Tuesday, July 27, 2010

Postal Employment in the Federal Government

Occupations at the Postal Service represent four of the top 31 occupations in the Federal Government in May according to the Occupational Employment Statistics Program data released today.   These figures represent career, non-career, full-time, part time, casual, and temporary jobs at the Postal Service and may differ from figures that the Postal Service presents based upon differences in definition of occupations by the Postal Service and the Department of Labor.

Largest Occupations in Federal Government, May 2009
Occupations Employment Percent of
Mean wage
Hourly Annual
Postal service mail carriers     339,030       12.73   $23.53 $  48,940
Business operations specialists, all other    170,450          6.40     36.71     76,350
Postal service mail sorters, processors, and processing machine operators     162,860          6.12     23.20     48,260
Compliance officers, except agriculture, construction, health and safety, and transportation      99,570          3.74     25.00     51,990
All other information and record clerks      84,450          3.17     19.01     39,530
Postal service clerks      73,050          2.74     24.96     51,920
Computer specialists, all other     64,540          2.42     42.75     88,920
Registered nurses     62,920          2.36     37.39     77,780
Management analysts      50,310          1.89     40.53     84,290
Managers, all other     47,720          1.79     49.96   103,910
Detectives and criminal investigators     43,380          1.63     36.32     75,550
Claims adjusters, examiners, and investigators      42,510          1.60     31.73     66,000
Purchasing agents, except wholesale, retail, and farm products      32,030          1.20     36.58     76,090
Lawyers     31,570          1.19     61.30   127,490
Tax examiners, collectors, and revenue agents     29,680          1.11     30.87     64,210
Janitors and cleaners, except maids and housekeeping cleaners     27,820         1.04     19.70     40,980
Physicians and surgeons, all other     27,000         1.01     83.37   173,400
Eligibility interviewers, government programs     26,860         1.01     21.73     45,190
Human resources, training, and labor relations specialists, all other      25,800         0.97     37.80     78,620
Secretaries, except legal, medical, and executive      25,090         0.94     22.35     46,490
Postmasters and mail superintendents     24,890         0.93     28.65     59,600
Logisticians      24,730         0.93     37.90     78,820
Forest and conservation technicians      24,400         0.92     17.36     36,110
General and operations managers     23,410         0.88     56.01   116,500
Accountants and auditors      23,360         0.88     42.28     87,940
Engineers, all other     23,220         0.87    5 1.47   107,060
Air traffic controllers       22,020         0.83     52.49  109,170
Financial specialists, all other     21,170         0.80     36.56    76,040
Maintenance and repair workers, general      21,020        0.79     24.19    50,320
Bookkeeping, accounting, and auditing clerks      19,560        0.73     20.84    43,340

Sunday, July 25, 2010

Putting the Subcommittee Vote in Context

Most postal stakeholders are please that the House Subcommittee on the Federal Workforce, the Postal
Service and District of Columbia approved H.R. 5746, “the U.S. Postal Service CSRS Obligation Modification Act of 2010.”  However, anyone who listened to the arguments against the bill made by Congressman Jason Chaffetz (R-UT) would quickly see that this bill could quickly become part of the partisan fodder that infests nearly all legislation in Congress.

Even though the Democratic majorities in the full committee make it likely that the bill could reach the House floor, there are potential landmines in the legislative process that could still derail its passage.  These include:
  •  The limited number of days in the legislative calendar.   It is difficult to get a new bill passed given what is already on the Congress's plate.   The bottleneck is tighter in the Senate than it is in the House but time is limited in both chambers. The legislative calendar becomes even a greater roadblock if the issue becomes a partisan hot button as opponents have many opportunities to delay action and cause the legislative clock to run out.
  • The difficulty of getting any Republican support in the House or Senate for a bill that "increases" the budget deficit.    It is not hard to imagine those opposed to this bill calling it a "bailout for a failing government agency."   It is not clear what the upside is for Republicans supporting this bill before the election.
  • Budget concerns among blue-dog Democrats that could make finding a House majority difficult if there is no Republican support.  The development of a budget focused caucus among moderate Democrats suggest that the budget impact of all legislation will increase in importance in the House for the remainder of this session.   There is no reason to suggest that the next Congress will be less budget-focused than the current one.
  • The challenge of getting 60 votes in the Senate.  Passing any change in the retirement liability in the Senate will likely depend on what it takes to gain the vote of between one and  five Republicans depending upon whether there are any Democrats who object to the change.   While Senator Susan Collins will clearly be a major player, others whose votes could determine passage includes Senators Scott Brown (R-MA), Lisa Murkosky (R-AK), Olympia Snowe (R-ME),  and George Voinovich (R-OH).
So while the National Association of Postal Supervisors and other stakeholders can celebrate this first step, they still have a lot of work ahead of them if the legislative language contained in H.R. 5746 is to become law.

Thursday, July 22, 2010

If UPS can do it why can't the USPS

In its conference call discussing its 2nd Quarter 2010 results,  UPS explained that the growth in its profitability this quarter reflected the fact that while volumes grew slightly, both labor hours and miles driven were down.    The decline in the use of labor and transportation assets reflected a more streamlined network than what existed a year earlier. The streamlining put downward pressure on the total work hours of its Teamster employees.

In addition to streamlining its network, the total complement and work hours of Teamster employees, UPS also made major strides in cutting layers of management by eliminating a significant portion of its district and regional management.   Elimination of middle management reflects the fact that UPS's standards based management approach and strong information technology platform allows fewer managers to manage more territory and employees effectively.

The Postal Service, even though it has reduced work hours and employees, has not been able to get ahead of the curve in streamlining either its facility or transportation network.  The Postal Service has not been as aggressive as financial conditions warrant in streamlining regional and area management.

Looking forward into 2011, the Postal Service expects that single piece First Class mail will decline by double digits from current levels and bulk First Class mail will decline by 6% further increasing over-capacity in its collection, mail preparation and origination sortation operations and may reduce demand for destination sortation capacity as well. 

No one knows how well the consolidation efforts now in the evaluation stage will work to reduce the over-capacity problem.  However, the public method projecting savings underestimate the benefits of plant consolidation because 1) they do not use volume forecasts which would identify the impact of declining First Class volumes on capacity needs; and 2) they do not use a net present value analysis that would show the impact over 2 to 5 years that would clearly show the value of early retirement incentives and some capital expenditures to speed the consolidation process and operating cost savings. 

In addition, consolidation efforts are limited due to three reasons:
  1. the lack of capital that forces the Postal Service to use existing facilities that may not be ideally located for the most cost-efficient means of providing high quality service;
  2. the lack of a employment plan that includes focused early retirement incentives and severance pay that would reduce head count more quickly than now occurs; and
  3. full time job requirements which are increasingly difficult to justify given both declining originating volumes and the efficiency and service quality requirement that proportion of time that mail spends inside the walls of a processing plant decrease and the the time the mail spends in transit increases. 
 As both the shareholder and bondholder of the Postal Service, Congress needs to have a clearer understanding as to:
  • the network that could optimally handle mail volume in 2020 while improving on or maintaining current service levels and how the constraints listed above prevent the Postal Service from having such a network;
  • the additional costs that are imposed by the constraints identified above;
  • the cost impact of not having such a network and the impact of those costs on postal prices and to a lesser extent on employee compensation; 
  • the risks of not having such a network creates for the Postal Service's ability to pay its obligations to the treasury and be self-sufficient; and
  • the impact of not having an efficient operating network on economic growth.
Additional Comments:

Retirement Liabilities:  I do recognize that the Postal Service has expenses for retiree benefit liabilities that no private sector company does in addition to having had its obligation for pension liabilities overstated.   However, even if these expenses were liabilities were removed from the balance sheet, the Postal Service would still face the challenge of dealing with flat or declining volumes total mail and declining First Class mail volumes which has created the need to adjust the sortation and transportation networks.     In order to be financially self-sufficient, the Postal Service has to move from behind the curve to ahead of the curve in its efforts to ensure that operating capacity fits the demand for mail.

Cuts in Management:   As one reader noted, the Postal Service has made some cuts in district and area management.   However,  UPS has made an even larger proportional cut in middle management than the Postal Service.   UPS made these cuts in order to deal with profitability challenges that exist due to competition from FedEx and slow growth in demand.   The Postal Service's profitability challenges are even greater which would suggest that further consolidation of area and district management may be warranted on top of its efforts to streamline its production operations.

    Tuesday, July 20, 2010

    Markup of USPS Retiree Benefits Bill

    On July 21st at 1:30 pm, the House Federal Workforce, Postal Service and District of Columbia Subcommittee of the Oversight and Government Reform Committee will hold a mark-up of H.R. 5746, United States Postal Service's CSRS Obligation Modification Act of 2010.  

    The subcommittee will mark up this bill at a meeting when it is marking up 4 other bills, three related to the District of Columbia and one related to supervisor training in small agencies.  

    Assuming the subcommittee passes the bill, the next steps are as follows:
    • Mark-up and passage by the full committee
    • Committee report written
    • Referral to the Rules committee to set the rules for floor debate
    • Debate on the House floor
    • Referral to the Senate where it will be reviewed by the Homeland Security and Government Affairs Committee and if unchanged  sent on to the full Senate
    • The Senate then debates the bill which will likely require a 60 vote majority for passage;
    • If the bill passes unchanged it becomes law otherwise;
    •  the bill must pass through a conference committee and pass both Houses of Congress again.
    Postal stakeholders who want to change the retiree obligation calculations during this session of Congress face the challenge of a limited number of legislative days available to handle new legislation, particularly in the Senate.   It would seem that even if the bill passes the House prior to the end of the fiscal year, it is likely that final passage will require action in a lame duck session.

    Saturday, July 17, 2010

    Fixing the Retirement Liability Calculation

    Congress has begun to move on the Postal Service's retiree obligation issues.   The House Committee on Oversight and Oversight and Government Reform will mark-up H.R. 5746, The United States Postal Service’s CSRS Obligation Modification Act of 2010 on Wednesday, July 21 at 1:30 p.m.

    Given the limited number of legislative days involved, any action on retiree issues has to move at a pace far faster than what is common in Congress.  While passage in the house in an expedited fashion would appear possible, passage in the Senate in a timely fashion is less certain.   Senator Carper has indicated that he is preparing his own comprehensive reform bill which may go beyond the retiree benefit fix and would have to be reconciled with the House language.  In addition, objection by any one Senator can hold up passage.

    To understand how fast this is moving, at least in terms of legislative speed  here are some relevant dates.
    • January 20th, 2010 -- The USPS-IG report, The Postal Service’s Share of CSRS Pension Responsibility released.
    • March 2, 2010 -- Request from the Postal Service made to Postal Regulatory Commission for actuarial report.
    • June 30, 2010 -- Civil Service Retirement System Cost and Benefit Allocation Principles (Segal Report) is released by Postal Regulatory Commission
    • July 16, 2010 -- Congressman Stephen Lynch on Friday introduced H.R. 5746, The United States Postal Service’s CSRS Obligation Modification Act of 2010.  The legislation follows the USPS-IG methodology.
    • July 21, 2010 --  House Committee on Oversight and Oversight and Government Reform marks up H.R. 5746, The United States Postal Service’s CSRS Obligation Modification Act of 2010.  After mark-up, the agreed upon language is sent to the Committee on Rules to set the parameters of debate on the House floor.

    Friday, July 16, 2010

    A 8-Point Plan to Save the Postal Service

    The Blog Tongue in Cheek has produced an innovative 8-point plan to save the Postal Service.   All 8-steps are actions that individual citizens can take to improve the financial condition of  the USPS.  They are:
    • Point 1 – We are applying for as many opportunities to receive junk mail as possible. To speed up the process we are also helping our neighbors get the picture by ordering junk mail for them as well.
    • Point 2 – We play chess… via postcard. With an average game lasting 40 moves, and the price of a postcard stamp currently set at 28 cents, that’s $11.20 handed back into the very capable hands of our favorite Governmental Institution. Not only is this helping us to remember the joy of receiving mail once again, but we are also feeling a sense of satisfaction in knowing our game will outlast the current presidential administration. Kellen and I are seven moves into our current game. In my most recent move I B6′d to his D5, if you catch my drift. He doesn’t stand a chance.
    • Point 3 – We are ordering our big-ticket items—speedboats, shipping containers, and mail order lutefisk—online. Not only does this give the USPS more to deliver, but it has the added benefit of helping to suage Kellen’s insatiable lutefisk habit.
    • Point 4 – We have become penpals with foreign dignitaries, professional athletes, and popes. Current corresponders include Usain Bolt, Neil Diamond, and Nikita Khruschev.
    • Point 5 – We plan to use stamps as wallpaper in our homes. Not only will this display our high sense of style, but it will also be a history lesson for our children. “Here we have the James Madison memorial stamp room, and over here is the Hello Kitty room…”
    • Point 6 – We are lobbying the USPS to begin selling ice cream out of the backs of their trucks.
    • Point 7 – We are writing letters to people who have been mean to us letting them know they never should have crossed us because we are now rich and successful Doctors and Senators.
    • Point 8 – From now on, comments to this blog will only be accepted via mail.
    Link to the blog and see the details of this plan.

    Wednesday, July 14, 2010

    Cutting Delivery One Day a Week

    The Globe and Mail has reported that the Montreal Gazette is eliminating its Sunday paper.  This decision leaves the Montreal metropolitan area without a Sunday paper.  The Saturday paper, which already has the week-in-review and other features that are commonly found in Sunday papers in the United States will pick up those features that are now published on Sunday.

    The decision to end the Sunday paper also reflects a far different competitive market in Canada for the delivery of saturation advertising than is found in the United States.  In Canada, newspapers do not distribute nearly the number of inserts they do here.  Newspapers in Canada have not effectively competed with Canada Post's unadress admail product as well as newspapers in the United States have competed with the Postal Service.  That is why nearly every newspaper in the United States has a thick polybag of inserts for delivery on Sunday and additional inserts delivered on other weekdays.  

    So what is considered unadressed admail?

    Unaddressed Admail consists of printed matter and non-printed matter such as product samples for delivery that are not addressed to a specific address in Canada. In order to provide maximum flexibility and choice, the Customer’s advertising piece can take on a variety of forms and content, including, but not limited to:
    • flyers
    • newspapers
    • community newspapers
    • cards
    • coupons
    • single sheets
    • envelopes
    • catalogs
    • magazines
    • brochures
    • co-op mailings
    • inserts and enclosures
    • samples
    • CDs and DVDs
    How is unaddressed admail priced?

    Canada Post has a published tariff for unaddressed admail.  However nearly all users of unaddressed admail only use the published tariff as a basis for defining the rates that are included in the contract that they sign with Canada Post.  The contract rates are private documents and are signed and implemented without regulatory review.   The same is true with contract rates for addressed advertising and First Class bulk mail. Therefore it is impossible to use public documents to compare the rates that a distributor of coupons would pay in Canada with what they pay in the US. 

    What is the service quality?

    Canada Post offers 3 day delivery windows for unaddressed advertising starting from the day it is dropped at the delivery unit.  In addition it offers a premium service, for a slightly higher rate that allows a customer to specify the particular day that the delivery window will begin.  Canada Post has developed specific tools for mailers to use to identify the carrier routes that they want use for advertising distribution.

    What about small businesses?

    Canada Post has a small business program called VentureOne that allows businesses to get free assistance in developing their unaddressed advertising program in addition to 5 to 8% discounts on all of the parcel services that Canada Post offers.  The program includes assistance in all phases of creating and tendering advertising mail.  

    Can the United States Postal Service do what Canada Post does?

    No, it can not.   Regulatory restrictions prevent it from offering contract rates that are not open to scrutiny by a regulator and in some instances other customers.   Regulatory restrictions prevent it from offering discounts for business mailers that are not available to consumers unless they can be "cost justified."  (Canada Post has an internal review process that sets parameters for profitable discounts.)  Finally, the Postal Service would have significant difficulty offering a program like VentureOne without regulatory approval and many of the features could run affoul of restrictions on providing "non-postal services" as they competes with services that firms in the private sector charge for.

    Wednesday, July 7, 2010

    The Exigent Rate Case: Rethinking Price Regulation

    Yesterday the Postal Service proposed a major change in its rate structure through an exigent rate case.   The general and postal press have focused on 1) the rate increases themselves with particular attention to the impact on First Class single piece mail; and 2) the exigent process itself, a rate setting process that is being used for the first time. 

    Mailers have organized a major effort to stop the changes through a new group the Affordable Mail Alliance.   With only 90 days to press their case mailers have a major challenge in their effort to argue that:
    1. the conditions necessary for invoking the exigent process had not been met; 
    2. the rate increases proposed are too large;  and
    3. the changes in individual rates result in rates that are not fair and reasonable and do not meet the pricing objectives in postal law.
    Given the limited amount of time available for the proceeding, the level of discovery, expert testimony, and cross-examination in this proceeding will be limited.   While the procedural schedule is not yet out, the Commission will likely need around 20 to 30 days to review evidence and write its opinion which compresses the first nine months of a traditional rate case into a 60 to70 day period.

    What makes the exigent rate increase particularly difficult for mailers and the Commission is that it represents more than just a simple across the board increase in rates.   The proposal represents a fairly bold rethinking of regulatory pricing and the economic thinking that guided postal pricing for nearly thirty years.  These new approach can be summarized in seven statements as follows:

    1. Divergence to electronic alternatives for single piece mail is not affected by stamp prices.   "The Postal Service does not believe that the erosion of single-piece mail through electronic diversion can be materially affected by limiting the growth of the stamp price." (Statement of James M Kiefer on Behalf of the United States Postal Service, July, 6, 2010, p. 15)  "As long as these forces [that encourage electronic payment] are in play, efforts to hold down the stamp price to "protect" the single piece customer will be unlikely to spur usage of single piece mail among users, for whom continence trumps the small impact of the postage savings." (Kiefer, p. 16)

      From a business standpoint, this means that the Postal Service cannot protect itself from the decline in single piece First Class mail by holding prices down.   Given that single piece mail is now declining at a faster rate than it did before the recession, the Postal Service's single piece rates today will increasingly be required to bear the costs associated with reducing the workforce that currently handles single piece mail at a rate far faster than the rate of normal attrition.  The public should expect that single piece rates will begin rising faster than other postal products to generate cash to cover these costs.
    2. The markets for single-piece and presorted First Class mail are different.   By separating the markets for single-piece and presorted First Class mail, the Postal Service presents a direct challenge to the theory behind workshare discounts as they are currently constructed. "Traditional workshare theory suggests that increasing presort First-Class Mail prices would simply cause customers to re-evaluate their decision to perform worksharing activities.  Essentially, the theory argues that if it costs less for a customer to presort mail than the postal discount, then they will do the sortation. Conversely, if it costs more to presort mail than the postal discount, then the customer will choose to tender unsorted mail to the Postal Service. While this argument may have been valid at the inception of the automation program, it ignores the realities of decisions that customers are making today. Much of today’s presort mail is generated not by physically sorting mail pieces but by using presorted mailing lists to produce the resulting mail in presort order. 

      Customers pay prices, not “discounts” and decide whether to mail or not to mail based on the total cost of mailing, including the postage paid (not just the price differential between single-piece and presort mail) and the costs of producing that mail. While at some level the size of the discount affects workshare decisions, the overall postage price affects the decision to mail or not to mail. If this price goes up substantially (because discounts are reduced) the decision to mail at all may be reconsidered." 
      (Kiefer, p. 18)

      The Postal Service carriers maintains the separation between individual and commercial users of First Class mail in its development of First class mail products regardless of shape and is clearly seen in the discussion of both letter and parcel rates.  

      The separation of individual and commercial mailers requires the Postal Regulatory Commission to overturn current precedent on First Class rates and worksharing discounts as applied in the Postal Regulatory Commission's 2009 Annual Compliance Determination.   The Postal Regulatory Commission will like spend some time deliberating this change but much of the public work on this issue has been completed as part of another proceeding, Docket No. RM2009-3.
    3. Pricing is still subject to the Postal Regulatory Commission's worksharing rules even if the Postal Service does not believe it makes sense.   Mr. Kiefer's statement has numerous sections on worksharing to deal with the Commission's approach to measuring traditional worksharing discounts.   The inconsistency between these sections and the Postal Service's thinking on separating single piece and pre-sorted First Class into two separate markets indicates that the Postal Service still must prepare its proposal to meet Commission precedent even if it believes that the precedent does not allow for postal prices to reflect market realities.  While the Postal Service may want to challenge worksharing precedent and law, the Postal Service is holding off that challenge until at least 2011.   
    4. Weight Categories for First Class Pre-sorted mail require rethinking.   The Postal Service has proposed allowing single piece First Class letters to hold 1.2 ounces and still pay a single ounce rate.   This allows more advertising inserts in letters, items that help make mail that normally is a business expense become a profit generating advertising opportunity.   The question that this change makes is: why 1.2 ounces?  As mailers and the Postal Service experiment with this proposed change, it is possible that the Postal Service may want to allow commercial mailers to send higher weights as long as the mailing meets automation requirements.
    5. Pricing should not reflect bad operating processes or short term economic challenges.  The prices proposed for Standard Flats and Periodicals both are more modest than traditional price setting rules would require.   The process for handling flats are currently in flux and the costs associated with moving them in one to two years should reflect a different operating process than the Postal Service now uses.  Also if the Postal Service, started an aggressive program to remove excess capacity through a new round of early retirements and a national distribution strategy for flats similar to what it did with the NDC's it may be possible to reduce costs even further.

      The Postal Service's rates also reflect a limited recognition that catalogs and magazines are struggling in the marketplace that sees significant reductions in consumer demand.   Magazines in particular have seen significant drops in ad pages that reduce the amount of postage a magazine pays per issue.    The recovering economy has seen some increase in the number of advertising pages sold that will increase the amount of revenue the Postal Service generates per magazine.
    6. Not all products that look the same compete in the same market.   The Postal Service in its press conference described two Standard Parcel markets.   The first is a product sample market that is a form of advertising and competes with other means of distributing product samples.    The second is fulfillment and includes the distribution of light weight parcels.   Physically, these items look very similar.  However, the value of the item to the sender is very different.   Samples are designed to generate sales so the postage price, combined with all other costs of producing the sample must product a positive return on the advertising expenditure.   Fulfillment parcels rates must allow the seller of the item to earn a profit on the sale including the item's cost as well as all other sales, marketing, and overhead costs associated with the sale.   The differences between the two markets are intuitive, proving this as part of a regulatory proceeding may not be. 
    7. The Postal Service's regulated parcel services, regardless of class, are offered in competitive markets.   The Postal Service with the exigent filing has begun the process of moving its parcel products into the competitive product category. This would allow it to offer all parcel services to commercial customers within contracts just like its competitors do and offer services to individuals based on rates contained in published tariffs.  The Postal Service at its press conference stated that it will propose moving Standard parcels to the competitive category this fall and is evaluating moving other products to this category as well.  

      The Postal Service's position in the parcel market is unique in that it both offers services directly to consumers and businesses and offers its delivery network to its competitors for delivering light weight items and items destined to the rural households.   All of the Postal Service's parcel products sold directly to shippers have private sector substitutes, although some are offered at prices that the private sector finds unprofitable and no private sector carrier offers a service that is price competitive. 

      The Postal Service's last mile delivery service competes with other firms that can offer last mile delivery as well as the employees and regular contractors of United Parcel Service and FedEx Ground.  The use of the Postal Service's last mile service reflects a classic make or buy decision that United Parcel Service and FedEx Ground that these companies constantly evaluate to ensure that they meet their profitability objectives.   The Postal Service ability to raise its prices for the last-mile delivery of light weight and rural parcels depends on price of its customer's alternatives. 
    The seven items listed above should give the mailing community a lot to think about as they deal with the details of the Postal Service's proposal.   They all reflect long-term issues that go beyond the rates themselves.  For many stakeholders, including the Postal Rate Commission, postal unions, and many mailers, the changes reflect challenges to their long standing positions.  In 90 days we will see if the Postal Service has overcome the pull of precedent and traditional viewpoints or if a new era in postal pricing has begun.

    Saturday, July 3, 2010

    First Mover Advantage

    My most recent post looked at the possibility that a private sector firm would decided to offer pick-up of items in automated lock boxes.   Looking over how these boxes are being used in Europe has identified what the real advantage could be: allowing Amazon and other internet retailers with multiple distribution centers to offer same day delivery.

    Amazon offers same day delivery in seven cities with orders placed in most cities before 10:30 am.   Barnes and Noble offers same day delivery in Manhattan.   The growth of this same-day market is limited by both demand and the cost of home/business delivery relative to the cost of the item sold.

    Same day delivery is of interest to Amazon and other internet-only retailers because they compete with companies like Best Buy and Sears that offer on-line sales with store pick-up.   Having a lock-box at least as close to a consumer's home as the nearest Best-Buy or Sears store would allow them to expand their same-day service to smaller cities at the same time they lower the cost of shipping those items.

    The following video illustrates how picking up a shipment would work with either a notice left on a door or a notice e-mailed.  It is fairly straightforward.

    While, the parcel collection and delivery locker solutions are relatively new, but in every country where they have been introduced there has been positive consumer acceptance and the company introducing the lockers made a second and in some cases a third order.  More importantly, as the ad for the lockers used by Deutsche Post shows, these lockers allow for better integration of e-mail, messaging, and smart phone technology used by consumers and businesses into the delivery process.  Something that will be critical as

    These secure parcel lockers do not work for parcels that are too big or heavy to fit in the boxes provided. However for many electronics, software, and apparel shipments, this solution fits quite well.

    Friday, July 2, 2010

    Could the Postal Service Lose its Niche in Parcel Delivery?

    The Postal Service's parcel delivery business have a limited competitive advantage in serving customers that send three types of shipments.
    1. Items under 2 or 3 pounds shipped to households.  These customers either ship these items themselves or use a consolidator like FedEx Smart Post.
    2. Items shipped  to rural areas and in particular rural households.
    3. Infrequent shippers who find retail services offered by the Postal Service more convenient or lower in cost.
    The Postal Service serve these markets because they have a competitive advantage due to its ability to deliver light weight items cheaper over the last mile than FedEx or UPS could using its own contractors or employees and due to the advantages that its retail footprint offers both in terms of selling parcel delivery services or offering pick-up of parcels that were not delivered because no one was at home.

    Unfortunately for the Postal Service these advantages are tenuous.   Postal Service competitors are now exploring secure alternative delivery options for households that reduce delivery costs per package by eliminating delivery to the home itself and more importantly eliminating multiple delivery attempts when no one is home when the first attempt is made.   These carriers are exploring the marketing campaign needed to implement the parcel pick-up and delivery systems sold by KEBA and now installed by Austrian Post, DHL Deutsche Post, Post Danmark, Posten Norge, and PTT Turkey.

    If such a system is installed in the United States, the Carrier could provide the recipient with the location of the secure parcel box and the code for retrieving their parcel as part of the track and trace record. Such boxes could be placed outside of existing retail outlets like FedEx Office, Staples, UPS Stores or other contracted location offering 24-hour access to delivered parcels.  Without the need for employees to staff a parcel location, private sector carriers could offer full service parcel and express services in communities that are currently too small for even franchise or contract locations.   Such a system would also allow private sector carriers to offer six and even seven day delivery without requiring it to go to every address that receives a parcel.   This would be a major advantage if the Postal Service eliminates its Saturday delivery service.

    This blog discussed how such a system could expand the retail presence of the Postal Service last August through the use of such automated parcel systems. in two posts.

    Should the Postal Service Close All Post Offices?

    Marketing the Pakstation

    If competitors chose to do this first, then the Postal Service risks the loss of a significant share of its parcel delivery business that exist because competitors chose it as the delivery contractor.   The Postal Service could further lose business from retail customers who find that the automated solutions of competitors are more convenient. 

    Postal Service to Announce Price Changes

    The Postal Service will announce the price changes that will be included in its exigent rate case on Tuesday, July 6, 2010.    The Postal Service will then file the rate changes with the Postal Regulatory Commission shortly thereafter.    The Postal Regulatory Commission will have 90 days to review these rates.

    The rules regarding written comments on the Postal Service's proposal in an exigent rate increases define the 3 issues that will like be the focus of the PRC's decision on the proposed rates.  They are:
    1. The sufficiency of the justification for an exigent rate increase;
    2. The adequacy of the justification for increases in the amounts requested by the Postal Service; and
    3. Whether the specific rate adjustments requested are reasonable and equitable.
    As this will be the first exigent rate case, it would not be surprising if any decision is taken to court regardless of whether the PRC approves the Postal Service's proposed rates as they are presented, modifies the proposed rates or rejects them.