For USPS To Survive, It Needs To Act Like A Business

No CEO of a struggling business would propose a turnaround that hinged on degrading the service of its flagship product, but that's essentially what the U.S. Postal Service is doing with its cost-cutting proposals that include eliminating Saturday mail delivery and virtually eliminating overnight delivery of first-class mail.

"The changes the Postal Service announced don’t make the essential issues go away," says Michael Crew, director of the Center for Research in Regulated Industries, and CRRI professor of regulatory economics at Rutgers University. On Thursday, the USPS acknowledged it was facing a "new reality" as it continues to lose business to electronic forms of communication.

"It'll probably result in the further decline of the postal service," Crew predicts, as customers ranging from consumers who still pay bills via snail mail to companies that depend on overnight mail turnaround like Netflix alike seek out electronic alternatives more aggressively.

The problem, say experts, is that the USPS isn't run like a business. "The essential problem is that the law does not create a framework for the Postal Service that gives them sufficient flexibility to adjust to a changing market," says James I. Campbell, an attorney and consultant on postal policy.

Although the USPS isn't funded by taxpayer dollars, it still has to follow a host of Congressional mandates on its operations.

"What's costing them is their business model doesn't encourage them to innovate," Crew says, "So all they can think of is cut, cut, cut — and that's probably the only option that's available to them under current law."

Other industrialized nations have mail-delivery systems that aren't bleeding red ink; the difference is that those are run like corporations (some are entirely privatized). And in business, cutting costs is only half the solution to an underwater balance sheet. What's even more important is stimulating demand.

The USPS could do this in a few ways, experts say. First, it could ramp up parcel delivery. Market research firm comScore says online retail spending in the second quarter of this year alone was $37.5 billion. That adds up to a lot of goods that need to be transported around the country. Now, though, the USPS only handles around 15 percent of this market, with the rest handled by UPS and FedEx.

Postmaster General Patrick Donahoe also suggests increasing demand by growing "last-mile service," in which a private courier delivers a package to the farthest stop on their route and a mail truck takes it to its final destination.

Conversely, the USPS could offer a similar service in congested urban areas, says Crew. Private companies would bring their packages most of the way to their destination to be handled by the USPS for the final leg of the trip. This "urban logistics" service would grow in appeal as congestion pricing increases the cost of vehicle access to urban centers during peak hours.

Even with the mail volume lost to digital transactions, "(i)n the US we have two to three times as much mail per person as any other industrial country," says Campbell. "There ought to be some way to make this work."

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  • by tug Location: new bern on Sep 17, 2011 at 09:23 PM
    I couldn't tell you the last time I bought a stamp. I do use Netflix but thats pretty much it. All my bills are either paid online or in person. My wife works in shipping for a small business. She never uses the mail to ship stuff, since its not reliable. UPS, FedEx or other shippers are more reliable and when it has to be there overnight or in 2 days its there, not 3-5 days as the USPS does. That is the post office's biggest hangup, their logistics don't lend themselves to overnight or 2 day shipping, that manufacturers and other companies depend on.
  • by Barlow Location: Winterville on Sep 17, 2011 at 07:00 PM
    "Although the USPS isn't funded by taxpayer dollars, it still has to follow a host of Congressional mandates on its operations." The one single mandate that is hurting the post office the worse is the one that makes them fund 75 years of retire benefits in 10 years. What "business" could do that and be profitable?
  • by anon Location: fwf on Sep 17, 2011 at 03:13 PM
    i might actually ship with usps if my mail lady wasnt always gabbering on the phone, didnt bend my do not fold envelopes to the size of letters and just leave my packages at the end of the driveway rain or not
  • by G on Sep 17, 2011 at 11:23 AM
    Last mile delivery sucks. It basically just adds another day to the delivery time of the other services with not that great a price reduction, plus it increases the chance of the package being lost, stolen or damaged. What the USPS really need is to be relieved of the massive yearly payment they have to make (unlike any other company or government agency) to ensure retirement benefits. Without this payment, they wouldn't be going under. Lastly, I'm getting tires of the clerk at the window trying to upsell me overpriced crap every time I go to mail a package, while at the same time not ever having a supposedly free box for priority mail in the right size available.
  • by Anonymous on Sep 17, 2011 at 08:58 AM
    What do they pay or what is the real cost to produce all those custom stamps ??
  • by Formerly O.L.I. Location: ENC on Sep 17, 2011 at 05:59 AM
    "...suggests increasing demand by growing "last-mile service," in which a private courier delivers a package to the farthest stop on their route and a mail truck takes it to its final destination." Uh, I thought that was what they are already doing, you know, delivering the mail.
  • by cottonmouth on Sep 17, 2011 at 05:44 AM
    In my opinion, the USPS appears to be dogged by both a bureaucracy and an archaic structure. Incompetence is tolerated and the union makes it really difficult to fire anyone but proven crooks. Productivity does not seem to be a condition of employment. A normal corporation would have replaced a large percentage of the USPS employees long ago.
  • by MB Location: Martin County on Sep 17, 2011 at 05:02 AM
    The USPS needs to get out of the box business and everything else they offer free. When ebay was booming and internet sales were booming; I use to get two carts from the back of the Post Office and fill both up with packages that sold on ebay; but not any more! The sales just are not that big any more. The USPS saw all this going on and decided to jump on the band wagon but they didn't think it over well and gave away free large rolls of priority tape along with many different size free priority boxes to millions of people; then those sellers all turned the boxes inside out and used the brown side and shipped Parcel Post so the USPS lost any money they thought they were making. By the time they got smart and stopped giving the large roll of priority tape away "that people used on everything but the boxes"; and then printed priority on the inside area of the boxes; it was too late; the big internet sale boom was over. The sad part is the post office is still giving away those boxes for free. STOP making the free boxes & paper work. Get back into the MOVING MAIL BUSINESS USPS!!! Fire who ever it is sitting up at the top of your Chain who made all those very bad decisions!! Ebay is not; nor ever will come back to what they use to be USPS; they have hit their low now and this is where they will be for a very long time. So Pay attention to what they are doing because they were your biggest sales ever! It's over now!
    • reply
      by Formerly O.L.I. on Sep 17, 2011 at 06:02 AM in reply to MB
      Wow; I never thought about doing that with the boxes. Guess some people don't have any ethics or integrity. My rule is what a person does can come back to bite them, or pay them back; good or bad. So, I do the right thing. If I take a box, I pay for it when I bring it to mail. What a world.
    • reply
      by Anonymous on Sep 17, 2011 at 05:49 PM in reply to MB
      I think you are a bit confused about internet sales , e-bay and the like being at a low... all the data that I've seen and my personal experience show that its actually rising...
  • by George Location: Washington on Sep 17, 2011 at 04:51 AM
    USPS is a reflection of our govt. They need to trim the fat and look real hard at profit margins. A good amount of customers have switched to UPS because of USPS's poor handling of mail. Their standards are low. Have you ever talked to a UPS worker that acted if he had all of the time in the world on his hands??
  • by m on Sep 17, 2011 at 04:40 AM
    USPS is a dinosaur and needs to close it's doors. Let private industry take this on. You will get 1000% better customer, Finally the monopoly would be broken. Finally the union would go away, the PIA they are, but of course they would sue and waist more money.
    • reply
      by Formerly O.L.I. on Sep 17, 2011 at 06:05 AM in reply to m
      You'll eat those words when that important thing you are waiting for does not arrive CONVENIENTLY in your postal box, and you have to pay to pick it up, have it delivered, and drive to where ever it is laying. Good luck with your Christmas cards too.
      • reply
        by Chuck on Sep 17, 2011 at 11:04 AM in reply to Formerly O.L.I.
        Christmas cards are a thing of the past as are The Stockings with fruit & Nuts that used to hang from fireplace at christmas. Don't think many folks mail christmas cards anymore.I Know we don't get many.
        • reply
          by Formerly O.L.I. on Sep 17, 2011 at 05:34 PM in reply to Chuck
          Chuck, that is sad to hear. The number one thing I have always looked forward to has been the Christmas cards, with hand-written messages inside. I enjoy sending them too. I use email, very proficient with a computer, but I still choose the old-fashioned way of communication on holidays. If you think Christmas cards are from the past, perhaps you just don't like Christmas period? How very sad...
        • reply
          by Chuck on Sep 18, 2011 at 07:31 PM in reply to Chuck
          Christmas is my favorite time of the year.Never said i do not like christmas cards.Just said not many folks are mailing them these days. I Think a personal visit to a friend & Saying merry christmas with a hug or handshake is better than a stupid card. I Do personal visits for local friends & Call Or SEnd E-mail cards to out of town friends. Things are changing.You might want to change with the times. Have a great day!!
    • reply
      by Anonymous on Sep 17, 2011 at 06:15 AM in reply to m
      Your dreaming if you think unions will go away, they will just move to the next industry.
      • reply
        by Stupid Unions on Sep 17, 2011 at 08:47 AM in reply to
        The unions don't need to go away, they do however need to get real. This nonsense with protected status workers has got to go. A huge part of the problem with the USPS, is they can't get rid of the dead weight because the union says they aren't allowed. The result is the USPS has to pay people not to work because they are either too incompetent, or they know they can't be fired.
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