When is $600,000 more than $6,200,000?

When the $600,000 involves sex and "waste, fraud, and abuse" of Postal Service funds.

The $600,000 is the amount of money that the USPS - Inspector General has indicated that the Postal Service could save over the next two years if it improved training on travel expenses were introduced.   Overspending on travel and abuse of corporate credit cards is nothing new in either the private sector or public sector.   Reports similar to the one issued by the Inspector General probably have been written since at least the times of the Roman Legion.  Given that Postal Service currently spends $97 million on travel expenses annually, the impact of the Inspector General's findings suggest that better training on travel rules would reduce travel expenses by 0.32%.     Discovering that travel rules are complied with 99.68% of the time would suggest that employees are not doing all that bad of a job complying with travel spending rules and appropriate use of corporate credit cards.

The $600,000 in savings identified has received lead stories in nearly every paper covering the Postal Service and comments from both Senator Susan Collins and Senator Tom Carper.   It has generated some truly salacious headlines:

Washington Post:
Report: Postal workers expensed private travel and 'adult entertainment'

Business Insider:
Postal Workers Buy Porn, Plane Tickets While USPS Drowns In Debt

The $6.2 million is the cost of the fines that OSHA has imposed on the Postal Service.  Stories of individual fines as well as the fact that OSHA is now seeking enterprise relief has received coverage only by local newspapers and publications that cover OSHA actions.    These fines have received scant attention by either the national, Federal Government or postal press.   These fines have not generated statements from any member of Congress who are looking at changes in postal legislation.

Even though spending $6.2 million in OSHA fines is ten times more waste than the abuse of travel rules, the attention that policymakers place on it suggests that they believe that  the $6.2 million in OSHA fines are less than the $600,000 that would be saved by the Postal Service if no employee abused travel rules and corporate credit cards.  

The real reason for the failure of policymakers in elementary school arithmetic is that the travel abuse issue has an obvious fix and the OSHA fine problem only suggests that there is a more serious underlying problem that needs investigation.   Doing that investigation is critical particularly as it would likely identify significant capital spending, training, and non-capital equipment and supply needs that fall outside the financial capabilities of the Postal Service with or without relief from all of its retirement benefit accounting issues.   Until this and other similar investigations are completed, a significant portion of Congress will believe that all that is needed is to remove "waste, fraud and abuse" making fixing the retirement benefit accounting issues much more difficult.

When Will the Fines End?

Occupational Health and Safety has reported that OSHA has identified announced one willful violation with a $70,000 proposed penalty against the Postal Service $70,000 for violations in its Royal Parkway in Nashville, Tennessee for allegedly allowing workers to use damaged, un-repaired dock levelers. This is the first OSHA finding of 2011 against the Postal Service.

Details of the investigation and the reason for OSHA's action, as reported by Occupational Health and Safety are as follows:

OSHA's Nashville Area Office began an inspection following a complaint that an employee was seriously hurt while lifting a damaged, steel-hinged plate that provides a bridge between the dock and a truck trailer. When the strap the employee was using to lift the plate slipped off the steel flap, the employee fall backward and struck the concrete floor, according to OSHA's account. "The Postal Service was made aware of the hazards related to its use of dock levelers that should have been removed from service," said William Cochran, director of the Nashville Area Office. "The hazard must be addressed and corrected, because this type of disregard for employees' safety and health will not be tolerated."

The investigation raises further questions about the condition of Postal Service facilities and equipment given the budgetary pressure to extend the life of all physical assets and operating equipment.   The specific problem raise some questions about the design of the dock in Nashville and whether the dock and equipment used to move rolling containers off and on vehicles could use an upgrade to reduce injuries and improve the efficiency of loading and unloading vehicles.

Prior to this investigation, the focus of OSHA has been on issues with electrical systems and maintenance of those systems.   After completing investigations at 30 facilities in 2010, OSHA fined the Postal Service $6.2 million for what it described as “willful and serious” electrical safety violations.  Electrical Construction & Maintenance (EC&M) magazine in its January 2011 cover story indicated that "even more citations expected in the coming months."  The article estimates that "the total in proposed fines could exceed $10 million."   

The EC&M article provides a useful summary of 29 of the investigations that generated fines in 2010. (EC&M's summary is presented at the bottom of this post for convenience to readers.) As a group, the cases illustrate how financial challenges have resulted in short cuts that may reduce immediate spending but result in even greater costs in the future. 

Fixing the problems that are generating OSHA finds require capital spending to fix and/or replace facilities; increased operating expenses to replace non-capitalized operating equipment and supplies, and increasing spending on safety training of employees that work with aging electricity dependent sortation and other equipment.   Given that the Postal Service will have trouble making payroll this year, finding the cash to cover these expenses is unlikely any time soon unless it delays other investments designed to cut costs, improve service or increase revenue.

Following is a list of facilities and the record of their electrical safety violations:

  • Jan. 27, 2010 — Des Moines, Iowa: OSHA initiated an investigation in October and cited USPS for two alleged serious and one alleged repeat violation of federal workplace safety standards. Proposed fines total $46,200.
• April 29, 2010 — Providence, R.I.: OSHA cited USPS for alleged willful and serious violations of safety standards. Proposed fines, chiefly for electrical and lockout/tagout of energy startup hazards, total $558,000.
• April 30, 2010 — Denver: OSHA’s inspection found that employees were performing testing on live electrical equipment and doing so without adequate training, personal protective equipment (PPE), and safety-related work practices. OSHA issued three willful citations. In addition, one serious citation ($7,000 in fines) was issued for failure to post warning signs to alert employees of electrical hazards. “USPS was aware of the hazardous electrical conditions but did not correct them in a timely manner to prevent potential serious injuries,” says Greg Baxter, OSHA regional administrator in Denver. The violations total $210,000 in proposed fines.
• May 5, 2010 — Bedford Park, Ill.: OSHA’s inspection, which began in November 2009, found that USPS failed to provide required electrical safety training for its workers; to ensure they used safety-related work practices while working on electrical equipment; and to provide workers with appropriate PPE while working on energized equipment. OSHA cited USPS with three alleged willful violations, which total $210,000 in proposed fines.
• May 24, 2010 — Anaheim, Calif.: Proposed fines total $11,050.
• May 24, 2010 — Las Vegas: Proposed fines total $10,625.
• May 24, 2010 — Bell, Calif.: Proposed fines total $18,425.
• June 3, 2010 — Philadelphia: OSHA cited USPS for workplace safety violations related to electrical hazards found at two Philadelphia facilities. OSHA’s inspections found inadequately trained employees performing work without the proper PPE while being exposed to live parts. OSHA cited the network distribution center with four willful violations with a proposed penalty of $280,000. The processing and distribution center was cited for three willful violations with a penalty of $210,000 and one serious violation with a penalty of $7,000. “The Postal Service’s disregard for workplace safety standards has left workers at these facilities exposed to unnecessary dangers, including electric shock, electrocution, fires, and explosions,” says Al D’Imperio, director of OSHA’s Philadelphia Area Office. Combined proposed penalties total $497,000.
• June 7, 2010 — Baton Rouge, La.: Postal employees were found working on energized equipment without protective gear and were exposed to potential electrocution from live machinery. Proposed fines total $97,500.
• June 8, 2010 — Pittsburgh: OSHA initiated an inspection in October 2009 and discovered four willful violations carrying a penalty of $265,000; one repeat violation, with a penalty of $25,000; and two serious violations with a penalty of $9,500. The willful violations include inadequate training for employees exposed to electrical hazards, failure to provide electrical protective equipment to protect employees from arc flash hazards and electrical current, and failure to use appropriate safety signs, safety symbols, or accident prevention tags to warn employees about electrical hazards. The repeat violation is due to the facility’s failure to use approved covers for electrical junction boxes. The serious violations include the use of an unapproved junction box in a wet and damp location and a failure to provide voltage-rated tools. Proposed penalties total $299,500.
• June 16, 2010 — Portland, Ore.: OSHA’s inspection found workers were performing tests on live electrical equipment and doing so without adequate PPE, safety-related work practices and warning signs, as well as working on equipment that had not first been de-energized. As a result of these conditions, OSHA issued one willful citation with a proposed fine of $70,000. In addition, two serious citations with $7,500 in fines have been issued for failure to adequately lock out machines’ power sources to prevent unexpected startup during servicing and for inadequate insulation on electric cables. “The Postal Service disregarded basic electrical safety practices, which left workers at this facility exposed to unnecessary risk of serious injury,” says Richard S. Terrill, OSHA regional administrator in Seattle. Proposed fines total $77,500.
• June 23, 2010 — Belleville, Ill.: Proposed fines total $2,925.
• June 25, 2010 — Scarborough, Me.: An inspection, which began in December 2009, uncovered employees working with or near live electrical equipment without adequate training or qualifications, PPE, safety-related work practices, and warning signs. In addition, OSHA found that access to electrical panels was blocked in several instances by materials being stored adjacent to them. Proposed fines total $430,000.
• June 25, 2010 — St. Paul, Minn.: Inspectors found employees working on live machinery without proper equipment or training, exposing them to the risk of electric shock. Proposed fines total $210,000.
• July, 1, 2010 — Capitol Heights, Md.: OSHA initiated an inspection in January 2010 in response to a complaint alleging the hazards. Inspectors cited four willful violations and one serious violation. The willful violations include inadequate training for workers exposed to electrical hazards, failing to provide electrical protective equipment to protect workers from arc flash hazards and electrical current, and failing to use appropriate safety signs, safety symbols, or accident prevention tags to warn employees about electrical hazards. Proposed penalties total $272,000.
• July 9, 2010 — Simi Valley, Calif.: Proposed fines total $13,175.
• July 22, 2010 — White River Junction, Vt.: OSHA’s inspection, which began in January 2010, found untrained or unqualified employees routinely performing troubleshooting, servicing, voltage testing, and maintenance on or near live electrical equipment, such as mail sorting and canceling machines. The machines had not first been de-energized, the workers lacked PPE, and insulated tools were not provided to perform electrical lockout/tagout procedures. OSHA cited six alleged willful violations of safety standards. Proposed fines total $420,000, chiefly for exposing workers to electrical hazards.
• July 26, 2010 — Boston: OSHA’s inspection, which began Jan. 28, 2010, found that employees, including mechanics and technicians working with or near live electrical equipment or parts, such as bar code readers and elevator control panels, were not provided with adequate training, safe electrical work practices, required PPE, or insulated tools. These conditions exposed the workers to the hazards of electric shock, arc flashes, and arc blasts — and resulted in OSHA issuing five willful citations. OSHA also found that the Boston facility failed to have an authorized person conduct periodic inspections of its energy control procedures to prevent the unexpected startup of machinery during maintenance. This situation resulted in one serious citation ($7,000 fine). “These citations and sizable fines reflect both the gravity of the hazards identified during this inspection and USPS’ knowledge of and systemic failure to address these hazards,” says Assistant Secretary of Labor for OSHA David Michaels. “The dangers of electric shock, burns and explosions were real, present, and ongoing. USPS must take comprehensive and aggressive action to correct these conditions once and for all.” Total proposed fines reached $357,000.
• Sept. 2, 2010 — Binghamton, N.Y.: OSHA issued citations for several serious safety violations, including lack of sufficient access and working space in front of some circuit breaker panels to permit ready/safe operation and maintenance of the equipment, as well as employees performing troubleshooting on or near energized circuits who were not provided with proper protective equipment. Proposed fines total $8,000.
• Aug. 11, 2010 — Dayton, Ohio: OSHA’s inspection, which began in April 2010, found that USPS failed to provide adequate electrical safety training, ensure that workers followed safety-related work practices while working on electrical equipment, provide workers with appropriate PPE while working on energized electrical equipment, address machine lockout procedures and hazards, and provide proper lockout/tagout training. OSHA issued citations for three alleged willful and six alleged serious violations. Proposed fines total $225,000.
• Aug. 19, 2010 — Portsmouth, N.H.: OSHA inspectors issued five alleged willful violations of safety standards following an inspection that found untrained or inadequately trained employees performing troubleshooting and voltage testing on or near live electrical equipment and wiring that had not first been de-energized. The workers also lacked PPE and were not instructed on proper electrical lockout/tagout procedures. USPS faces a total of $350,000 in proposed fines, chiefly for exposing workers to electrical hazards.
• Sept. 19, 2010 — Sharonville, Ohio: OSHA issued the three citations after inspectors found that USPS failed to provide employees working on electrically energized equipment with adequate training and protective equipment, exposing them to the risk of electric shock. Proposed fines total $210,000.
• August 27, 2010 — Kansas City, Kan.: The inspection revealed seven alleged repeat and 21 alleged serious violations. “There is no excuse for the lack of attention to the work environment that resulted in a multitude of violations, including seven repeat violations,” says Charles Adkins, OSHA’s regional administrator in Kansas City, Mo. “It is imperative that employers take the necessary steps to eliminate hazards and provide a safe working environment for all of their employees to prevent accidents from occurring.” OSHA has proposed $191,000 in penalties against the facility.
• Oct. 12, 2010 — Columbus, Ohio: OSHA inspectors issued five citations, after they found USPS failed to properly train employees on safe electrical work practices and provide them with proper protective equipment when working on live machinery. USPS also failed to use proper procedures to prevent electrical parts from being inadvertently energized. Proposed fines total $210,000.
• Oct. 12, 2010 — Huntington, W.Va.: OSHA issued citations for failure to properly train employees assigned to work on electrical equipment and failure to provide workers with protective equipment. USPS also failed to use lockout procedures on machinery to prevent electrical parts from being inadvertently energized. USPS faces proposed fines totaling $212,500 for willfully exposing employees to electrical safety hazards.
• Nov. 17, 2010 — Bluefield, W.Va.: OSHA inspectors issued four citations after finding USPS failed to label electrical cabinets, properly train postal employees, use proper safety practices when exposing employees to live machinery, and provide adequate PPE. An additional serious violation was issued for allowing an unauthorized employee to perform inspections at the facility. Proposed fines total $287,000.
• Nov. 18, 2010 — Los Angeles: OSHA inspectors issued the USPS 18 citations after finding that USPS failed to properly train postal employees or provide them with adequate safety equipment, and live machinery was not properly de-energized, exposing employees to the risk of electric shock. Other violations included failure to maintain clean and orderly working conditions, maintain fixed metal ladders and guardrails, keep aisles and passageways clear, and properly mark circuit breakers. Proposed fines total $220,000.
• Dec. 29, 2010 — Shrewsbury, Mass.: OSHA inspectors found that the USPS failed to properly train postal employees or provide them with adequate safety equipment, and live machinery was not properly de-energized, exposing employees to the risk of electric shock. The facility also lacked proper voltage meters, and the USPS failed to perform periodic checks on energy control procedures. Proposed fines total $238,000.
• Dec. 29, 2010 — Duluth, Ga.: OSHA inspectors found no safeguards to prevent accidental startup of machinery, material was stored in front of electrical and circuit breaker panels, electrical boxes had unused openings, and there was exposed electrical wiring. Proposed fines total $80,000.

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.

Opportunities for Policymakers to Learn Before They At

Tomorrow, the President's budget expected to recommend changes in law that will jump start a multi-year process of revamping postal law and the Postal Service's business model.    Just in time, the Center for Research in Regulated Industries of Rutgers University has announced three conferences that should help stakeholders and policymakers evaluate the options that will be on the table.   The titles of three conferences below are linked to web pages on the Postal Journal that provide more details and information on how to register.


April 1, 2011 Washington DC - Advanced Workshop on Postal Policy: What is a Viable Postal System?

The day long program presents ten views as to the future of the Postal Service.  These views come from the Postal Service, the GAO, the Postal Service-Office of Inspector General, customers, consultants to the industry and a representative of Canada Post.

May 18-20, 2011, Skytop, PA, USA - 30th Eastern Conference in Regulatory Economics
The three-day program presents thirteen sessions that include 39 presentations on a wide range of topics on operating, marketing, and regulatory issues affecting both the Postal Service and other industries subject to  economic regulation.   This conference presents a unique forum for those who are interested in postal policy to discuss current postal policy issues in an informal manner.  The conference also allows those whose primary interest is postal policy to learn about new theories in economic regulation that might provide ideas as to the appropriate regulatory model for whatever business model is created for the Postal Service in the next few years.

June 1-4, 2011, St. Helier, Jersey – 19th Conference on Postal Economics
The four day program presents the latest in economic, policy and legal research relating to issues affecting the postal market worldwide.




 

How Much Longer for Transaction Mail

The Postal Journal has just posted three recent studies looking at the changing ways that consumers and businesses receive and pay bills.    The articles as a group suggest that consumers are increasingly looking toward web and mobile methods of handling bills and web, mobile and in-person methods of paying bills.

The studies, listed in order of their publication and their relavent conclusions are as follows:


Consumers Shift to ePayment to Get Control Over Finances 

 With the release of the 2010 Billing Household Survey by Fiserv Corporation provides a significant update on how the availability of multiple web and mobile based payment and bill presentment delivery modes has changed consumer use of traditional and new modalities. The survey, conducted by The Marketing Workshop, showed that consumers that have online access are gravitating toward payment options that provide them more control and allow them to hold onto their money as long as possible. In particular, the number of online consumers that use checks declined to 54.5 million households, below the 65.0 million households that use either biller direct or financial institution bill pay services.


Federal Reserve Study Shows More Than Three-Quarters of Noncash Payments Are Now Electronic

The Federal Reserve’s 2010 study of noncash payments revealed that in 2009 more than three-quarters of all U.S. noncash payments were made electronically, a 9.3 percent annual increase since the Federal Reserve’s last study in 2007. This growth and other statistics in the study emphasize consumers’ increasing adoption of electronic alternatives for payments in the United States. The 2007 study revealed that in 2006 roughly two-thirds of the payments were made electronically.







e-Bills Will Surpass Paper Bills By 2016

This study conducted for NACHA, the national electronic payment association by Blueflame consulting showed that 26.6% of all bills are now sent electronically with the largest percentage among customers of educational institutions and wireless telecommunications companies.  The study also showed that on average firms surveyed had e-bill volumes grow by 32.3% on average over the past two years.   The study indicated that at this point consumers are more amenable to e-billing than businesses.

 Implications of These Studies


These studies confirm the Boston Consulting Group's (BCG's) conclusion that the primary purpose of mail in 2020 will be the delivery of advertising as the volume of bills and payments in the mail decline.   These three studies suggest that the Postal Service and others interested in the future of the Postal Market need to take a second look at the forecasts developed by BCG and presented publicly last spring in order to determine if the more recent data suggests a faster or slower decline in transaction mail than previously believed.

From a policy standpoint, these studies suggest that more information is needed about:

• the proportion of the population that are only using mail continues to handle bills and payments continue to shrink and better information is needed about the characteristics of U.S. households that continue to use mail as their primary means of handling transactions; 
• how the shift of the mix of mail senders affects demand for collection and delivery services and the accuracy of the Postal Service's understanding of the business needs of its advertising mailer and parcel shipper customers;
• the appropriate role of the Federal government regarding the maintenance of an infrastructure to deliver advertising containing media (both direct mail and periodicals) when the volume of printed communications handling transactions or information becomes significantly smaller; and
• the relevance of the Postal Service's money order product when unbanked individuals are increasingly using walk-up electronic payment services rather than mailing postal or private sector issued money orders.

Unbundling Postal Prices

Currently most postal customers have their rates set as a discount from a base rate for the class of the product being mailed.   The discount is based on an analysis of the savings generated from reductions in the amount of work that the Postal Service that the Postal Service does for the customers.

One of the most common discounts for Periodical, Standard, and Parcel products are drop shipment discounts.  These discounts allow customers to reduce their rate by tendering the mail or parcels at a facility close to the destination.

In order to get the drop shipment discounts, the mailer must either provide or purchase transportation services from their plant to the location where the mail is tendered.     In order for the mailer to justify paying for the transportation costs, they must have sufficient volume to generate discounts greater than the transportation costs.    Making drop shipping pay requires larger volume levels the closer the mailer gets to the final destination.

Since 2009, the Postal Service has conducted the Collaborative Logistics Market Test which has tested the sale of less-than-truckload transportation services over its existing transportation network.   The most recent quarterly report indicated that the customers for this service represented "traditional freight companies as well as mail consolidators."

The interest of mail consolidators in this service makes perfect sense.  By using the Postal Service's transportation service they can then use an agent at the destination who can both claim the pallet and direct that the pallet be moved to the appropriate location at the facility for acceptance and/or processing.  In doing so the consolidator can then provide its customers with a service that allows them to pay the lowest possible rate for both postage and transportation of the mail from origin to destination.  

If the Postal Service had to charge the "official" rate for mail that was dropped in Dallas rather than Shreveport, La the mailer would pay more than the charges that they can pay with the market test that allows them to pay the postage for mail entered at Shreveport and the transportation from Shreveport to Dallas separately.   The mailer's only additional cost is for the agent of the consolidator or the freight firm who will ensure that mail that arrives in Shreveport is moved to the location in the facility where paperwork can be checked and the processing and delivery process begins.

The Postal Service currently can offer services in an unbundled way if it keeps a Chinese wall between the two services.   This prevents the postal service from handling the movement of the mail from its loading dock area that handles the Collaborative Logistics services to the area on the same loading dock for drop-shipped mail as well as collecting the paperwork for the transportation and processing charges at the origination facility.  Clearly, mailers would benefit if this Chinese wall was removed.

Removing the Chinese wall requires rethinking how postal products are costed and priced.  In this case, the Postal Service would generate profitable prices by first estimating the cost of only providing acceptance, processing, transportation and delivery service from the destination processing facility to the recipient and then estimating the cost of providing transportation service from another facility.  
The customer's price would then be the price for delivery from the destination facility plus an add-on charge for transportation from another facility where the pallet of mail is dropped off.

Fixing this problem requires the Postal Regulatory Commission to agree that postal costs should be measured from the bottom up and not from the top down as they are now.  It would require it to accept the use of imperfect automated data systems as a replacement for costly sampling systems that were not designed to develop precise product costs at the level of product and customer detail necessary for today's Postal Service.   



Once product costs were measured from the bottom up, the Postal Service would have the ability to expand this market test and introduce a bundled service that combines a mail processing and delivery service for mail dropped at the destination facility and a transportation service for moving a pallet of mail from another facility on a Postal Service truck.   The sooner this occurs, the sooner the Postal Service can offer lower rates to mailers who can palletize their mail but can't justify the transportation costs to move the pallet to a destination facility.   Given the Postal Service's financial challenges, there is no time to wait to shift to a pricing system based on bottom-up costs that would allow this to happen.

Delivering to Empty Houses

In order for mail to remain a viable options for communications and advertising, every part of the mail supply chain has to eliminate every penny of unnecessary costs.  No cost is more unnecessary than printing and delivering a mail piece to the wrong address.  Every penny associated with delivery to the wrong address reduces the return generated by mail delivered to the intended recipient.  

Minimizing this wasted expense has focused on mail that is addressed to a specific individual.   However, a recent report by Diana Olick on CNBC.com suggests that even saturation mailers face this problem.   Her report indicated that that identified that 11% of all homes are vacant.  The problem is greatest in those parts of the United States that either saw over building of new home, as occurred in Arizona, Nevada, and Florida, or have experienced long periods of economic decline as have occurred in manufacturing focused cities in Michigan, Ohio, western Pennsylvania, and upstate New York.   

Right now, saturation mailers accept a level of waste to get the lower rates available to those mailing to every house.  For example, if the mailer's total cost of printing and postage is 25 cents, then delivering 11% of saturation mail pieces to a vacant house  increases the cost per occupied address to 28.1 cents, a 12.25% increase over the cost per possible address.   The cost per occupied address would be even higher in one of the cities with above average vacancy rates.  

Mailers, printers and the Postal Service would benefit if they could develop a way to reduce delivery to unoccupied houses as an effort to reduce wasted deliveries improves the economic return on saturation mail and will increase demand for this service.  However, currently fixing the problem of delivering to unoccupied houses can result in skipping a significant portion of possible addresses on a carrier route which could bump up the rate to one that does not require delivery to every address on a route.   The Postal Service, mailers and the Postal Rate Commission should take the opportunity to solve this problem by developing a way for the Postal Service to continue to offer the lowest Enhanced Carrier Route rates even if requirements for that rate could not be met due to low occupancy rates on one or more routes within a metropolitan area.