To ensure its future, the U.S. Postal Service must do more than seek short-term fixes to its long-term financial problems. Year after year, the Postal Service continues to raise postal rates to cover its growing expenses without adequately addressing its significant underlying organizational and operational issues. Instead, it is offering to cut service by eliminating Saturday mail delivery.
These are complex problems requiring a comprehensive plan. Cuts in delivery service should be last on the list of considerations. Projected short-term cost savings from delivery cuts are minuscule in the context of the systemic change required and would only accelerate the decline in mail volume and revenue over the long term. It is difficult to find any business that would choose to increase prices and reduce service as a path to sustainability, yet this is precisely what the Postal Service is recommending.
A healthy Postal Service is vital to Americans who depend on timely, affordable, reliable mail delivery. The dual strategy of raising rates while cutting Saturday delivery is no way to sustain customer loyalty or encourage use of mail. It also overlooks the dependence that many-including small businesses and rural customers-have on six-day delivery.
According to research from the Postal Regulatory Commission, an agency that provides oversight of postal rate and service changes, the actual savings for ending Saturday delivery would be only about half what is estimated.
The commission also found that customers in rural and remote areas would be hit especially hard because their mail delivery would take longer, and that small businesses and other first-class mail customers who depend on timely delivery would be affected far more than bulk mailers.
Of course, change clearly is needed, but there are more substantive steps that can be taken before cutting Saturday delivery, to eliminate inefficiencies and achieve a sustainable solution to the fiscal dilemma.
A reasonable funding plan for pension accounts, and especially retiree health benefit accounts, is one step. Addressing excess capacity and associated costs is necessary as well.
According to the most recent report of the Office of Inspector General, the Postal Service has nearly twice the capacity it needs in its 260 processing and distribution centers to maintain good service. Excess capacity at this level is something no business could sustain and is a major factor in continued rate increases.
Because wages and benefits make up more than 80 percent of expenses, postal management and union leaders must work together to find viable ways to manage these costs.
In short, the solution to the financial crisis will not be found in failing to adequately serve small towns in remote areas. It’s about the need to address major structural issues embedded deep within the business model itself.
It is important to remember that the Postal Service is an independent entity and expected to operate as a business. It is fully paid for by postal customers and receives no public funding-a critical distinction that often is misunderstood.
I value postal employees, the work they do and the important role their service plays in our nation’s economy. To ensure its continuation, the service must address its underlying organizational and operational issues. Reducing delivery service to customers will instead jeopardize its future further.
Donald J. Hall Jr. is president and CEO of Hallmark Cards Inc., headquartered in Kansas City, Mo.
10/21/11 (c) 2011 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail email@example.com.