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?

An Opportunity for Mail in the Decline of Local Media

In recent days, a number of news articles focused on financial troubles across all media modes that depend on advertisers for most if not all of their revenue. While all advertising media are suffering, the economic downturn plus a switch to Internet-based media has pushed print media, and in particular daily newspapers, toward bankruptcy.

As the largest deliverer of print advertising, the question arises: Is the Postal Service facing the same fate, or is there an opportunity in the decline of a direct competitor?

The answer to this question requires that six questions be answered.

1. What are newspapters doing to cope with change that affects the market for advertising?
2. How do these changes affect the competitive position of postal delivered advertising and in particular what gaps in advertiser needs are the changes creating that postal delivered advertising could meet?
3. How well do existing mail-delivered advertising vehicles fill in the gaps that the changes in the newspaper industry create?
4. Could new mail-delivered advertising vehicles fill in these gaps in a way that these new vehicles will have a higher value to the recipient than traditional advertising vehicles?
5. Does the Postal Service have operating processes and rate structures that will allow the creation of these new advertising vehicles especially when many of these vehicles may not fit the traditional definitions that define existing mail classes and sub-classes?
6. Can the regulatory process handle the creation of new Postal products for which any forecast of revenue and volume would be speculative?
   

Right now the greatest opportunities may exist in those markets where newspaper home delivery is threatened. For example, Detroit's two dailies are talking about ending daily home delivery and only delivering three days a week. Similar opportunities exist in communities with the highest proportion of young, internet-savvy residents where daily newspaper delivery has not taken hold. Now is the time to start developing plans for this new vehicle so that it can launch when the economic and advertising recovery comes in 2009 or 2010

Hard Times

The Postal Service is now beginning to tell its stakeholders the extent of the hard times that it faces. In a notice to members, APWU President Burrus provides some financial details that were not presented at the Board of Governors meeting. The information he provides along with my comments in italics is as follows:

• The Postal Service experienced a 12 percent reduction in mail volume during some unspecified time period. [Most likely this figure represents an early estimate of volume for the 4th quarter. If true it means that mail volume has truly dropped precipitously as in the 3rd quarter volume was only down by 5.5% over last year. ]
  
  
• The Postal Service's expected loss in 2008 will be around $2.3 billion. [This is about $1 billion less than the estimate that I generated in my last post but still a substantial number. The difference reflects the fact that I was not able to identify all of the one time charges and accounting credits that will occur]
  
  
• There are no prospects that increases in mail volume or for productivity improvements will be sufficient to offset losses. Increasing postage rates, beyond what is permitted under the rate cap, is not an option either as large price increases would hasten the substitution of electronic alternatives for mail. [With these comments, President Burrus is preparing APWU membership of the prospect for significant changes in postal operations beyond productivity improvements within a single facility.]
  
  
• Postal Service employees may experience layoffs in the next fiscal year. [The layoffs would come from the 16,000 employees have less than 6 years of service. The layoffs would further reduce Postal Service head count beyond what the hiring freeze and the early retirement program will generate.]
  
  
• The Postal Service will have losses in 2009 of around $2 billion. [The projection of a $2 billion loss is most likely , the Postal Service's best projection for FY 2009 even with the hiring freeze, the early retirement program and the layoffs that President Burrus is hinting at.]
  
  
• To cover losses, the Postal Service will have to borrow around $5 billion. [If the business cycle recovers in FY 2010, the Postal Service will need to still hold down costs then to pay back the debt.]
  

President Burrus closes his note linking the Postal Service's financial challenges with the upcoming election and the impact that the election could have on the prospect for postal privatization. While I am less convinced than President Burres that postal privatization is in the offing, I do agree with him that the next administration will likely examine "the future role of government in providing postal services."

Filling in the Gaps

At the Board of Governor’s meeting on Wednesday, September 24, Postal Service’s CFO Harold Glen Walker provided only a limited picture of the Postal Service’s current and near term and financial condition. He did not present as expected either a forecast of a projected loss for the remainder of the fiscal year, nor did he present an integrated financial plan for FY 2009 as was expected from the agenda e-mailed to the press. His only clear statement on finances was that the “4^th quarter decline has occurred at an accelerating rate.” The postal community needs more information than that, and this post will provide an analysis that hopes to fill in the gap in public information that was left behind at the conclusion of the meeting.

In particular this post and the ones that will follow, I will provide:

• an updated forecast of the Postal Service’s loss for FY 2008;
• an examination of the economic and business trends that will drive revenue and costs in the remainder of the fiscal year and next fiscal year;
• the challenge of doing any forecasting in today's economic environment;
  
• some thoughts on strategic planning; and
  
• a preliminary forecast for FY 2009.

The fourth quarter is clearly one of the most difficult periods that the Postal Service has faced in its history. The release of the Postal Service's revenue and expenses accounts through August shows that the Postal Service's loss so far this year is how challenging this period is. So far this quarter, revenue is$11.850 billion and expenses are $13.025 billion, producing a two month loss of $1.176 billion.

The loss so far in the fourth quarter is driven by a 4.7% decline in revenue, a 1.3% increase in expenses, and a $329 million workers compensation adjustment. Extrapolating this trend through September would result in a quarterly loss of $2.168 billion and a fiscal year loss of $3.326 billion.

The increase in expenses in these two months appear likely to continue through the remainder of the quarter. During the 4th quarter, COLA payments raised labor costs. Changes in energy prices raised expenses by over $140 million as noted in transportation, gasoline, natural gas, heating oil, and electricity accounts. Given that much of the increase in energy prices happened after the beginning of 2008, this increase in cost will clearly continue through the remainder of the quarter. The Postal Service will be able to cut the projected deficit on the expense side only if they can make substantial reductions in work hours, reduce contracted and postal transportation, or have accounting adjustments that affect final expense totals.

The decline in revenue raises some serious questions about the near term business prospects of the Postal Service, particularly since it raised rates just a few months ago. The decline in revenue potentially reflects two trends that were not present previous. First, the decline in revenue most likely reflects a volume decline that is greater than the 4.7% decline in revenue given the increase in rates. Second, the decline in revenue most likely indicates that both long term trends and the economic downturn are having a greater impact on the Postal Service's products that generate more revenue-per-piece than others.

Looking at the revenue figures in more detail does provide some hints as to which products are driving the revenue decline. In particular the revenue data shows that:

• Revenue from those payment categories most likely to represent single-piece First Class mail declined by 6.75% or $158 million. This includes revenue from stamps, other than precanceled stamps, PC Postage, and low speed meters. The decline in revenue here is only marginally larger than the decline in single piece revenue in the third quarter (5.6%). During that quarter, single piece mail volume declined by 9.8%. This fourth quarter will likely show the first double-digit decline in single piece mail volume. As the downward trend in single-piece mail volume, that presents a faster decline in each subsequent year, began almost a decade ago, the decline in First Class Single Class mail is unlikely to return when the economy returns.
  
  
• The 7.3% or $242 million decline in revenue in Standard Mail permit and pre-cancelled stamp revenue in the 4th quarter shows the intense impact of of the economy on revenue sources linked to advertising. Regular Standard Mail permit revenue declined by 7.4% and Non-profit Standard Mail permit revenue declined by 5.9%. Both of these products saw declines in permit revenue greater than that experienced by the Postal Service as whole. In the 3rd quarter, standard regular mail volumes were down by 6.8% and non-profit volumes rose by 2.9%. In the 4th quarter, the Postal Service may be seeing large single-digit or double-digit declines in regular Standard mail volume and single-digit declines in non-profit mail volumes. The Postal Service will get a small bump in non-profit mail in September from the election but much of the election effect will occur in the next fiscal year.
  
  
• All other postal products do not appear to be as adversely affected by the economy or long-term secular trends. However, the impact of the economy on periodical revenue may be delayed due to advertising page commitments for July and August may have been made before the depth of the downturn was as clear. The Postal Service may be seeing problems in periodical revenue in the next fiscal year.

Given that the economy has slowed further in September, with the greatest impact occurring in the mail intensive financial service businesses, the Postal Service is unlikely to report better revenue trends in its 4th quarter RPW report based on one additional month of data. Therefore, extrapolating the year-to-year change in revenue feels like a reasonable assumpt ion without further data.

If the Postal Service's projected loss is even close to the $3.3 billion that an extrapolation would suggest, then the sooner the Postal Service begins to prepare its stakeholders for the end-of-the-year reports the better. Holding back on bad news is unlikely to make life any stakeholder including Postal unions and their leaders, employees, mailers, Congress, and Postal Regulatory Commission.
Service

Oct 1, 2008 Correction: Since this observation was posted, I have learned that the Postal Service has told its unions, and management associations that it expects its losses for the year will be $2.3 billion, $1 billion less than what is projected in the observation above. I take the Postal Service's statement to be authoritative and all future observations will use this figure. The difference most likely represents one time expenses or accounting adjustments to either revenue or expenses that I did not account for. I should have noted that possibility in the original post.

The APWU reported that the Postal Service has stated that mail volume decline by 12%, most likely in the 4th quarter. This would match the revenue decline identified above. Combining the volume decline with the revenue decline really highlights that the slowdown in the economy is hitting the Postal Service particularly hard.

Why Lehman Brothers and Merril Lynch Matters ot the CEP Industry

The seriousness of today's financial news is broadcast across the top of all of the world's newspapers, at the top of Internet news sites and is the lead story on all broadcast newscasts. The headline in today's Wall Street Journal succinctly describes the situation, "Crisis on Wall Street as Lehman Totters, Merrill is Sold , AIG Seeks to Raise Cash" In the first paragraph, the Wall Street Journal states that "the American financial system was shaken to its core" by these events that developed yesterday.

The financial crisis may represent the greatest since 1929. More recent financial collapses of savings and loans, Mexico, Long Term Capital, and the Russian Ruble all pale in size. As this is not a financial blog, I will not comment as to what it means to your investments including your home, and savings in 401-K's, IRA's or equivalent retirement savings accounts. What is clear is that a lot of large banks, insurance companies, and other corporate and public institutions hold significant quantities of assets that have values well below what is currently on the balance sheet and will need to sell assets or seek infusions of cash to meet their obligations to their customers, policyholders and pensioners. Also, equity investors and lending institutions of all types will be more risk adverse than they were. This will will result in tighter capital markets in the near term.

So, what does this mean the courier, express and postal industry?

• The immediate impact of crisis will be some job losses in the financial sector that will slow growth in regional economies most heavily dependent on this industry. (e.g. New York, London, etc) CEP business tied to those markets will suffer.
  
  
• Tighter investment capital will act as a brake on the economy. It will make it more difficult for businesses and individuals to gain capital to do everything from buy a set of tires on credit to expand a factor to meet customer demand. Less credit-worthy businesses may even find their normal sources of operating credit drying up. A slower economy means less volume. FedEx's recent announcement on its current quarter's earnings highlighted the impact of a slower economy on volume. Postal operators should see a similar impact on revenue generated by their more economically sensitive products including parcels, advertising and periodicals.
  
  
• Well capitalized and cash generating CEP competitors, may try to provide alternative financing arrangements to lock customers into a broader relationship of financial and transportation services. UPS's recent announcement that it will use it UPS Capital unit to lend to small exporters, illustrates this trend. Other CEP competitors that have home markets that can generate substantial cash, may also enter this market.
  
  
• Certain costs of the CEP business may drop due to the slowing economy. Lower fuel prices will reduce the expense of delivering letters and parcels. Lower demand for transportation capacity in general may reduce the cost of capacity bought on the spot market. The industry should be cautious that, in the near-term, some of the lower fuel prices may reflect an oversold commodities market as financial institutions unload positions in oil and gas futures to raise cash.
  
  
• The lower fuel costs will have a side benefit of higher margins for companies that charge fuel surcharges in that the decline if fuel prices is occurring at a faster rate than the companies are reducing the surcharges. Fedex noted that affect in announcing higher earnings than projected in its current quarter. A similar impact will be felt by UPS.
  
  
• Capital spending among all CEP firms will slow. Every quarterly announcement from publicly traded firm will announce a delay in capital investments for the foreseeable future.
  
  
• CEP firms, and in particular postal operations facing faltering finances due to the slow economy will find their path to improved finances more difficult. Those administrations that are planning reductions in headcounts, retail offices, or capital spending may take a second look to see if further reductions can be made. Those administrations that have not begun the process will begin the process.
  
  
• Consolidation of letter and parcel sortation operations into fewer, more automated facilities will occur among both public sector and private sector firms. Plant consolidations at national posts, both public and private, in their home markets will likely receive significant political attention given the impact on jobs in a slow economy. Consolidations happening in the private sector and by national posts outside of their home market will receive little if any negative political attention. UPS's recent opening of a new ground terminal in Louisville, Kentucky consolidated sortation that was done elsewhere in Louisville, as well as in Lexington, Ky., Cincinnati and Sharonville, Ohio. The opening was attended by Louisville's mayor and the city named the day in commemoration of the opening.
  
  
• To the extent that regulatory restrictions do not restrain competitive responses, incumbent operators may begin to expand and accelerate counter-moves to new entrants in upstream, downstream, and end-to end markets to use excess capacity in more efficient automated facilities to recapture market share.