Fixing the Postal Service

It is clear now that there will be legislation within the next year that will change the business model within which the Postal Service now operates. The fact that new legislation is needed so soon after the Postal Accountability and Enhancement Act (PAEA) was enacted raises questions two critical questions.

1. Did the act cause the crisis that is now focusing policy-maker's attention on the new legislation?
2. Does the current crisis change the political environment sufficiently to allow policymakers to choose options that stakeholders were then unwilling to accept?

What is driving the crisis now is a combination of the economic downturn and the requirement that the Postal Service must pre-fund its post retirement benefit. While electronic diversion creates a challenge for the Postal Service, diversion did not generate the precipitous decline in volume over the past two fiscal years.

Impact of the Economic Downturn

The economic downturn for the Postal Service began when the vertical markets (e.g. industries like automotive, financial, housing, retail, etc.) began experiencing significant declines in business in 2008 and cut all forms of advertising. Advertising mail is both more economically sensitive than the rest of the Postal Service's products and its price sensitivity rises and falls depending upon the business cycle. As the economy worsened after the Lehman bankruptcy, so did the decline in advertising and the volume of mail delivered, with a particular focus on the mail deliveries to households. The economic decline exposed four key flaws in the current business model

First, the current business model does not allow the Postal Service to react to changes to business conditions in as timely fashion as it must. Both the producers of mail and the Postal Service's competitors reacted significantly faster to the decline in volume and most were able to survive the downturn in shape to compete when the economic cycle turns upwards.

Second, the decline in business exposed why the pricing models and historical price relationships may no longer make sense. The economic decline exposed the fact that all mail has a return on investment for the sender. Mail business can thrive when the return is sufficiently positive and both prices and costs must reflect the challenge of ensuring that the Postal Service's customer's can generate a positive return in all business conditions.

Third, the business model created by the PAEA underestimated the capital needs of the Postal Service to deal with both modernization, structural changes, and the cost of adjusting plant and equipment to deal with changes in business conditions and market opportunities.

Fourth, the business model created by the PAEA limits the Postal Service in a way that made it increasingly dependent on the success or failure of one product, advertising mail, and one part of the conception to delivery process, the last mile. While mail advertising, appears to have survived the downturn in better shape than broadcast advertising, not all delivery services are as bi-polar. The focus on the last mile may have prevented the Postal Service from fully participating in the vertical production consolidation that is occurring in the mail industry.

Impact of Pre-funding Post Retirement Benefits

The presentations that Postmaster General Potter made this week provided the clearest picture as to the impact that pre-funding has had on the Postal Service. Since 2007, the Postal Service has made payments to OPM of $18.3 billion. Some of the payments was funded from borrowing from the Treasury with the rest coming from cash generated by the sale of products and services. As the Postal Service's primary creditor, to whom the Postal Service must pay its obligations for debt, retiree benefit obligations, and workers compensation obligations, the Federal Government is not made any better (except possibly in an artificial budget score-keeping sense) if the Postal Service must borrow from the Treasury to pay the Office of Personnel Management for retiree benefits. The amount the Postal Service owes the Treasury does not change, only the account that the money has to paid to changes.

Based on what the Senate and the House of Representatives are now discussing, and the Postal Service's projections of its borrowing needs to cover operating losses, the Postal Service now owes the Federal Government around $65 billion dollars. In requiring the Postal Service to pay its retiree benefits in the manner it did, the PAEA in effect required the Postal Service to speed up payments on obligations to its creditor. This is the equivalent to a creditor requiring faster repayments from a debtor, that the creditor was worried may not be around long enough to pay off all of its debt so it requests a faster payment schedule. Just as a creditor may not worry whether the faster payment schedule would force the debtor out of business, neither did the PAEA take into account whether the Postal Service could take the necessary actions to generate the cash necessary to speed repayment of its obligations. So the Postal Service is now faced with the equivalent of bankruptcy, insufficient assets to pay off its obligations, and insufficient cash flows to make the required payment schedules.

While there is no disagreement that the Postal Service has obligations for retiree benefits, debt and workers compensation claims, the Federal Government has limited options to ensure that the obligations are paid right now. Liquidation of the Postal Service, which would be available in bankruptcy is not an option and would unlikely provide sufficient cash to cover all of the obligations. Liquidation is also not an obligation also because of the Federal Government's constitutional responsibility to provide a postal service and the untenable impact that shutting down the Postal Service would have on the American economy.

In essence, the Federal Government, as a creditor, as little choice but to renegotiate the payment schedules on the Postal Service's obligations, while at the same time it must develop a business model and business plan that will allow the Postal Service to generate the cash flow that will pay some if not all of its obligations. In many ways it is in the same position as creditors of railroads were when nearly all of the railroads in the Northeast went into bankruptcy over three decades ago. The public interest required that the railroad continue to operate as long as a viable business model could be derived that will allow the creditors to be paid.

Of the two most attention-getting proposals that the Postal Service has presented to cut costs, only the elimination of one day of delivery could have a substantial impact on the Postal Service's ability to remain a competitive enterprise and generate the cash necessary to pay off its obligations to the Federal Government. As the Postal Service's creditor, Congress has to think long and hard whether the short term savings is worth the risk that future loss of business would weaken the Postal Service's ability to pay its obligations to the Treasury. If it believes that the risk is too great than it must provide sufficient funds to continue the service. At the same time, it may need to give the Postal Service the opportunity and funds to streamline its operations in ways not apparent to customers. Otherwise the potential for the turnaround necessary to pay off the Treasury cannot occur.

The proposals on the table appear to reflect the Congress's understanding that it is a creditor and the Postal Service is a debtor. The changes in payment schedules and increases in loan limits provide for a short-term fix until a more viable business model and comprehensive business plan is set for the Postal Service. Time is short but for those that know the mail business and the people at the Postal Service the potential for a successful solution exists.

The Patient is not Dead

Reading recent news reports about the Postal Service, one would think that it is on its deathbed. While times are dire and a major restructuring is in order, the underlying business may be better than what some of its competitors face even if the Postal Service's ability to remain a sustaining enterprise under the current business model looks increasingly unlikely.

Why do I think the future of the mail business is positive even though the Postal Service's situation is dire?

First, it appears that the worst of the economic decline is over. The economy may still be sick, but the fever has finally broken. The businesses that have survived the downturn all see a turnaround, some as soon as this fall and clearly no later than the fall of 2010. The recovery of the stock market suggests confirms that investors, as a group no longer see a catastrophy but just see a return to a normal recessionary cycle. (Unfortunately, everyone had to endure the last 9 months to get back to just a recessionary cycle.)

Second, and most importantly mail dependent businesses are starting to see the smoke clearing. In particular advertising mailers are beginning to notice that while mail volumes are down, mail and advertising has not been hurt as badly as other media as advertising budgets were cut. In particular, chain retailers have found that glossy coupons can have a far greater stimulative effect per dollar spent than what television, cable, or even internet display advertising. Mail is not the only recipient of this movement toward "value-oriented" advertising as free standing inserts in newspapers have done even better than mail as the delivery costs are lower than what the Postal Service now offers.

As one of the largest mailers, Valassis illustrates where mail advertising is today in its July 30 conference call. The following are some relevant excepts from the comments of Allen Shultz, the CEO of Vallassis.

Business is bad but not as bad as the competition.

"From a revenue perspective, although the economy has driven down client media spending, we continue to outperform most other media companies who are reporting advertising revenue declines in the 13 to 30% range. Our reported revenue for the quarter was down 8.6% versus prior year quarter. When you remove 9.8 million of revenue from divested and discontinued businesses and the 1.8 million impact of currency fluctuations from the prior year quarter, revenue declined 6.7% on a pro forma basis this quarter."

Business Profits are improving even at lower volumes

"The revenue decline in our Shared Mail segment was due to a reduction in mass merchandiser spending, continued grocery retailer light weight and the general competitive of the market place. On the plus side, we are pleased that Shared Mail margins continue to do well, which may seem counter intuitive considering the high operating leverage associated with this business.

As you saw in our release, revenue decline 10.5% but segment profit increased 2.6%. We continue to drive efficiency with package optimization efforts, newspaper alliances and overall improvement and expense management. We also made a small improvement of 1 percentage point in unused postage and a 3% increase in pieces for package versus last year."

Seasonal advertising patterns may be returning

"in terms of third quarter Shared Mail business, I would say in general, Shared Mail and kind of across the Board in terms of our product portfolio, I think we have seen a relatively strong back-to-school promotional time period."

The Economic downturn has generated more price competition

"Basically what I am referring to in terms of competitiveness in Shared Mail, it's a market place where everyone that we're competing with is living through the same economic downturn that we are living through and everyone is being very competitive from a price perspective in order to secure business."

Postal Costs Matter

"What we try to do is blend newspaper and Shared Mail and digital into an optimized solution for customers and so if postal cost go up, then we could see ourselves shifting business into other media."

The Challenge of Retail

The Postal Service has whittled down its Post Office closing list to around 1,000 offices. The final list represents less than 3% of all existing Post Offices. While many communities may feel relieved that the have been spared the loss of their post office, the Postal Service still faces the challenge of providing retail services that makes both business sense and serves the non-business needs of the communities the Postal Service serves.

Providing retail postal services in stand alone offices goes back to the founding of the Post Office Department when the  individual office not only sold stamps, weighed parcels and determined postage but also delivered and collected all mail at a counter. The invention of door-to-door delivery, collection boxes, carrier pick-up, and sale of postage at supermarkets and over the Internet has shrunk the frequency that postal customers use a post office. These changes suggest that a new innovative model is needed to provide retail access to the Postal Service to reflect the reality of the current methods of handling mail and to maintain the Postal Service's competitive advantages in serving retail customers of parcel and express services.

The Postal Service is not alone in finding it a challenge to serve retail customers.   Both FedEx and United Parcel Service have extensive retail networks in the United States with  well over 10,000 locations nationwide in a combination of company owned stores, franchised mail centers and counters in office supply superstores.   Even though they both use a variety of business models to provide retail access, providing such access profitably has been a challenge.   FedEx has had to revamp its FedEx Office operations to deal with its weak profit performance.   UPS franchises, and in particular smaller franchises  have had challenges making sufficient profits to justify their investments.   Both UPS and FedEx deal with the challenge of providing services to the retail market by charging higher prices to customers who require retail access and the highest prices to customers who do not ship frequently enough to take the time to get a UPS or FedEx corporate account number that is available to any business or individual who asks for one.

The challenge of retail is also one of the top challenges of foreign postal services.  In general, the approach that they took depended upon political, labor relations and business considerations and focused on solving three problems:

• The existing postal retail network is too expensive to operate.
• The existing retail network provides too few services/products to justify the network.   
• The existing postal retail network is often in the wrong location for where people now live, work, or shop.

To solve the first problems, postal operators have used technology to reduce the cost of providing the service.   For example, some have made the self-service concept that the the Postal Service has barely implement with its Automated Postal Centers into the primary option for customers needing a retail postal service.   Deutsche Post has taken this a step further in regards to parcel delivery, creating automated parcel lockers that eliminate the need for a postal employee to look for a parcel that could not be delivered.  Recipients are notified that a parcel is in a locker by e-mail or mail along with the location of the locker, the locker number and the code necessary to open the box where their parcel resides.  

To solve the second problem,  postal operators have expanded their reach into other types of retail transactions and the provision of government services.   Retail services including packaging of items for shipping, selling of office supplies, copying services, banking, and insurance.   For example the Italian Post Office entered the market for simple life insurance and savings products for individuals whose needs were too expensive for larger firms to serve and used that to turn its retail locations into profit centers.   Other Posts expanded banking operations that already existed, or in the case of La Poste in France started a whole new bank.   Some Postal services also contract with governments to provide services that require a retail counter including those relating to motor vehicles, driver licenses, etc.

To solve the third problem, postal operators have a combination of closure of traditional facilities, opening of new corporate owned facilities in better locations, and franchises within both small businesses and nationwide chains.   One of the first things that Canada Post did when it faced a similar financial crisis two decades ago was a complete revamp of its retail strategy to include franchises.  Franchises were important because Canada Post did not have the capital to revamp its retail strategy in urban and suburban areas.  Today, retail access generally is better than it was two decades earlier and in many cities and suburban areas where there are more franchised locations than corporate offices.  Canada Post still is responsible for providing retail services in small towns and rural areas which remain a financial challenge to the corporation.

Given the Postal Service's strength in the retail market, it needs to look at its problem as an opportunity and develop a real strategy for providing and pricing retail services profitably.   It needs an innovative strategy that reflects the needs of customers for easy access to services, the experience of UPS, FedEx and foreign postal operators with franchising services and the capabilities self-service technology.   A truly creative strategy would look at the non-business benefits that a post office provides to small communities and senior citizens  to see whether a model focussed on these benefits provided by the Postal Service, a private enterprise, a community organization, or municipality could include the mail services in a multi-faceted retail facility.  Only with the annoucement of a coherent retail strategy would the Postal Service have a positve message when making the neccessary changes to its retail locations and communities would see that there are private sector and community based options to meet the needs that the Postal Service cannot provide with its existing retail model.

Unfortunately one strategy may not be sufficient.   The Postal Service faces many constraints that affect its ability to implement a coherent retail strategy including the availability of cash, labor contracts, regulatory processes for modifying locations or opening new ones, and other legal constraints on retail services.   Retail strategies need to be developed that reflect the existence and removal of each of these constraints.  

As the Postal Service faces significant financial challenges that raise questions about its future, at a minimum  it needs two retail strategies, one that examines the issue without constraints on capital and one that includes the constraints that exist due to the continuing operating losses and other restrictions that affect operating flexibility.   Without developing an unconstrained strategy, management and policymakers cannot know what the full cost is of maintaining the status quo with regards to operating flexibility  or the full capital needs of creating a real future for the Postal Service's provision of retail services.    

Sorry for my absence

For the past week the computers at blogger marked this blog as spam. It prevented me from posting. I have no idea why and nothing on blogger's website explains why. I apoligize to my readers for the ineruption.

Within the next few weeks, this blog will be moving to my business's website where this will not happen again. The swich will also allow me to better coordinate my writing on a variety of topics.

Could the USPS Turn a jobless recovery into a job full recovery?

With the Dow climbing above 9,000, it appears that investors believe that the financial panic that began with the Lehman bankruptcy is over. Much of the recovery in stock prices reflect 2nd quarter earnings reports that are coming in higher than analysts projected. Unfortunately for the general economy, and in particular the consumer-driven segments of the economy that the drives the Postal Service's business, the improvement in company earnings come from aggressive efforts to cut costs, capacity and employment to match lower demand levels and not from growth in sales and revenue. Similar stories exist about how small businesses are surving by cutting capacity and employment.

For both large and small businesses to grow out their current depressed demand levels, they need to find ways to attract new customers at a time that new customers are harder to find. The challenge of finding new customers is exasperated as companies large and small have increasingly restricted sales and marketing budgets due to declines in business profits.

With restricted sales and marketing budgets, businesses are turning to new technologies that appear to offer a nearly cost free means of marketing services. Unfortunately, the internet has not proven particularly effective for businesses trying to find new customers or launch new products. The problem is even greater for small business who find that using electronic alternatives to media such as yellow pages and local newspapers may be cheap but their technical skills may not be sufficient to effectively use the internet and the internet has found it most challenging to successfully serve the advertising needs of small businesses with limited geographic reach Furthermore, firms that create on-line advertising opportunities often find small business too expensive to serve for the money they have to spend.

Mail could now make a difference for businesses seeking the new customers necessary to start growing again but only if mail can improve its value proposition. Improving the value proposition means more than just lowering the price of postage. It means simplifying the service and the process of buying the service so that more customers can use it Right now the products toffered by the Postal Service and the private sector mailing industry do not fully address the needs of small business in terms of product, price, service, or convenience. Therefore, even though mail is the best means for small businesses to find new customers very few small businesses take full advantage of mail to grow their business.

For mail to become a driver of small business growth, the Postal Service needs to rethink its whole process of pricing, accepting, and setting standards for the type of mail that would provide small business access to potential customers. The Postal Regulatory Commission may have to rethink the process for creating new products that would allow for a roll out of a product from one geographic market until it offered nationwide through an experimental proceeding and not requiring an evaluation of the experiment until the roll out is complete.

For purposes of illustration, a product targeting small businesses could be called "Flat Rate Business Mail," and would be designed for infrequent mailers that find the whole process of going from conception to delivery too expensive or too complicated.

What would the new product have to have to both improve the prospects of small business and attract volume for the Postal Service from customers that have not used mail before?

• Mailers would pay a single price for a tray of mail (1/2 or whole would be options) regardless of how many pieces are in the tray.
  
• The standards for this mail have to be simple enough that any retail clerk or letter carrier can tell that they are met.
• The Postal Service will provide all packaging which would include a tray and sleeve.
• The product would not require a permit. Instead, postage will be paid using the same technology for click and ship and label would be placed on the tray or a retail clerk could apply postage on the tray at any retail outlet. The postage label would tell the Postal Service where in the system it should first be sorted.
• Mailers would have two addressing options. 1) Mail pieces could have a typewritten address that is machine readable.The evaluation of machine readability has to be something that can be done visually by a nearly untrained observer. Address quality will not be checked but customers would be provided information as to how they can improve their list quality and why it is important.
  
• Mailpieces could have a printed intelligent barcode in the address area that designates a geographic area as defined by a set of 5, 9 or 11 digit barcodes with the barcode designed in such a way that a machine would know that one piece is to be delivered to every address in the geographic area.
  
• The mail can be tendered to either letter carriers or retail clerks who will make sure that every thing is copacetic.
• Once inside the Postal Service, the tray skips facing and canceling and goes directly to the appropriate automation operation in its originating plant or if the tray is to be first handled elsewhere it is cross-docked without sortation.
• In the plant the mail will be handled without delay. The service will be sold would be with the expectation of sortation at the same time as all collection mail received by the originating plant.
  

The key here is simplicity. Just like the flat-rate Priority Mail boxes work for small businesses because they are simple, so would this. For each new customer, the product allows a small business to find, it would give that business growth where it had none.

The challenge would be implementation. Given the potential for both new revenue and the need to get everything right, it would probably have to be rolled out from one geographic market to the next. At each stage in the roll out the product would be tweaked to make it simpler and less expensive for the customer to produce and purchase, the training of postal employees modified and eventually standardized and the operating issues would be dealt with until the lowest cost method of handling the mail in the system while meeting service are determined.

Such a roll out would require cooperation from a cross-functional team within the Post Office that would include labor representatives with advice provided by potential and existing small-business mailers. Labor should be a willing participant in this process as the product's success would result in more jobs throughout the system and their input, particularly in the early stages would help management develop the new operating processes and training required for each subsequent stage in the product roll out.

Given the challenges now facing the economy, the potential that mail has to jump-start business activity, and the risks that declining volumes from existing customers has to postal labor, management and the taxpayers it is time for all parties to think creatively. It may be time for all members of the postal community in the United States to take the words of George Barnard Shaw to heart, "Some men see things as they are and say why, I see things that never were and say why not."

Reading for Postal Policy

I have been doing a bit of reading lately that people in the postal community may find both interesting and helpful in understanding the challenges ahead. The books and studies listed here all are easily accessible either for free on-line or from a number of used book stores. I have provided links to the appropriate websites for free items and Amazon for those that must be purchased. Other used book sites such as Alibris.com may provide better prices.


Books About The Transformation of the Bankrupt Railroads in the United States

Both of these books are very readable histories of the railroad industry in this period. Richard Sunders is a history professor at Clemson who is has written a number of books on railroad history. Rush Loving, Jr. is a journalist who has written about the demise of the Penn Central as well.

Main Lines: Rebirth of the North American Railroads 1970-2002 by Richard Sunders, Jr

The Men Who Loved Trains: The Story of Men Who Battled Greed to Save an Ailing Industry, Rush Loving Jr.

Strategies and the Post

Accenture has published a number of studies comparing the strategies of posts worldwide. These studies are generally well written and provides some helpful new information about what seems to work and what does not. The studies raise a number of questions about why a particular Post chose a particular strategy, the path that was taken that resulted in the current strategy, whether there is a path to a different strategy in the future, how political and capital constraints may have determined the strategies that were available to the Post's management at the time the study was written.

Achieving High Performance in the Postal Industry: Accenture Research, 2009

Achieving High Performance in the Postal Industry, Accenture Research, 2006


Now that I have started the dialogue on research for postal policy, it is now time for this blog's readers to spread their knowlege by adding additional books, studies, and articles in comments. I am particularly interested in the input of readers outside of the United States who can provide information on a number of topics where information is scarce. These topics include:

• The role of politics in postal transformation. While most countries that have transformed their post offices are within a democracy, decision making in democracies do vary from country to country because of the relative power of the head of govenment and the individual legislators, the stability of governments during periods of postal transformation, the challenges the Post created for a government prior to transformation, and the competitiveness of elections for individual seats in a legislature or parliament among political parties ell as the importance of postal policy in competition.
  
  
• The costs and challenges of transformation particularly at posts that had outdated delivery, processing, retail, communications or computer infrastructures.
  
  
• The challenges of transforming the relationship with postal labor as posts m
  ove from labor rules, salary levels, and benefits offered to government employees to those negotiated with unions once a Post must develop its own pay and benefit packages.
  
  
• How capital needs for covering the expenses of operating modernization affected postal policymaking and the decisions that individual posts have made regarding their operating and marketing strategies.
  
  
• The opportunities for innovative labor-management initiatives to build volumes and revenue through work-rules and/or contracts designed to serve specific customers and/or postal submarkets.

Now it is your turn.

Saving the 6th Day

The Federal Times recently reported that the Postal Service is now developing plans to reduce delivery to 5 days a week. To do so would require not just the implementation of these plans but also approval of Congress. Further reports from the National League of Postmasters and others indicate that the Postal Service's plan would have the switch to 5 days occur in Fiscal Year 2011.

The reduction of delivery days will clearly reduce postal costs although it is unclear whether it will be able to reduce the postal workforce fast enough to have the needed speedy cost relief given no-lay-off clauses in the Postal Service's union contracts. However it is not clear if eliminating the 6th day of delivery will save the Postal Service from increased competition and the economic downturn that has resulted in a cratering of mail volumes.

Therefore the question: "Can the 6th day be saved?" raises two additional questions.

• Is eliminating the 6th day of delivery wise?
  
  
• Are there alternatives?

The first question focuses on the issue of what service must the Postal Service offer to thrive. Looking at the service offered by Posts in the industrialized world provide little guidance as to what is required in today's competitive communications environment. Both 5-day and 6-day service offered in different countries and management of the individual Posts argue that the service that they offer is what their customers want.

Countries that have reduced their delivery frequency to 5-days per week, such as Canada Post, did so at time of significant financial crisis similar to what the Postal Service is now experiencing. The reduction in delivery days did allow Canada Post to shed costs quickly when its business was hemorrhaging cash. I do not know the impact on delivery volume but Canada Post made its decision over twenty years ago when competition from the internet did not exist and customers who adjusted only had to think about adjusting their mail production to the new delivery schedule and did not have the opportunity to consider electronic delivery as a means of replacing the mail.

At the same time, Posts with volumes far less than the Postal Service, as measured by pieces per recipient per day, are able to provide 6-day delivery and maintain levels of profitability that are sufficient to maintain the enterprise. There is no evidence yet that other Posts facing a similar increases in competition and the economic slowdown are contemplating reducing delivery frequency to deal with recession related reductions in profits or losses

Given the lack of guidance from other Posts, the question comes back to what does the Postal Service need to offer to compete. While the recipients of mail may not care if they receive 5-day or 6-day delivery, their opinion is less important here than that of the mail sender, for it is the sender that pays the bills. For the sender, the concern is how much does reducing the number of delivery days reduce the value of the mail and the return that they receive by using the mail. To the extent that reducing delivery days could slow bill payment or bill presentment , billers may increase the incentives they offer customers to pay bills electronically, accelerating the already rapid decline in bill payments through the mail and the nascent decline in mail delivered bills. For advertisers the question is simpler, "Does eliminating the 6th day reduce mail's return on investment to the point that sending mail is no longer worthwhile?

While the Postal Service's projections indicate that the cost savings will be greater than the loss in volumes, it is unclear if the projections on volume changes reflect the shock effect that a new delivery schedule would produce. The change to 5-day delivery will be a major news story in both the general and business press. Mail managers at companies that now send mail on a 6-day a week schedule or targeted for the delivery day being eliminated will be prodded by senior management to look at the viability of internet based delivery closely for not just the mail that would have been delivered on the day being eliminated but their entire mailing program.

The second question suggests that there are alternatives. Experience in other countries show that maintianing 6-days of delivery requires a cost structure that can support the service profitably. For the Postal Service, this would a restructuring of its costs to reflect the new reality of the value of mail and parcel delivery by its customers that reflects the ubiquity of internet access. While the Postal Service has done a much better job recently in reducing its costs and workforce in the past few years, the cost restructuring required to save the 6th day would require cooperation from both Congress and labor to make the cathartic changes in operations, operating network and labor-agreements.

The changes required are changes that all foreign postal administrations that both offer 6-days of delivery and are profitable have done. In addition, these are changes that all of the Postal Service's competitors in delivering parcels as well as the businesses that produce and prepare the mail that the Postal Service ultimately delivers have implemented to deal with today's challenging times. These changes include:

• Implementing mail processing rationalization on an expedited schedule including consolidations that have already been rejected if significant cost savings exist;
• Implementing retail rationalization on an expedited schedule;
  
• Reducing non-union workforce to minimum required levels;
• Reopening labor contracts with a focus on removing clauses that limit management flexibility including the use of part-time employees and the inability to lay-off employees at facilities experiencing improvements in efficiency and reductions in mail volumes;
• Implementing wage freezes and if possible wage reductions of non-unionized employees;
  
• Reopening labor contracts to implement wage freezes; and
  
• Renegotiate and/or rebid all existing supplier contracts to reduce the prices paid for contracted service.

Clearly these are all unpleasant options and in all likelihood all would need to be implemented within a very short time period. Also, additional ones may be required to produce the required cost savings to save the 6th day. However, eliminating one day of delivery is also painful as it will reduce significant number of full time positions as well.

Before closing, two questions remain.

• Is it possible that the 6th day would have been saved if the alternatives listed above had been implemented in less financially challenging times?
  
  
• Is it possible that the current challenges are so great that both eliminating the 6th day and the alternatives listed above will be necessary to ensure the long-term viability of the Postal Service?