the needs of the United States."  39 US Code (d)(1)(E)

    Both Jerry Cerasale and Tony Conway stated that their organizations will challenge the legal basis for an exigent rate case and in particular whether a recession and electronic diversion represent "extraordinary or exceptional circumstances."   Both agreed that the Postal Regulatory Commission's decision will be more based on political considerations than legal ones. 

  • Labor Negotiations - The Postal Service believes that a number of changes in work rules and other terms in their labor agreements could significantly reduce costs and more effectively deploy the employees covered by those agreements.  The most important change mentioned is increasing the proportion of part-time positions.   As these changes require negotiations with the Postal Service's four labor unions and if necessary arbitration, Tony Conway noted that cost savings from changes in labor contracts could not be implemented until 2011 or 2012 for clerks and mailhandlers and 2012 or 2013 for city and rural letter carriers.
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