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Don’t Go Postal; Upcoming Changes Are Good for Business

Published on 12/14/11 03:09PM


Despite what you may have heard, the USPS changes that are forthcoming will be a good thing. We realize that there is a lot of speculation, questions and misinformation crowding the already overcrowded news cycle, so on Tuesday, December 13th our team sat down with Jane Larson from the USPS to have a candid conversation regarding all of the changes to make sure that we can provide you with the most accurate information. Our goal is to help clear up many of the misconceptions and questions that you may have.

Here are the highlights. If you’d like more details and our thoughts on the changes, we’ve included them below.

Highlights

  • The USPS needs to save $20B by 2015
  • One of the proposals is to cut Saturday delivery, but there are repercussions
  • Change doesn’t come easily. There are costs associated with office closures and laws that govern what the post office can and cannot do without congressional approval.
  • Offices that are on the closure list are not necessarily closing, they are being reviewed. No closures will happen until May 15, 2012.
  • There are many benefits to the closures including increased efficiencies, savings on fuel, rent, utilities, etc. Additionally, fewer facilities streamline the mail process.
  • First Class postage is increasing on January 22, 2012 from $0.44 to $0.45. Delivery times now change from 1-3 days to 2-3 days.
  • For direct mail customers, there will be a slight postage increase for both Presort First Class and Presort Standard mail on January 22, 2012. In addition, Presort First Class will now allow up to 2oz at the same rate (vs. 1oz now).

Details

The Changes Need to Happen:
The USPS needs to save twenty billion dollars by 2015. They are currently in a large financial hole because of pre-retirement funding and a large majority of retail post offices being unable to sustain themselves financially. They are the only government organization that has the pre-retirement funding requirements and of the 35,000 retail offices nationwide, only 15,000 make enough revenue to support themselves. The USPS is the only government organization that is not tax subsidized.

Cutting Delivery Days:
Cutting a delivery day will save a substantial amount of money but there are repercussions. The selected day to cut is Saturday because it is not a business day, but this frustrates many consumers who enjoy receiving mail and packages on Saturday. Additionally, this will result in lost revenue for the USPS because companies who send packages through the USPS to avoid the Saturday delivery fee charged by FedEx and UPS will undoubtedly begin sending through one of those sources in order to ensure that customers receive packages in a timely fashion.

Instituting Change:
All changes made by the USPS are subject to approval by Congress. There are bylaws that were written long ago that have not been amended and as such, the proposed changes must go through the same outdated procedures. Additionally, there are financial repercussions involved in closing an office even if that particular post office wasn’t financially sound. If the building is owned, there are costs associated with selling it and the carrying costs while it’s up for sale. For rental buildings, there are often rental termination costs.

Closing Offices and Processing Facilities:
This is an area of constant misunderstanding. The offices that are on the closure list are not definitely closing. They are simply studying these offices to determine which retail offices and processing facilities they should close. As many people know, there are often multiple retail post offices in a town and more often than not, they are very close to each other. Additionally, many of the processing facilities are operating in old buildings and are no longer efficient. The closings have been delayed until May 15, 2012 per the request of multiple Senators and to allow ample time for public hearings.

The Benefit of the Closings:
There will be substantial savings. The most obvious are the savings from eliminating many offices: rent/mortgages, utilities, snow removal, landscaping, etc. Next are transportation costs. Trucks are sent from one processing facility to another moving mail around as it needs to in order to reach its final destination. Additionally, trucks are sent to every post office twice a day; first in the morning to deliver the incoming mail, second in the evening to pick up the outgoing mail. There is a lot of gas and unnecessary vehicles being used daily going to 487 processing facilities and 35,000 retail offices multiple times a day. Additionally, the staff cuts will also result in additional revenue. Obviously this is the most unpopular portion of the cuts, but the cut employees are all being given a chance to interview for positions within the USPS.
o By removing offices and thereby eliminating many stops for the trucks, the USPS’s transportation system will be efficient and mail will make less stops along the way, thereby getting there quicker in some cases than it does now.

How the Changes Affect the Public:
There are a few, but when push comes to shove, they are minimal. If you are used to going to a particular retail post office location, there is a chance it will be closing mid-2012. If it does, have no fear…there is another one close-by! As far as delivery times are concerned, the current delivery time for First Class mail (what you pay $0.44 for) is 1-3 days. In theory, it’s actually crazy to think that you receive overnight delivery for that price, but it’s not guaranteed overnight so that’s the difference between First Class and Express Mail. The changes will affect the current delivery time by 1 day so the new First Class delivery standard will be 2-3 days.

Direct Mail:
Direct Mail is a large source of revenue for the USPS and while there will be minor rate increases for both Presort Standard and Presort First Class mail, the changes will benefit Direct Mail customers. Standard mail grew by 3% in 2010 and the goal of the USPS is to allow that to continue to increase easily. By consolidating processing facilities, there will be more employees on throughout the day to sort mail and get it distributed in a timely fashion. Additionally, Presort First Class customers will now be allowed up to 2oz for the same rate (versus the current standard which only allows up to 1oz before a rate increase). The delivery time standards will not be changing for bulk mail with the exception of periodicals.

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Final Thoughts...
At the end of the day, what’s important to emphasize is that the guidelines by which the USPS currently operates were written long before the days of any instant forms of communication and even before automobiles were popular. While it may be nice for some to have 2 or 3 post offices in their town 1 mile apart, it isn’t necessary anymore. By cutting the fat and allowing processing facilities and retail locations to work more efficiently, the long-term benefit really will be to their customers. According to the recently released Epsilon Targeting 2011 Channel Preference Study, 60% of US consumers enjoy checking the mailbox for postal mail and 50% feel that postal mail receives more attention than email. We all need the USPS but everyone can plainly see that the old rules just aren’t cutting it anymore. It’s time to change the rules and enjoy the rewards that will come as the USPS gains its profitability again. Want to share your thoughts on all of this? Feel free to comment here, or share with us on Facebook, Twitter or LinkedIn.