Growing up, there were three things that I would look for in my day that would get me running for the door, the sound of the approaching Mister Softy ice cream truck and its peculiar bell, the rumbling sound of my father’s approaching Plymouth Duster and the peculiar sound of a funny looking white right- sided steering wheeled truck with red and blue emblems and manned by men in blue uniforms delivering news, bills and packages — the all too familiar postman.
We all have grown seeing a lot of changes in our lives but always taking for granted our trusty mail system. For as long as I can remember, the USPS was this consistent, trusted and extremely effective “machine like” organization that could take your envelope from one side of the country to another for less than the price of a “pocillo” at your local “panadería.”
The USPS always kept things moving and would keep you connected to the ones you loved. I have lived in many places and could always count on the mail to follow me everywhere, it always did. While I was in college it ensured that my “Café Yaucono,” “habichuelas Goya” and “coquito” would be safely delivered to an always hungry and at many times homesick student such as me, and later in life it would ensure that I could remain connected to a love interest in Brazil, taking just seven days for a letter to be delivered, bringing with it the scents, emotions and hopes of somebody who is in love. The USPS was my cupid and best friend.
Yes, we all grew up hearing and believing that “Neither snow, nor rain, nor heat nor…” would stop the mail service. Am I right? It seems we were wrong on two accounts, the first one being that the USPS has no creed, this was merely a quote from Herodotus‘ Histories referring to the courier service of the ancient Persian Empire as it hang on a plate on a New York Post Office. The second one is that the delivery of mail can be threatened by other things besides climate conditions and barking dogs. Recession, technology and cultural evolution have created the perfect storm and no maze can make it go away.
I recently came across an article regarding the state of the U.S. Postal System and its struggle to continue to operate. Phillip Herr, the Director of Physical Infrastructure Issues for the U.S. Government Accountability Office (GAO), has been diagnosing what ails the U.S. Postal Service for the past three years. His conclusion in 2010 was that the postal service’s business model was so badly broken that collapse was imminent. A year later, it seems that the USPS prospects are not looking better.
The creation of the USPS in 1775 was truly an amazing feat. As directed by its first Postmaster General, Benjamin Franklin, it connected all parts of the new country by whatever means possible. To this day, mail is still delivered on foot on your local city, by truck, seaplanes and dogsleds in the great white north and mules in the most desolates areas. Today, the USPS delivers more than 560 million pieces per day and handles 40 percent of the world’s mail. It employs more than 500,000 people (the second largest single employer in the U.S.) and has the largest vehicle fleet in the world (more than 200,000 vehicles).
The USPS relies on first-class mail to fund most of its operations, but the volume of first-class mail continues to decline. Since 2005 there is more junk mail delivered than first class mail. It is estimated that the USPS needs three to four pieces of junk mail to replace the profit of a single first class letter.
The problem is and to simply put it, this operation, which generates more than $67 billion in revenue, is broke and will require lots of government aid very soon. It lost more than $8 billion in 2010, and an incremental funding of more than $5 billion is required to continue to operate beyond 2011.
Since 2007 the USPS has been unable to cover its annual budget and has continued to operate by borrowing $12 billion from the U.S. Treasury. In 2011 the USPS will reach its statutory debt limit. The 73rd Postmaster General, Patrick R. Donahoe, has informed Congress that his agency would default on $5.5 billion of health-care costs scheduled for payment on Sept. 30. He has required government assistance to avoid this situation, but he bluntly stated, “at the end of the year, we are out of cash.”
The reality of the issue is that it is an extremely complex one that goes beyond additional aid and budget extensions. There are some deep fundamental divisions in Congress about the operation of the USPS, its future relationship with its four Unions and how it should evolve within a new world which relies more and more on “paperless” communication.
But not everything is doom and gloom. The Postmaster General believes that there are some options, such as:
- Cut mail delivery from six to five days, an expected annual benefit of $3 billion.
- Reduce headcount by 20 percent over the next five years. All through attrition.
- Close 2000 post offices and move some of them into convenience stores and supermarkets with non-union workers staffing them.
- Have the USPS be excused from its annual health-care prepayment for future health care benefits.
When you compare the cost structure of the USPS, more than 80 percent goes to salaries and benefits, a little bit high when you compare it to the likes of Fedex and UPS, which run at 40 percent to 60 percent accordingly. The USPS has historically placed the interests of its unions first, and this may be ok for as long as the mail service is not compromised. The Postmaster General’s recommendations are nothing more than a “tourniquet’ to stop the bleeding and try to stabilize the patient. But the truth of the matter is that a real strategic and visionary solution that will bring fundamental changes to the operation is needed. The world communicates differently and the USPS has to evolve and follow this new trend. I am sure that Benjamin Franklin’s vision for the USPS was driven more by the needs of maintaining an effective service that assured a consistent and speedy delivery of nationwide communication, always putting the needs of the nation first.
Given March’s four-and-a-half-year agreement with the American Postal Workers Union, one of USPS’ four unions, it would seem that Ben’s vision is somewhat lost. The pact extends the no-layoff provision along with seven cost-of-living increases and a 3.5 percent raise for APWU members over the period of the contract. This agreement comes at a time during which the agency is losing more than $8 billion a year and facing the likelihood of lowering the quality and quantity of service. The country’s financial and fiscal situation can sustain this agreement. Higher salaries and benefits, at the expense of a lower quality of service and the perpetuation of a money-losing operation does not make sense. The math is simply wrong.
The real threat is how this agreement will impact negotiations and expectations of the other three unions whose contracts expire on 2011 as well. Since the 1970 Postal Reorganization Act, which transformed the Post Office Department into the USPS, a government corporation. Employees at the USPS have received more benefits than any other federal employees, a trend that started in the early 1970’s and now has become a burden on the public service.
A world without the USPS
Can you imagine living with a significantly diminished or practically invisible USPS? It may happen. The USPS is such a staple in our lives, not just delivering mail, it has been an inspiration to the likes of Elvis’ “Return to sender” and Joe Cocker’s “The letter,” to the use of the phrase “going postal,” to unforgettable TV characters such as Newman and Cliff. To quote Newman, “the mail never stops!”
But more than that, it is an essential tool to the lower socio-economic strata and the older generations, which still rely on it as their primary means of communication for official business and income receipts such as Social Security checks. The “paperless” concept within these segments is still questionable.
We need to ensure the survivability of this organization. A further reduction in operating capabilities at the expense of Union based requirements may not be sustainable in the times we are living. The lack of a practical plan that addresses the operational foundation of the structure and matches its cost with its revenues will have a huge impact on the little “day to day” happening of our market economy. From the advertising of the local supermarket specials to the payment and collection of credit card debt, loans and utility services; as well as the timing of deposits of those much needed pension and Social Security checks would be affected, all impacting and slowing down the economic cycle. We just can’t let it happen!
The evolution of mail
Going back to Mr. Phillip Herr, the Paul Revere in this story, he took the time to visit and analyze how some other countries have dealt with a similar problem within their mail delivery services. Mr. Herr sent a team to Finland, Sweden, Germany, Switzerland, Austria, and Canada to analyze their mail carrier services solutions and how they have evolved. He was fascinated by what they discovered.
These countries seem to have gone through a 30-year learning curve on this. Many countries closed as many of their brick-and-mortar post offices as possible, moving and thus privatizing these services into gas stations and convenience stores. Today Sweden runs about 12 percent of its post offices, while Germany only runs about 2 percent. This action turned these operations into profitable entities and thus allowing them to expand into other related services, an example is Deutsche Post buying DHL.
The extra cash has been used to develop new products leveraging leading computer and wireless technologies such as digital mail products that allow customers to send and receive letters from their computers. Itella, the Finnish postal service, keeps a digital archive of its users’ mail for seven years and helps them pay bills online securely. Swiss Post lets customers choose if they want their mail delivered at home in hard copy or scanned and sent to their preferred Internet-connected device such as a handheld PDA. These new services have also increased customer satisfaction by giving customers the online control tell the Postal Service if they would rather or not receive items such as junk mail. Interesting feature!
In February 2011, Mr. Herr’s team delivered a report to the House subcommittee that oversees the postal service making two major points: The USPS needs to close post offices and the USPS needs to create products for its wired online customers. Digital technology will reduce delivery costs.
PPP for USPS?
Following a similar European model may reposition the USPS as a service company with a hybrid Public/Private component and with the flexibility that a profitable enterprise has to pursue and explore new products and services that will ensure its survivability. This will bring the USPS back to its original Ben Franklin vision of maintaining an effective service that assures a consistent and speedy delivery of nation-wide communication.
The U.S. government has many challenges ahead and this one is surely on their list and should carry a high priority. Its impacts are social, economic and long-lasting. It drives at the heart of a mechanism that has held the nation together for 236 years.
It is true, that the concept of writing a letter has been replaced by the sounds of a keyboard and the silent and immediate transmission of an email. The “paper and ink” for means of personal communication, have been replaced.
But, it is also true that email cannot replace the experience of opening an unexpected envelope with a piece of paper with hand written notes channeling somebody’s emotions and thoughts.
I, for one, will never forget the first letter I got with lipstick kisses and perfume. To this date, I can still recall every single word on that piece of paper, all still bringing a chill to my spine. The scents and kisses I get with email are just not the same…