Monday, September 6, 2010

The OSHA Fines: A Canary in the Coal Mine

The financial problems of the Postal Service have so far had minimal impact on the service that mailers receive.   The Postal Service has generally met its service commitments at levels similar or better than what existed at the time of the passage of the Postal Accountability and Enhancement Act.  To the extent that the financial problems have affected operations, the impact has been hidden from view.

However recent actions by OSHA indicate that the financial challenges are beginning to impact the ability of the Postal Service to safely operate its facilities.   OSHA has found sufficient common violations exist that it issued a complaint to the Occupational Safety and Health Review Commission to order USPS to correct electrical violations at 350 facilities.  The complaint gives the Postal Service unwelcome notoriety as this is the first time that the Department of Labor has sought enterprise-wide relief as a remedyOSHA's action follows the Postal Service receiving fines for safety violations in multiple facilities from Boston to Kansas City.

Enterprise-wide worker safety is a serious issue that often only comes to light when there are more systemic problems that either suggest significant malfeasance or significant financial problems that prevents the enterprise from dealing with them.  In the case of the Postal Service, there is no evidence of malfeasance.  Malfeasance is a potential issue in the investigation of safety issues at the Big Branch mine in West Virginia.

The increase in safety violations at the Postal Service reflects the impact of the financial challenges that resulted in budget cuts and deferred capital spending.  These financial problems have generated issues of maintenance backlogs since at least 2007 when the GAO began reporting it.  OSHA's findings of safety issues expand the issue of maintenance and safety to include mail processing facilities as well. 

An increase in safety related issues often coincides with service related problems in transportation firms.   The recent problems with Metro trains in Washington, D.C. are good examples where deferred maintenance, upgrades and capital spending on infrastructure, information systems and new equipment have resulted in delays and a tragic accident.   Following the accident, Metro trains ran much slower for an extended period of time until the track where the accident occurred was deemed safe.  Also questions exist as to whether some of the older, less structurally sound cars should be removed from service which would increase crowding on the system and reduce train frequency.

Safety issues were also a serious issue for US railroads when they were facing significant financial problems in 1970's and 1980's.  Safety issues had a major impact on service as Conrail and other railroads slowed train speed in order to operate safely and even that did not prevent breakdowns that resulted in lengthy delays and complete denial of service to certain points on within the United States freight rail network.   Similar stories can be told in regards to a number of the commuter rail systems where budget constraints resulted in safety issues that forced slower and less frequent service.  

For the Postal Services, safety issues could affect the service if the safety issues reflect deterioration of basic systems (i.e. plumbing, ventilation, electrical) that require the facility to be closed.   Such problems have closed retail facilities but have yet to close any processing facility.   Even if the problem is less severe, it can have an impact on service.  For example, if the electrical system serving a significant number of pieces of automation equipment must be taken off line for repairs, then mail from that facility could be delayed as mail must be worked on equipment that is not affected.

Safety and maintenance issues raise additional questions in regards to the Postal Service's retail and mail processing strategy.   The expense of keeping a facility open is not just the operating costs involved.  All facilities require regular maintenance and upgrades to basic systems as well as installation of new generations of material handling and automation equipment.

As such, the costs associated with maintaining the existing retail network is not just the cost of the employees who work there and the regular facility operating costs. (i.e. heating costs, electricity, and rent and/or depreciation)  Measuring the true cost of maintaining the existing retail network must include the cost of items that are not incurred every year including regular upgrades in basic systems, painting and remodeling expenses of the retail counters, etc. If the Postal Service has been deferring these building expenses then any review of historical expenses would underestimate the costs of maintaining the existing retail network.

For mail processing facilities the problem is similar.   Cost models that evaluate the Postal Service's network and decisions to consolidate facilities need to look at the capital spending required to maintain existing facilities when then look at the potential costs and benefits of either consolidation into an existing facility or consolidating two or more older facilities into one newer facility.   Not including these costs misstates, and most likely underestimates the benefits of consolidation and may underestimate the benefits of consolidating processing from multiple older facilities into a better located new facility. Also similar to the issue with retail facilities, underfunding of maintenance expenses both understates the costs of keeping processing facilities open and may impact the potential capital spending needs in the future. 

The problems with deferred maintenance and safety issues suggest that the costs of maintaining the existing retail network and a processing network that is too large for the mail volume and mix that the Postal Service handles is probably greater than what the Postal Service currently measures.   Replacing them with retail and processing networks that make sense for the volume and mix of mail and parcels that the Postal Service handles would generate greater savings than now believed even if the remaining facilities required spending to cover deferred maintenance and capital needs.  Not fixing the retail model creates the possibility that the Postal Service could increasing provide more limited hours of service at existing retail locations and use the labor savings to cover the maintenance costs of the facilities.  Not fixing the mail processing model raise the possibility that maintenance problems could result in a significant service failure if a facility has to be taken down to repair the problem.   

The OSHA citations represent the canary in the coal mine in regards to the Postal Service's financial problems.   They illustrate the first instance of how the financial problems that forced deferred maintenance and capital spending affect key stakeholders of the Postal Service; in this case, its employees.  Given what has happened in other transportation companies, customers could expect that financial problems that resulted in deferred maintenance and capital spending to the service they see.  At this point maintenance issues have affected some retail customers and could affect more if increased maintenance costs require costs in operating costs and hours that retail facilities are open.    Commercial mailers should begin to wonder how soon it will be before the costs of maintaining an over-sized and mis-matched physical plant begins to affect the quality of service that they receive.


dryMAILman said...

Postal safety is a joke. What other entity has an $8+ billion workers compensation deficit? Delivery costs are not fixed; look for this deficit to skyrocket. Postal FSS is coming. No one has bothered to show how to deliver it. The only enterprise-wide strategy is placing enough corruptocrats and cronies in key positions to block change. Not to be critical.

Anonymous said...

Letter carrier on-the-job injuries are all treated as faked by the carriers: managment bonuses are determined by number of workplace injuries (one variable). Even OSHA turns a blind eye to this abuse of honest, hard-working citizens.

Anonymous said...

Excellent article, but people dont know the half of it. Earlier last year the tests were rewritten for the postal exams and made so virtually anybody could pass even the most advanced test Electronic Technician) with no experience. The APWU mistakenly (I believe)signed off on this. We now have clerks being excessed into custodial positions and then testing until they pass (you can take them as many times as you want,your score can only go up so you learn the questions). We now have a couple of mechanics that had to be shown the most basic skills, like how to use an electric drill. As the rest of us who qualified under the old system and were qualified to do the work and went to school for these skills outside or were brought up with our fathers doing these things, we are somewhat horrified and are just waiting for the meat spray or electrocution.

In addition the school in Oklahoma that was supposed to teach these new people has virtually been shut down and most of the staff has been layed off.

In my own facility the maintenance supervisors are both out of operations and can't even keep the people away from us when we take over a machine to work on it. Our pallet jacks have been so severely overloaded with air cans under managements approval that the now all have bent frames and all wobble when they drive down the aisle unloaded. The routes on the machines are being signed off fraudently (supervisors bonuses are tied somewhat to route completion) and lot's of equipment is getting no preventive maintenance. I could go on for an hour but the bottom line is management doesn't care about safety, only a veneer that to an outsider looks acceptable and fine avodance. Dollars are the bottom line... and that just can't be when it comes to your maintenance program.