House of Representatives Losing Post Offices

Today the Postal Service announced that the beginning of a study to close 3653 Post Offices.  Among the list are four on Capital Hill.

• Capital Station
• Cannon Station
• Longworth Station
• Rayburn Station.

For those not familiar with the geography of Capital Hill, the list includes retail stations located in each of the three offices in the House of Representative and one office located on the House side of the Capital next to the flag office.

The four Post Offices in the House of Representatives are run by the Postal Service due to the Post Office Scandal of the early 1990's.  If it turns out that these offices are money losing, then it would appear that the Postal Service has been subsidizing the administration of the House of Representatives for a very long time.

No Post Offices are slated for a closure study in the Senate as the Post Office in the Dirksen Senate Office Building is a contract station. 

What LSU's Actions tells Us About Retail Postal Services.

The Baton Rouge Advocate reported that LSU is replacing a Postal Service run retail station for students on campus with one run by Ricoh, USA.    The switch will occur in the fall of 2011.  The switch is required because the campus Post Office is one of those being closed by the Postal Service.

In addition to the student mail center that is located in the LSU Student Union,   LSU has its own university mail service for non-personal mail and parcel services.  The LSU mail service also provides printing services for university clients.

The Postal Service's Post Office at LSU is one of a number of campus based Post Offices that the Postal Service is interested in closing.    Campus based post offices are not found on all campuses as many colleges and universities have their own internal mail services that provide mailboxes for students and may operate contract stations for the Postal Service as well.  For example, Macalester College, St. Thomas University, and the College of St. Catherines all operate contract stations for their college community that are also open to the public and can be found by searching for Post Offices in zip codes 55105. These campuses also have mailboxes for students that are run as a separate operation as per Postal Service contract station rules.   In many instances, mail services for students and the universities also handle copying and printing needs of campus based customers.

The following excerpts from the story 

The move will cost students more and require students living on campus to purchase mailboxes, but also should solve long-term mailing services problems on campus, said Jason Tolliver, LSU director of auxiliary services. ... The end result should be better quality in a consolidated, one-stop shop for mailing, copying, binding and graphic design services on the bottom floor of the LSU Student Union, he said.

“It’s a challenge for us, because we’re changing the way we do business,” Tolliver said. “But the service has not been what it should be. You can stand over there 20 to 30 minutes waiting in lines because of understaffing.

Although Ricoh may not be a household name, Tolliver said, the company offered to invest more in LSU and provide additional services like luggage carts, wireless “hotspot” printers and online “doorbell” notifications to let people know when they have new mail.

Ricoh will pay LSU about $133,000 in annual rent, he said, and invest $350,000 in renovations for the space, in addition to more than $200,000 in new equipment and software.

The switch to Ricoh USA illustrates the impact of change and suggests that it may have been possible for the Postal Service to continue to operate campus based Post Offices if they were able to

1. charge market rates for campus mailboxes; 
2. integrate delivery information with e-mail and text messages to provide box holders with information about when new mail arrives; 
3. legally provide on-site printing services that print documents that are then delivered to a post office box as a service to students on campus; 
4. find the cash necessary to invest in equipment and information systems necessary to provide both print services and the links between delivery and e-mail and/or text messages; and 
5. expand into other mail-related back office activities that it currently cannot provide under Postal Accountability and Enhancement Act restrictions that a private sector firms like Ricoh USA, the UPS Store, and Pitney Bowes can provide.

Postal Service Shrinking its Urban Footprint

Numerous news outlets are report the Postal Service's plans to close stations and branches.   Almost every article focus on the potential affect on rural areas. The following two quotes are typical

Washington Post

The U.S. Postal Service plans to save up to $500 million in the next two years as it works to close or consolidate about 2,000 mostly small, rural and rarely visited retail locations, according to senior postal officials.

 Wall Street Journal

The news is crushing in many remote communities where the post office is often the heart of the town and the closest link to the rest of the country.

However, a cursory review of the list released by the Postal Service, shows that the impact of the first 2,000 closures will affect the nation's urban centers and have minimal impact on service to rural America.


The closures of the these locations only make sense for Postal customers if the Postal Service simultaneously expands its use of contract stations and self service kiosks in supermarkets, drug stores and other retail locations as well as expanding the hours of those Post Offices that remain open and the use of mail and web-based provision of services now provided in retail facilities.   Those plans have been mentioned in the past but there has not been a public announcement of a roll out of expanded use of non Postal Service brick and mortar retail access. 

The closures will have the biggest impact on postal employees that are members of the American Postal Workers Union and the National Association of Postal Supervisors.   While the Postal Service has stated that affected employees would have jobs in nearby facilities, there is no guarantee that the nearby facility will be within a convenient commuting distance.  These organizations along with their allies on the Hill will try to fight these actions but given the fact that the first round of closures affect primarily urban areas represented by Democrats in Congress, it is possible that Congressional action to slow the process may not happen in time.

The more interesting question is how will the Postal Regulatory Commission react to this proposal and whether the Commission's review reduces the number of locations that are actually closed. 

Postal Policy: Now its Congress's Turn

Now that the Government Accountability Office report is out it is time for Congress to get down to the serious business of re-evaluating the current business model and regulatory framework.  Congress is starting this process with hearings in the House and Senate, this week and next. In preparing for these hearing, members on the relevant committees have a significant challenge preparing for the postal and other governmental witnesses.
Both hearings will focus on reports by the Postal Service, Government Accountability Office and the USPS Office of Inspector General.

• Federal Budget Treatment of the Postal Service by the USPS OIG
• The Postal Service’s Share of CSRS Pension Responsibility by the USPS OIG
• Final Management Advisory Report – Estimates of Postal Service Liability for Retiree Health Care Benefits by the USPS OIG
• Ensuring a Viable Postal Service for the Postal Service: An Action Plan for the Future by the U.S. Postal Service
• U.S. Postal Service: Strategies and Options to Facilitate Progress toward Financial Viability by the Government Accountability Office
• The U.S. Postal Service’s Financial Condition: Overview and Issues for Congress by the Congressional Research Service

In addition to representatives of the entities that produced these reports, members of Congress will hear from the Office of Personnel Management and the Postal Regulatory Commission who have an interest in many of the suggested changes in law that the reports discuss.

The three reports by the USPS Office of Inspector General cover technical actuarial and accounting issues over which there is a dispute between the Postal Service and the Office of Personnel Management as well as a critique of Congressional budgetary actions relating to the Postal Service. The CRS, GAO and the Postal Service have recognized the importance of the resolving the CSRS accounting and retiree health care funding issues in their reports. The critique of Congressional budgetary actions provides some context as to how Congress and the Office of Management and Budget has historically viewed their responsibility for the Postal Service and how the Postal Service’s cycles of strong and weak financial performance can be used as part of the solution of meeting budget goals.

The Postal Service’s report provides an action plan for operating its business within the current business enterprise business model. The modifications requested are changes from current financial, operating, employment, and marketing efforts that Postal Service management and the Board of Governors are sufficient to return the Postal Service to financial stability.The Postal Service’s report does not address the overarching mail industry policy, corporate governance and regulatory framework issues in any detail. Nor does the Postal Service report provide a vision for the Postal Service’s role in the US economy in 2020 that is much different than what now exists with the exception that its impact will be much smaller.

The GAO’s report, like the one produced by the Postal Service, provides strategies necessary to improve Postal Service operating, and to a lesser extent revenue management, and highlights Congressional action necessary to allow those improvements to occur. The GAO report goes beyond previous reports in its examination of the Postal Service’s cost structure and the legal impediments that prevent it from adjusting its costs to match current and projected revenue. The GAO report, like the Postal Service report does not address in detail the mail industry policy, corporate governance and regulatory framework issues that affect the Postal Service’s ability to implement operating, and marketing plans to best meet the needs of mailers and parcel shippers.Neither does the GAO report provide Congress with information that would help it understand the role that the mailing industry, and the Postal Service as the core of that industry could have in the US economy in 2020 and beyond.

The Congressional Research Service (CRS)report focuses on a “number of ideas for incremental reforms have been put forth that would improve the USPS’s financial condition in the short term so that it might continue as a self-funding government agency, all of which would require Congress to amend current postal law.” The ideas that the CRS reviews are those previously presented by the Postal Service and the USPS OIG and include many included in the GAO report as well. The CRS notes the objections of the Office of Personnel Management to the changes in retiree benefit obligation calculation or funding schedules. CRS’s description of the report’s focus nicely summarizes the overall tenor of all of the reports that Congress will review in upcoming hearings.

Before developing their approach to questioning the witnesses, members of Congress have to first understand what the reports that the witnesses are presenting to them are and what they are not. The reports that Congress has before it present:

• Incremental reforms that proponents suggest would improve the Postal Service’s financial condition in the short term; and
• Incremental reforms that retain the current model of the Postal Service as a self-funding government agency

What Congress does not have before it is a framework for understanding the broader policy context within which these incremental reforms fit. As CRS notes, the incremental reforms in the various reports do not answer the question: “Is the USPS, as currently constituted, incapable of responding to a shifting, and possibly declining, market for its products and services?” It is this question that raises the fundamental questions about postal industry policy, governance of the Postal Service, and the regulatory framework that makes sense for the postal industry. If the answer to this question is yes, then the incremental reforms make little sense unless they are steps in the direction required to create an entity capable of responding to a shifting and possibly declining market for its products and services.

The following set of questions represent examples of the types of questions that Congress needs to ask witnesses in order to develop the framework within which incremental reforms make sense.   While some of the government entities can answer these questions, many of them go beyond the scope of the studies that they have just completed or their role in developing postal industry policy.
It may be time for Congress to begin the process of framing these questions so that GAO, CRS, the USPS OIG, the USPS or entities in the executive branch responsible for economic development, communications and transportation policy answer them.  After they are answered, Congress will be able to move forward on the incremental steps that the various reports suggest with an understanding of the broader policy context within the individual steps fit.

General Postal Industry Policy

1. What should the overall objective of postal industry policy over the next decade and beyond and where does the Postal Service fit into that objective?
2. Is that objective different from the objective of either the Postal Reorganization Act or the Postal Accountability and Enhancement Act both written when digital competition was less pervasive?
3. Is a self funding government enterprise, the best way to employ the postal market to generate economic growth and jobs in the United States or do other models provide greater opportunities to grow the US economy?
4. What impact do restrictions on entry of private sector entry into mail delivery and the Postal Service into non-postal products have on economic growth and jobs in the United States?
5. What benefits are generated by these restrictions and how do the benefits compare to the impact on economic growth and jobs?
6. What impact do current postal pricing law and the Postal Regulatory Commission’s interpretation of that law have on U.S. economic growth and jobs?  How would different postal pricing law affect or regulatory policy affect economic growth and jobs?
7. How does Postal Rate Commission regulatory responsibility affect economic growth and jobs and how does that compare to the benefits of regulation?

Postal Governance

1. Is the USPS, as currently constituted, incapable of responding to a shifting, and possibly declining, market for its products and services?
2. Is the USPS as currently constituted handicapped in responding to a shifting and possibly declining, market for its product and services?
3. How does the current governance structure as a government sponsored enterprise affect the Postal Service’s ability to manage the types of changes that the GAO, the CRS and the Postal Service describe?
4. How does the governance structure affect the speed at which the Postal Service reacts to changes in the postal market?
5. Does the current Postal Service board have sufficient experience in managing similar enterprises?
6. What would be required to ensure that it does?
7. How does the choice of a governance model (i.e. private sector vs. government enterprise) affect the choice of regulatory policy for the industry?

Financial Objectives

1. What is the financial measure that determines whether the Postal Service’s action plan or for that matter any action plan succeeds?
2. Is that financial measure sufficient to ensure that the Postal Service is self sufficient?
3. What is the financial measure that determines that a government enterprise is self-funding and is that the same measure that would determine if it is self sustaining?
4. Does self sustaining require only accounting break even or does it require a positive operating margin and rate of return?

The Postal Market

1. What is the fundamental role in the US Postal Service in the US communications and goods distribution infrastructure today?
2. By 2020, what proportion of mail will contain advertising whether in the form of direct mail, inserts in bills and statements or periodicals? How much greater is that from today?
3. How will the increased importance in revenue from advertising change the fundamental role of the Postal Service?
4. What impact does digital delivery of transaction documents, advertising, and personal communications have on the value of the Postal Service monopoly?
5. How should that impact be measured?
6. How does the existence of digital alternatives affect the price competitiveness of mail?
7. In particular, which industries using mail to distribute periodicals, send documents and correspondence, handle business transactions or advertise of customers are most sensitive to competition from electronic alternatives?
8. How does the proposal to eliminate a day of delivery affect individual vertical mail markets (i.e. personal correspondence, weekly newspapers, real estate advertising, supermarket advertising, utility bills and payments, etc.)?

Employee Costs

1. How do Postal Service wages and benefits compare with those offered by private sector firms in the postal industry such as FedEx, United Parcel Service, and Pitney Bowes?
2. What was the difference in the retirement rate of early retirement offers using voluntary early retirement authority and the incentives granted last fall?
3. How many months prior to normally planned retirement date do those that retire with an incentive retire and how much does that save the Postal Service?
4. What is the difference in net present value cost of offering an early retirement incentive to an employee as compared to retaining an employee whose position is excessed and paying them a salary above what their new position normally calls for?
5. How does attrition rate affect the decision to reduce network capacity?

Network Optimization

1. (For the GAO) How long have you presented recommendations that the Postal Service take effort to reduce its operating network?
2. What are the impediments in the Postal Service’s governance structure, labor agreements, cash flow, or culture that has prevented it from acting on network realignment faster?
3. How do attrition rates affect the decision to restructure the network?
4. How would the restructuring differ if the proportion of part-time employees increased?
5. How would the speed of the processing network optimization change if retirement incentives were readily available to handle the reduction in the need for employees?
6. What would be the upfront cost of using retirement incentives as part of a network restructuring?
7. What should the overall objectives of a postal network / retail network realignment commission be set?
8. Should a postal network / retail network realignment commission have the authority to make recommendations in regards to policy, governance, or regulatory impediments to the development of an efficient and effective network of processing and retail facilities?

Retail Access

1. What should the metric be for determining retail access to the services the USPS offers?
2. What proportion of users of retail customers of households and what proportion of users are non-households?
3. How often do households on average use a retail postal outlet? Does it vary by age, geography, or rural area?
4. What is the difference in access to retail services today in urban, suburban and rural parts of the United States?
5. How does access to USPS retail services compare to access to retail services of UPS and FedEx in urban, suburban and rural parts of the United States?
6. How have UPS and FedEx managed with primarily a contract/self-service model and are there differences in their retail customers that could affect the use of that model by the Postal Service?
7. What is the experience in other countries with their satisfaction with postal retail services before and after a switch to self-service and contract models?

Pricing

1. Is the issue of money losing products more an issue of cost levels or price levels?
2. What impact would only solving the problem with raising price have on the volumes handled and the ability of the Postal Service to meet its policy objectives?
3. GAO in its list of highlights for revenue generates suggests that the Postal Service revise pricing for market-dominant products, such as First-class Mail and Standard mail?
4. What revisions does the GAO suggest the Postal Service make?
5. How does current regulatory precedent and pricing objectives affect the ability to make the changes that GAO would suggest?
6. How do pricing objectives in the law and PRC precedent affect the ability of the Postal Service to implement the pricing flexibility that GAO and others suggest?

Closing Post Offices ... in Switzerland

The United States Postal Service has announced that the list of post offices being closed is down to 168.   The process of whittling the number of possible closures from 3,600 to 168 raise real questions about what the Postal Service was doing when it made the original announcement of closures.

• Why did the Postal Service even started the process with such a long list of possible closing Post Offices?
• Why did it not do the due diligence and confidential local market research  that resulted in trimming the list of post offices to be closed prior to announcing possible closings rather than once the closings were placed before the Postal Regulatory Commission?
• Would the Postal Service had had an easier time dealing with the turmoil that announcing post office closings had if it had started with a shorter list of potential post office closings backed by proper due diligence and confidential local market research? 
• How much did the entire process cost the Postal Service in the time of lawyers and other employees and how was that cost affected by starting with such a long list of potential closures?
• How much did the entire process, including the repeated reduction in the number of potential closures, cost the Postal Service in lost credibility before the Postal Regulatory Commission and on Capital Hill?
• Would the Postal Service have had a different result in post office closings if it had a plan in place for each possible closing for replacing the location with a contract or franchised outlet?
  

 The issue of post office closing is not unique to the United States.   The attached video from Swissinfo.com that was posted last April shows that announcing the potential closure of a post office generates the same arguments that are made in the United States.   The one difference is the tag line of the report. The Swiss Post has a plan B, a retail outlet in the local supermarket.   The only change would be the elimination of the Post Office's service of collecting bill payments at a window.

Cutting Hours or Cutting Post Offices

Sometime in the next few months the Postal Service will receive an advisory opinion from the Postal Regulatory Commission (PRC) on the potential closing of less than no more than 241 post offices, stations or branches. This is a far cry from the more than 3200 sites in its initial proposal that it presented to the PRC. Once the opinion is issued, the Postal Service will likely close most of th 241 sites now on the list.

Those communities that found their Post Office on the original list but are no longer under consideration for closing are likely relieved that their Post Office will remain open. These communities will be less pleased when the hours that the Post Office is open shrink as the Postal Service looks at ways to deal with declining demand for retail services.

The Postal Service has reduced operating hours at Post Offices across the U.S. for much of the past year. The Portland Press Herald recently reported on decisions affecting 52 offices in New England. Similar actions have taken place in Maryland, including my local post office in Silver Spring.

What the Postal Service is now doing is not much different than what public libraries, recreations centers, parks and other government service centers do when struck with declining budgets. When the agency cannot close a library do to community or political pressure, it finds it politically easier to cut hours of all libraries instead. Community pressure is less intense if the hours are cut by 10% instead of cutting 10% of facilities.

The impact of politics in this process does not necessarily improve service. While a community may like a library nearby, the library provides no service at hours when the community needs the service. For example, years ago, the City of Rochester had to choose between cutting library hours across the board or closing its least used facility and expanding hours at the closest nearby facility and maintaining extended evening and weekend hours at other libraries. A study of use of library services by patrons showed that customers would be best served by expanded hours. An examination of the addresses of patrons that used each branch showed that the branch to be closed was used by patrons that often used the neighboring branch as well. In the end, the least used facility was closed, and the expanded hours resulted in increased library use in the community that lost its neighborhood branch.

The Postal Service's actions show how its decisions, as influenced by regulatory, political, financial, and labor contract constraints, reflect the pre-eminence of the governmental characteristics of the organization. While the Postal Service does offer other ways to buy stamps and postage, its "retail strategy" appears to be no more than to shrink its business by reducing access at a rate most likely equal to the rate of retirement of postal clerks. The Postal Service appears to be managing more to the budget available to provide retail services rather than in following a coherent strategy to serve retail customers.

The Postal Service's strategy will likely drive business away, particularly among small businesses that will ship their overnight and two-day items via FedEx or UPS because their retail outlets are open an hour or more longer than Postal Service outlets. These customers will be paying FedEx and UPS's higher retail prices just because they have no other choice that day.

The Postal Service could follow actions that its domestic competitors and foreign postal operators have chosen and switch their retail presence from primarily corporate offices to primarily franchise offices. It could expand the use of automation and replace part of the line of retail windows with a line of automated postal centers like food and home retailers like Giant Foods, Stop and Shop, Kroger, Safeway and Home Depot have.

The Postal Service needs a real retail strategy with real revenue, capital and expense budgets that is focused on serving retail customers profitably. These budgets should reflect what is needed to successfully serve retail customers profitably, not just what can be done with existing capital resources and current employees. These budgets have to reflect the decline in retail letter mail, work to stem the decline in retail parcel traffic.

With a real retail strategy that retains widespread access to the network, the Postal Service could transition to a new retail approach without scaring communities that they will be abandoned. This transition will not be easy. Retail postal customers in Sweden where corporate Post Offices were all closed were resistant to the closure of their local corporate offices and often expected the worse. Surveys conducted since the switch to an all franchise operation show that customers are more satisfied with Sweden Post's retail services. In particular, the expansion in hours and shorter lines made Sweden Post's retail products more competitive with others offering retail parcel and express services.

Should the Postal Service Close All Post Offices?

Note: This blog post contains my first attempt to include pictures and videos. If you are having trouble viewing the videos they are all on YouTube and can be found by searching DHL and either Packstation or paketbox. I would appreciate feedback on workarounds for readers behind corporate firewalls from the more technically minded to the problem that many are having viewing the videos. For those that cannot see the videos at work, multiple readers have indicated that the blog is readable through virtually all ISP's on home computers. Thank you for your understanding. I will remove this paragraph once a workaround is found.

The Postal Service created a major political storm by proposing to close less than 700 retail locations. In addition to forcing every member of Congress to deal with irate citizens and Postal employees, the Postal Service must go though a laborious regulatory and public outreach process to make a rather small tweak in its retail network.

Deutsche Post, the German post office has just proposed closing its remaining company owned post offices. Does this mean that there is no retail access to postal services? No, in fact Deutsche Post guarantees that every town with greater than 2,000 population have a postal retail facility and in urban areas, no customer would be more than 2 kilometers (1.24 miles) from a retail facility.

How does Deutsche Post do this?

1. Deutsche Post simplified its pricing structure for all letter and parcel products used by retail customers. The prices can be found on two Deutsche Post web pages.

Letters flats, and smaller light weight parcels

Parcels of any weight with size maximums beyond those set for parcels under 2 kilograms (4.4 pounds) with certain size maximums

Deutsche Post's price list for shipments of parcels of any size contains only seven different prices for shipments within Germany and only 20 different prices for shipments anyplace in the world. (If you look at the website, Deutsche Post uses the word "paket" for parcel and "päckchen" for small parcel.) It does this by nearly eliminating a customer's need to weigh the parcel that they are shipping. If a customer does not have the weigh a parcel to get a precise weight, they do not need a retail facility to weigh and price the shipment.

For domestic cards, letters, flats, and flat shaped parcels up to 2" thick there are five total rate levels . Besides the single rate for cards, there are four other rates: standard letters, heavy letters, standard flats and thick/heavy flats. Letters over 2 ounces are priced within one of the two flat categories.

For domestic parcels, customers only need to know the parcel's dimensions and whether the parcel weighs less than one of four weight band maximums. (Most parcels are handled by the DHL subsidiary.)

* 2 kilo (4.4 pounds) and no larger than 23.6" x 11.8" x 5.9" (60cm x 30 cm x15cm)
* 10 kilo (22 pounds) and no larger than 47.2" x 23.6" x 23.6" (120mm x 60mm x 60"
* 20 Kil0 (44 pounds) and no larger than 47.2" x 23.6" x 23.6" (120mm x 60mm x 60"
* 31.5 kilo (69 pounds) and no larger than 47.2" x 23.6" x 23.6" (120mm x 60mm x 60

For international parcel shipments, Deutsche Post has a pricing structure with a similar simple structure that has a total of 18 possible rates. Small parcels (parcels whose dimensions are such that width+ height+ length <= 35.5 inches) have two rates depending on whether they are destined within the European Union (EU) or the rest of the world. Larger parcels have rates within four weight-based price bands that are determined by destination country. Countries are grouped into four categories: the EU; rest of Europe; Middle East; and North America; and the rest of the world. For each country group, the weight based limits within each price bands are:

* 5 kilo (11 pounds)

* 10 kilo (22 pounds)

* 20 kilo (44 pounds)

* 30 kilo (66 pounds)

2.Deutsche Post contracts out all of its retail operations to either its former subsidiary, PostBank, independent providers of mail services or independent sellers of postage. Eliminating the need for precise mail weight simplifies the sale of postage. The simplicity of the transaction allows even the smallest kiosks and convenience stores can sell postage without the need for sophisticated point-of-sale terminals or revenue protection efforts that would be required with a more complicated tariff. Retailers can sell postage with the same level of effort they employ to sell scratch-off lottery tickets. By simplifying the product sold, Deutsche Post also simplifies the record-keeping, and security challenges with ensuring that non-corporate outlets do not pay for the postage sold, using models that work for lottery tickets and consignment items.

to the extent that weighing is necessary, a customer can go to an outlet that has a clerk that weighs the parcel. That is the service that the PostBank outlets can provide. However, the simplified tariff would allow a customer to go to an outlet that only sells stamps to buy the appropriate postage and determine the weight by using a scale the outlet provides for customer use, do the weighing themselves at home, or even just guess the weight prior to purchasing postage. The simplicity of the tariff allow individuals with limited training to determine the Deutsche Post postage stamp that would be appropriate for their letter, flat or parcel.

3.Deutsche Post has a significant technology program for self-service acceptance and delivery of parcels. They have developed two devices: paketboxes that can only accept parcels and packstations that can accept or delivery parcels. A simplified parcel tariff, on-line postage, and independent sellers of postage are clearly critical for the technology program to work. Paketboxes are larger version of the postal drop box and can be used for items that have postage already applied. Pictures on the web indicate that they are located in places not much different than where UPS or FedEx may have their drop boxes in the United States.

The video of the paketbox shows how it is used

Packstations are automated, large parcel lockers that can both collect and deliver parcels. They can deliver parcels to customers that are either not at home when the carrier arrives or for those customers that prefer to use the automated facility. They are located either in stand alone locations like cluster boxes in the United States or within buildings.

The following video shows how the packstation is used to accept parcels. (The process starts at the 20 second mark.)

The following video, most likely created by eBay and Deutsche Post, illustrates not only the use of a paketbox to tender a parcel and a packstation to pick up the parcel but the entire sortation process for parcels. The use of the paketbox by a customer and a Deutsche Post employee can be seen around 40 seconds from the beginning and the use of of the packstation can be seen at the 8 minute mark. All filming appear to have been done at PostBank or DHL facilities.




Could this be duplicated in the United States? Absolutely, but traditional thinking, regulatory processes and financial impediments prevent the Postal Service from doing so.

Traditional thinking prevents the simplification of the mail prices for retail customers to the extent that Deutsche Post has. The traditional approach to postal costing is to develop detailed tariffs with different rates for every characteristic of the item to be delivered that affects its costs. Shape based rates reflect a rationalization of this approach but did not change the complicated traditional weight and distance based tariff significantly. The Postal Service has two products that take a non-traditional approach to pricing: Express Mail envelopes and Priority Mail flat-rate boxes. The forever stamp is an example of a non-traditional way of selling postage for letters. While the market has shown that the success of these products in the retail market, traditional thinking prevent using these successes to expand the simplification of prices for retail customers.

Regulatory processes act to protect existing service locations, ways of serving customers and rate relationships. Changing to a simplified, self-service model would change where postal services are bought and parcels are tendered and would require abandoning any linkage between rates charged to retail customers and business customers of the Postal Service. By moving toward a simplified, self-service model, most traditional post offices would be unnecessary except to protect the jobs of existing employees and the social benefits that they now provide. As the current controversy over closing less than 1,000 post offices shows, both postal employees and citizens seeing changes in cherished routines are quite effective in making their interests known to Congress and the PRC. Similarly, de-linking the rate relationships between retail and business customers of the Postal Service would require overturning nearly forty years of regulatory precedent that has tried to balance the share of overhead that these two types of customers should bear, let alone how the overhead costs should be born among the various types of business customers. De-linking rates charged to retail and business customers would put the PRC in the uncharted territory of choosing market based rates over cost model based rates. The rulemaking on workshare discounts illustrates how wedded customers are to the regulator process, the concept that historical rate relationships matter, and the search for cost theories that would justify new rates and a regulator set advantage over competitors or the Postal Service. Weaning customers off of PRC protection and de-linking the prices of retail and business customers could create a ruckus just as loud as what now exists for closing a few post offices.

The Postal Service weak financial position and near-total lack of capital financing options leave a real retail restructuring beyond the reach of Postal Management. Over the next two years, the Postal Service does not have the cash to pay all of its mandated obligations for retiree benefits and will use most of an expanded borrowing capability to just cover operating losses. The financial requirements of a program that is the magnitude of what Deutsche Post did would dwarf the Postal Service's investment in Automated Postal Centers and would also have to deal with start-up costs of restructuring the concept of retail and covering costs of excessing both employees and facilities. Postal management position is not much different that scene in many Christmas movies where poor children can see the toys in store window but have no hope of seeing them under the tree.

Eliminating all post offices, therefore, is just a fantasy. Unfortunately, so is developing a modern customer-focused model for serving the Postal Service's retail customers.