The USPS continues to lose money. However, the steps they are taking to return to profitability are in the wrong direction in my opinion,
The USPS wants to change its delivery schedule. Currently, first class mail is delivered in 1 to 3 business days depending on the distance. Under its new plan, that would change to 2 to 3 business days. One day doesnít seem like a lot. For mail that is not time critical, it isnít an issue.
However, for businesses where time is important, itís going to further erode the use of the postal service. Itís going to drive business away. For example, my municipal water company is locally operated. They send out a monthly bill. The day I get the bill, I drop a check in the mail. Under the current delivery schedule, my water company sends out a bill on, say, Monday. They receive many payments back in the mail by the end of the week. Under the new plan by the USPS, my water company will be lucky to get any payments back by the end of the week. What is normally a 3-5 day turn around for people who pay promptly is going to become 4-7 days. In the end, the water company waits longer to get more money in the bank. For companies that donít have a lot of working capital, this delay is going to be a problem.
If the USPS implements its decision to move to a 2-3 day delivery schedule, how many companies are going to give up on the USPS and move to electronic/automated payments? Many companies have gone this route already.
The USPS has a good product that is losing money and volume. To save money, they are going to reduce the quality of the service. That may save money. But how many customers will move to other alternatives? Will the increased loss of mail volume wipe out any savings created by the service reduction? Sorry, I donít see how reducing service is going to improve anything. It could make matters worse.
If the USPS stays on this course, I see a death spiral on the horizon. Reduce the service and increase the cost so that they make money. Which will reduce mail volume. Which will lead to further reductions in service and increased postage rates. Itís a vicious cycle.
Banks and other businesses will have a field day with this decision. I can picture the advertising now. ďUnsure when youíre payment is going to be received? Do you want to avoid late charges? Tired of waiting for your statement to arrive in the mail? Sign up now for electronic payments and statements. Why wait for the slow mail delivery?Ē
What are my suggestions to fix the USPS? I have a few ideas.
First, the USPS needs to get away from its crushing labor contracts. The USPS isnít allowed to lay off workers. In some cases, workers arenít fully utilized because of reduced mail volume. I blame USPS management for accepting labor contracts that prevent it from dealing with the labor issues.
Second, consider other options to home delivery. It takes a lot of people and a lot of vehicles using a lot of fuel to deliver mail to everyoneís home. Are there better alternatives that arenít inconvenient to the people but could save the USPS some money? For example, what about using neighborhood cluster boxes? Use home delivery for large packages that wonít fit in a cluster box. And do home delivery for handicapped or elderly people who canít make it to a cluster box to pick up their mail.
Third, should the USPS be privatized? In the past, the argument has been that companies will take over the profitable big cities but the remote little towns will be left behind. Thatís easily fixed. There should be a single mandate from Congress. Whoever delivers the mail must do so to every postal address, period. Mail delivery should be every day except Sunday and national holidays. There should be no more meddling by Congress in telling the USPS how to run its business. The days of Congressmen coercing the USPS to not close some postal facility in their district are over. A privatized company will make sound business decisions. The current USPS is suffocating under political decisions.
Fourth, stop subsidizing mail at a loss. The USPS has reduced rates for mailers that are willing to barcode and pre-sort their mail. I understand that. This reduces the handling costs the USPS has to endure. Mailers should get a break on their postage rate. Otherwise, there is no incentive for them to do any of that. In my opinion, I think the rate reductions are too steep. Can the USPS really deliver a piece of mail that is only paying 10Ę? I donít know what the correct rate should be, but some of these rates look really low. Large mailers may scream, but the USPS isnít in the business of subsidizing their mail. The rate should reflect the savings made by less processing of that mail, plus a reasonable profit on top of that. If it costs 45Ę to deliver normal mail, how can some mail be delivered at a profit for a mere fraction of that?
I could write volumes about the USPS. For now, I think the USPS is headed in the wrong direction with increasing postage rates while reducing the level of service.