What’s next for the USPS?

On September 30^th, Congress approved legislation that gave the United States Postal Service a one-year reprieve on its obligations to pre-fund retiree healthcare benefits—averting a potential crisis as the USPS did not have the cash on hand to make this payment. (As noted previously, no other federal agency is subject to this requirement.)

With fiscal year 2009 in the books, the USPS now turns its attention to 2010—and the outlook for postal profits remains bleak. Addressing the National Press Club last month, Postmaster General John Potter remarked:

Without a big change in the way we’re required to do business, we’re likely looking at a deficit of more than $5 billion dollars—for years to come. This is a critical public policy issue.

We’ve commented previously on the various efforts the USPS has taken in light of their current budget challenge. And you have to give them a lot of credit. This past year, like a lot of companies, they stepped up their cost cutting, trimming $6 billion from their expenses and cutting almost 115 million work hours. All while service and customer satisfaction reached record highs.

One also has to agree that mail still ranks as a critical communication vehicle that connects businesses with their customers. Even with the recession, the USPS delivered 176 billion pieces of mail last year and generated over $68 billion in revenue—sales figures that most companies would envy.

The problem, according to Potter, is that the business model created to support the mail simply doesn’t work anymore and changes are necessary.  We agree.

So as we ask “what’s next” for the USPS, it is likely that you can expect changes to fall into a few categories: operational, legislative, marketing and innovation. 

• Operational. We expect postal officials to continue their work to create a more effective, more streamlined organization.  Technology and process re-engineering will continue to play an important in role in cost reduction.
• Legislative. The Mailers Council—a coalition of corporations, nonprofit organizations and mailing associations—has a vested interest in effective, low-cost postal service.  So it’s not surprising that they’ve published a white paper calling for new laws that would allow the USPS to compete more effectively.  Among their recommendations: making it easier for the Postal Service to reduce its head count, close unneeded facilities and consolidate its retail network. They also propose changing the pre-funding schedule for retiree health benefits. Plus, they would also like to see a study on whether five-day-a-week delivery makes sense. Some would argue that these are the same benefits enjoyed by other companies—the freedom to make well-informed business decisions—and clearly the USPS would welcome these legislative changes.
• Marketing. In recent months, we have seen the USPS employ marketing tactics that are common for most businesses, but new for postal officials. The ‘Summer Sale’ and the current First-Class Mail incentive program provided mailers with good reason to mail more – a concept that may be continued if talk about a “Winter Sale” holds true. The USPS is also looking to maximize the value of the 37,000 retail outlets known as “Post Offices” by expanding the breadth of products and services offered at these locations.
• Innovation. From its roots in ancient Persia where relay messengers delivered mail on horseback, to today’s barcodes, priority services and e-notifications, the postal industry has demonstrated an ability to reinvent itself over its 4,000-year history.  So it was refreshing that PMG Potter did not conclude his speech at the National Press Club by discussing how to get through another year. Instead, he talked about taking a fresh look at the future of the Postal Service and its role in serving America—examining what the Postal Service will look like 7, 10 and 15 years from now.

Potter spoke of establishing a public dialogue about the future of the Postal Service – and we invite you to be a part of it.  What do you want the USPS to do next? When you think ten years down the road, how might the Postal Service add value to your business?  We welcome your thoughts.