Wednesday, September 8, 2010

A Decade of Postal Mismanagement Is Costing Publishers and Catalogs

Postal officials set out recently to justify big rate increases for catalogs and publications, but all they proved was that they have been mismanaging the handling of flat mail for more than a decade.

Arguing that Periodicals (magazines and newspapers) and Standard flats (mostly catalogs) are money-losing products, the U.S. Postal Service’s exigent rate request includes above-average hikes for Standard flats and Periodicals – 9% for some magazines.

But if those products are indeed losing money, an industry coalition responded recently, it’s only because of “the extraordinary inefficiency and lack of economy of the Postal Service’s handling flat-shaped mail” and its "failure to manage its workforce effectively and reduce its size sufficiently.”

The “Users of Flat-Shaped Mail” – a coalition of major publishing, catalog, and direct-marketing organizations – also noted that “in the last several years, even the Postal Service has conceded the presence of excess labor.” It pointed out that a postal official admitted to the Postal Regulatory Commission that 30% of flat mail was “processed in a non-optimal fashion by manual sort” -- even though there was apparently more than enough equipment to handle it all in a more efficient, automated manner.

Citing the Postal Service’s own numbers, the coalition chided postal officials for allowing the reported cost of handling Periodicals to increase at more than double the rate of inflation from 1996 to 2009.

“Holding increases in flats cost to inflation should have been easy,” it wrote, because:
  • During those 13 years, USPS transitioned to AFSM 100 machines, which can sort four times as many pieces per hour than the old FSM 881 machines.
  • “The percentage of Periodicals pieces sorted to the Carrier Route level [the least costly for USPS to handle] increased from 44.1% percent in FY 1996 to 57.9% in FY 2009.”
  • The proportion of Outside-County Periodicals that mailers dropshipped [resulting in lower transportation and handling costs for USPS] rose from 30% in 1996 to 65% in 2009.
  • “The number of sacks [which are expensive to handle] used to mail Outside County Periodicals dropped by 65.9% from FY 2004 to FY 2009.”
Periodicals postage rates have risen far faster than the rate of inflation in the past 13 years, the coalition noted, but those rate increases couldn’t keep up with the Postal Service’s ballooning costs. The story is similar for Standard flats.

“In short, handling flat-shaped Periodicals and Standard Mail has become the make-work of last resort for the Postal Service’s large and growing reserve army of underused workers,” the coalition wrote.“This busywork, not the needs of flat-shaped mail, is the reason that the attributable costs of flat-shaped mail reported by the Postal Service have risen so sharply.”

If the PRC grants the Postal Service’s request, it would remove USPS' incentive to bring its flats-handling costs into line, the coalition added.

“Why cut costs when you can recover unnecessary costs through rate increases?”

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6 comments:

johnd said...

I have posted this before!

Since Potter has been Post Master General the post office has been going down hill! They cut service and want to cut delivery. They get rid of the little guys and hire at the top. They have forty executives and five hundred officers. That is one executive for every 12.5 officer and ten officers for every state. Then you go down into other layers of management to get down to the postmasters and supervisors. I would not be surprised to find out the postal service has more managers then UPS and FEDX combined!

The service is down. How many times do you see people complaining about standing in lines for thirty minutes or more! They cut the staffing at the windows. Remember when they had machines in the offices that sold stamps. They close offices so you have to go miles to the next office. They cut hours at lunch time when people need to go to the post office and they close early when people are getting off work.

They say 78% of expenses are pay roll! How much of that is management? Why doesn't someone look at how much it cost to pay management? Potter has a lot of people that make more then $100,000 that they do not need.


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Guy said...

It is amazing the number of flats that are not delivered because of the rules that applies for a business. If we have catalogs that have the street address and they have a PO Box, all the sales catalogs are disposed of.

Anonymous said...

Standard Flats actually got a below average price increase.

Everyone is entitled to his own opinion as to what the increase should be, but everyone is not entitled to his own facts.

Anonymous said...

The reasons for high manual sorting is not "make work" but for processing all the pieces damaged by automated handling. Pieces damaged by automatic handling over and over to try to get as many pieces as possible in the end have to processed by hand as management junked the paid for machines that could efficiently handle these items. Add in pieces with inserts and flimsy flats The new FSS eliminates the clerk who removed all of the non machinable pieces that keep the machine running, probably to be replaced by a mechanic (or 2)

Robert Johannes said...

Folks, we can point fingers, quote facts, blame management, blame past decisions all we want to.

The end result will be we still have a bloated, unresponsive, sullen USPS who, like the US Government, thinks there is an unlimited revenue stream of price increases.

Buck stops here, boys and girls.

In poker, we call this an inflection point. A decision point on a course of action that will determine your future.

The post office must have a top to bottom house cleaning and realignment of costs to survive. It needs out of the box thinking that challenges its roots to the core.

Most of the process changes of the last 10 years have been huge failures to bring about efficiency. And it is living proof again that reliance on technology alone will not save you.

Mr. Potter should step down as an failed manager of the USPS. Union membership and it's leaders need to have a very sobering meeting that the ride is over. And new management and new union leadership should come together to save the beast.

Or it will go away. Or be privatized. Just as it has in other countries.

The culture of the USPS has for years been akin to "The Soup Nazi" of Seinfeld fame. I complete remake of the rules of the road for mail, postal employees and how it values it's customers is in order.

Are there technological changes that can be made? Sure. Weaning the USPS off gas is a good step for the long term. A recapitalization of the USPS to alternative energy could lead the way for other fleets to do the same, as they have the ideal distribution system in place. A private enterprise joint venture that eliminated all but "the last mile" using digital print technology could be a boon for marketers, giving them a tool for overnight one to one marketing to consumer via post box.

The post office is in need of a new vision and a new commitment, and until that is done, the chisel is out for verbiage on the gravestone.

Noah Knoble said...

Thank you for the information Mr. Dead Tree! I have been closely watching your coverage of the proposed price hikes by the USPS and referring others to tune into your blogs as well. It is amazing that the answer to all their problems is to pass the problems on to us. I hope the Affordable Mail Alliance continue to protest and there is some type of reform at the executive level in the USPS.