Mail It In: The Post Office is Done

Tuesday, March 16, 2010


By Dunstan Prial
FOXBusiness

The U.S. Post Office isn’t a publicly traded company. But if it was, the short sellers would be having a field day.
There are simply too many factors blocking a revival of one of the oldest and most venerated of government agencies, the only government agency with its own poem: “Neither rain, nor sleet, nor snow, nor gloom of night will keep them from their appointed rounds…"
And that’s a shame, according to one business consultant who makes his living helping firms cut costs.
“It’s just a wasted opportunity,” said Jon Winsett, chief executive and founder of NPI Financial, a cost reduction consulting firm with numerous Fortune 500 firms as clients, including Boeing Instead of falling further into decline, the USPS should seize this chance to increase efficiency and re-energize its brand, Winsett said.
But he’s not optimistic that’s going to happen.
The primary force driving business away from the postal service has been the Internet, where messages can reach their intended destinations in milliseconds at a fraction of the cost of mailing a letter.
And that doesn’t even take into account texting. An entire generation of teenagers has grown up with thumbs calloused from zipping messages back and forth. It’s highly unlikely any of them are going to put down their cell phones and PDAs any times soon in favor of pen and pad.
Even those Americans who may be inclined toward writing the occasional letter have apparently found it easier to pay bills online, often automatically, which eliminates any chance of forgetting to mail that cable or credit card bill.
It’s not that the postal service hasn’t tried to avert its decline. A few years back, acknowledging the fact that stamps tasted terrible, the postal service introduced peel off stamps.
It hasn’t worked.
In an effort to justify proposed reductions in service and layoffs, the USPS earlier this month released a slew of statistics that show just how far the agency has slipped in recent years.
Mail volume has fallen 17% from an all-time high of 213 billion pieces in 2006 to 177 billion in 2009, and the decline is expected to continue and, in fact, accelerate. The agency has warned that it will likely run up a $7 billion deficit in 2010, and if trends continue (which they almost certainly will) that deficit will accrue to more than $238 billion by 2020.
Reforms proposed by Postmaster General John E. Potter include adding new products, improving efficiency, slashing personnel and ending Saturday service. But those reforms would only slash the projected deficit by $115 billion, less than half of total deficit projected for the next decade.
McKinsey & Co., one of three firms the postal service commissioned to review its future, issued a report last week calling for the agency to consider cutting its delivery days by half.
Potter rejected that advice out of hand, however, saying cutting delivery to as few as three days a week would irreversibly damage the brand.
“I think that would negatively impact our business,” Potter told Bloomberg Radio last week. “If we change delivery from six to three, the ubiquity of our product and the value would be diminished.”
Winsett said genuine and effective reform is unlikely at the postal service because government culture is markedly different than business culture. And that’s unfortunate for the taxpayers who foot the bill for the USPS.
According to Winsett, the most progressive corporations operate in a culture that is conducive to change. A bit further down the ladder are corporations that are less progressive and less likely to change. Then there’s the government.
“Government is even further down the scale of progressiveness. It’s all politics and bureaucracy,” he said.
Winsett said he believes the USPS is likely just scratching the surface in terms of potential savings.
One place to start would be to review the agency’s contracts with its vendors and determine areas where the postal service is overspending. “Government agencies are under a false sense of security that they get the best pricing from their vendors,” he said.
They probably don’t. According to Winsett, government agencies tend to rely on the General Services Administration to procure vendors and establish contract terms. He believes the GSA doesn’t always find the best terms.
“The gold standard is GSA pricing,” he said, but that’s a mistake because clever vendors find ways to milk as much as they can from their government contracts.
With that in mind, Winsett believes the postal service is likely wasting at least tens of millions of dollars due to inefficiencies in its IT and telecom operations. Addressing those issues first would likely eliminate the need for cutting services and laying off employees, he said.
“We would go into USPS and benchmark their pricing and highlight areas where they’re overspending,” Winsett said.
But the CEO isn’t optimistic that effective reform is in the USPS’s future. “I think they’ll follow old school patterns. They’ll cut jobs and services, and the agency will fall into further decline,” he predicted.

http://www.foxbusiness.com/story/markets/grim-prediction-future-postal-service/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxbusiness%2Feconomy+%28Text+-+Markets+-+Economy%29&utm_content=Netvibes

This article relates to our talk in class about government agencies. One of the oldest government agencies that provides a needed service may be in decline. The demand for mail service has decreased, due to the internet and paperless bill paying. This article states that the postal service is in trouble and running in a deficit. There are pros and cons to the government controlling services such as the mail, but reform is often slow. The outlook for the postal service is a bit dim.