What's wrong with the US Postal Service?
It spends more than it brings in, and it's on track to hit its debt limit. Why can't it pull itself out of this mess?
How is it that UPS (UPS) and FedEx (FDX) can run profitable, successful delivery services while the U.S. Postal Service blunders its way into insolvency? That's an easy question to answer after you read the BusinessWeek article.
The USPS brought in $67 billion in revenue last year, not nearly enough to cover its costs. It's nearly $15 billion in debt and will hit its debt limit this year. If this continues, the Postal Service will collapse.
Post continues after this video interview with BusinessWeek's editor about the article:
Here are the biggest nails in the Postal Service's coffin:
1. Its union is too strong. The USPS cannot lay off employees due to union contracts. And in the next four years, union members will get a 3.5% raise and seven (yes, seven) uncapped cost-of-living increases. That's a shocking commitment.
2. It spends too much on salaries and benefits. About 80% of its budget goes to salaries and benefits, writes BusinessWeek's Devin Leonard. Can you even imagine that? Compare that with the 43% spent at FedEx and the 61% spent by UPS.
3. It hasn't raised prices enough. It costs the same to mail a letter to your neighbor as it does to deliver it by snowmobile to the Alaska wilderness. (Yes, the USPS actually does that.) The Postal Service should charge higher prices for longer travel distances.
4. It relies too much on junk and first-class mail. Total mail volume fell 20% from 2006 to 2010. The USPS relies too much on first-class mail for money, and when mail volume falls, its revenue falls as well.
5. It has too many post offices. Most of the post offices around the country lose money. What if the USPS took a page from Starbucks (SBUX) playbook and opened mini post offices at supermarkets, gas stations and retailers like Target (TGT)? Still convenient but with lower overhead. Even better: Nonunion workers can staff those offices, Leonard writes.
6. It hasn't embraced the Internet. Email has been a killer. But maybe the USPS has taken the wrong approach to the Internet. In other countries, Leonard reports, postal services let people pay bills online and even scan mail and send it to customers online.
In Sweden, people can take pictures on their phones and turn them into postcards. People can use their phones to send letters without stamps.
The USPS is incapable of owning up to its problems. And the revenue picture is just getting worse. The service predicts total mail volume will fall from 171 billion pieces a year now to as little as 118 billion by 2020, Leonard reports.
So far, the postmaster general wants to stop delivery on two days a week instead of just one. And he thinks that attrition will shave 20% off of the USPS workforce over five years. That's not going to be enough to stop the bleeding. The USPS needs to change dramatically, and that doesn't look like it's going to happen anytime soon.
quote: "how is it that ups and fedex can run profitable, successful delivery services while the u.s. postal service blunders its way into insolvency?"
while there are some good points listed in this article, the elephant in the room isn't mentioned: prefunding mandates by congress. the postal service's pensions are by the most conservative standards 100% funded, and are probably overfunded -- by tens of billions of dollars (with the us treasury holding the surplus, big surprise). also, the usps has to prefund a 75 year liability for future retiree heathcare -- literally funding healthcare for retirees who aren't even born yet. ups and fedex don't have these congressional mandates.
answer: if ups and fedex had these requirements, they too would be broke (on paper). if the usps had pension and healthcare funding requirements that matched its private sector competitors', the usps would also be profitable.
Why doesn't FedEx and UPS share the same woes as the Post Office?
You are comparing APPLES to ORANGES!!
The mailman comes by my door for free every single day, 6 days a week, even if I don't have any incoming or outgoing mail.
You only see the FedEx and UPS man if you get a package which is rare.
PLUS UPS & FedEx ONLY deliver on Saturdays for a HUGE premium!!
Did you know that Fed Ex and UPS charge you to let the Post Office finish delivering your packages to you if you live outside of the city ? Every single day UPS and Fed Ex comes to the post office (yes, even the small ones) and drops off skids and skids of packages that the Post Office delivers the next day for them. Then FedEx and UPS charges the mailer a "residential surcharge". Don't believe me? - pull out your bill and read the fine print and add on charges, oh yeah, right next to the "fuel" surcharge - no hidden costs with the Post Office - it is what it is!!
Although, I have been a past critic of the USPS, one thing that should be noted from reading all the E-Mails is that the USPS is mandated to provide mail delivery services to all 50 states and all US Territories, while UPS and FEDEX is not.
That has to factor in with respect to costs which the USPS has to pay, for if as a requirement for FEDEX and UPS to stay in buisiness as a regulated entity (which they are currently not regulated as a mail delivery entity) that they would have to deliver to the same territory as the USPS, either FEDEX/UPS would have to raise rates, and/or cut costs. Furthermore, FEDEX and UPS do not have a low cost letter mailing option like the USPS (nor do I think that FEDEX or UPS want that option, since they are making too much money on overnight delivery services right now).
One thing that can possibly be done to bolster revenues for the USPS also is to raise the rates that the USPS charges to deliver FEDEX and UPS packages to remote locations. If elther or both FEDEX and UPS don't like the rate increases, they can build their own remote outposts to deliver these packages. The USPS gets way too little in this regard from FEDEX and UPS (about $ 2.00 on average for each package), and the USPS should look at this service as a profit center.
Finally, in terms of service, myself, being a Communications Engineer, I did see a situation similar to this with the old Ma Bell (AT and T), and more recently with the Cell Phone companies. Under various Telecoms regulatory acts passed through Congress over the years, the old AT and T actually, through their monopoly rate structure to subsidize their remote rural customers from then high long distance revenues until that long distance monopoly was broken up by MCI. Basic Rural Telephone service never made money for AT and T, and is similar to the USPS losing money on many of the rural areas that they serve. Again, in the areas of Telecoms deregulation, the new Telecoms companies that showed up on the block focused building their infrastructure on the high density Metro areas, and avoided Rural areas which needed service like the Plague. Unfortunately, the USPS by its charter cannot do this, and does have to serve underserved rural areas (where FEDEX and UPS can avoid these places like the Plague).
But as I have said before, more cost cutting will have to be done at the USPS to make it at a break even or even profitable stage, since their primary competition is from the Internet. I wish the Postal Service a lot of luck on this one.
After retiring from the military with 25 years of service, I then decided to seek employment with the Postal Service, and worked there for better than fifteen years. I remember how I was dumbfounded by the way the Postal Service did things. Coming from a military environment, where discipline, moral, and esprit d corps, was a way of life, and a darned good one at that, I couldn't believe the chaos in the Postal Service. Over time, I came to realize that management was a big culprit. Add the Union to that equation (you know, protect the union member's job, no matter how sorry they were) and you have big problems, along with the fact, that the managers (that I knew) were usually the sorriest employees while they were on the work floor, and sought out management to escape having to do physical work. Many of the managers couldn't supervise themselves, much less other workers, so many of the sorry employees were allowed to do as they pleased, simply because the managers didn't want to go up against the union.
One male employee I knew while there, spent his tour going around visiting the ladies, or he was in the break areas nursing a hangover. I never ever saw him do any work during the sixteen years I was there. Finally, justice was served, when he stole a good bit of money, was caught, and fired. There were others doing similar things to avoid work and were allowed to get away with it. The good employees, and there were many, had to pick up the slack and carry the load, so to speak. That affected morale and created attitude problems throughout the processing plant where I worked. The overall result was a decline in production, resulting in the need for overtime, thus creating the situation that the Postal Service is currently in.
There was a need for the Union while I was there, to prevent employee abuse and misuse, but I feel that the Unions were too powerful, spending too much time protecting those sorry employees that should have been escorted out the door long before I got there.
Mr. Nader identified several drains on the U.S. Postal Service's financial resources, including a Congressional mandate that the USPS prefund its future retiree health benefits for the next 75 years by 2016 and $82 billion in over payments that the USPS has made to federal pension systems which have yet to be refunded.
Mr. Nader points out that the $103.7 billion prefunding mandate is something that, "no other government or private corporation is required to do and is an incredibly unreasonable burden." He continues by revealing that without this onerous prepayment provision, "the USPS would not have a net deficiency of nearly $20 billion, but instead be in the black by at least $1.5 billion."
Mr. Nader ended by calling on Congress to take action that would have a minimal impact on the patrons of the USPS and prevent further post office closings, deterioration of service, or job cuts.
At my station our routes are constantly being evaluated. We recently lost a route because of lower mail volume so all the remaining routes received an addition. We still have to be done in 8 hours regardless of this extra street time. Another item I have not seen addressed here is something we call "downtime" or "under-time", this is a situation where on a day where the mail volume is lighter than normal our supervisor will come to us and give out additional street delivery assignments from a route that is empty due to vacation or a sick call. We are expected to do this additional time within our normal 8 hour day, thereby saving the P.O. from having to pay overtime. By the way, with 11 years of service I currently get 4 weeks of vacation. After 15 years I will get an additional week. That is it, 5 weeks tops. As for calling in sick it is a sad joke. We are treated as if we are all lying about being sick. Between dependent care for taking care of my sick kids, doctor and dental visits and my own sick time I have used 22 hours this year and get questioned by management about it. I also do not know if many of you realize that the Letter Carrier is "the last mile" for many of the parcels you think you are receiving from UPS and/or FedEx. They drop off pallets of parcels for us to deliver since it is not economically worthwhile for them. If the P.O. is disbanded many people in rural or even lower class urban areas simply will not be served. UPS and FedEx would just cherry pick the profitable areas for delivery. Universal Service is the P.O.'s mission to deliver to everyone everywhere even if it doesn't make economic sense, not everyone has a computer or broadband access. I will have three sources of income for my retirement. A very small monthly pension, Social Security if it is still around and the Thrift Savings Plan or TSP which is basically a 401K. I put 15% of my salary into the TSP and have taken a significant beating over the last few years with the fluctuations in the stock market. I have a B.A. in History and was certified for Secondary Social Studies by the State of NY but the P.O. called before I could start a serious search for a teaching job so here I am. I have about 600 deliveries on what we call a park and loop route. I drive my vehicle to an intersection and get out and walk a loop, I then get more mail from the truck and do another loop, drive to the next intersection and do it again. I have a city route where each of my houses have about 5 steps. That would be 5 steps up and 5 steps down multiplied by 600 which is equal to 6000 steps a day over a 6 mile route carrying up to 40 pounds of mail in whatever weather the day happens to bring. I and the other carriers I know take great pride in our work and our work ethic and it really saddens me to see all the negative comments being posted here. I believe in an honest days work for an honest days pay and feel I work very hard for my compensation. At the end of most days my feet, knees and back let me know that they are not very pleased with my actions over the course of my 8 hours at work but I realize that these aches are a part of the job and I am being compensated for them. As for the loss of billions of dollars it basically comes down to a pension surplus of between 50 and 75 Billion that the USPS overpaid and would like back that could then be used to take care of the pre-funding of future retiree health costs. This pre-funding is where the current problem has come from. The Post Office would be in the black without it. I apologize if I have bounced from topic to topic but there was a lot of misinformation posted so far. Hope this helps set the record straight although from most of the comments I doubt it.
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