Wednesday, July 20, 2011

Postal Service Can No Longer Afford Money-Saving Tactics, Study Says

Two of the U.S. Postal Service’s most successful methods for cutting costs – early-retirement incentives and automation – are no longer viable strategies because of USPS’s cash crunch, according to a report released today.

“Overall, offering more early retirements for eligible employees would create additional cost savings,” says the report from the USPS Office of Inspector General on USPS's cost structure. It noted a Postal Service statement indicating that savings from buyouts of more than 20,000 clerks and mail handlers two years ago have already doubled the $15,000-per-retiree payouts.

“The problem, however, is how to incentivize further buyouts that the Postal Service cannot afford to offer in its current financial state.”

Largely because of investments in automation and other efficiency improvements, the Postal Service’s labor productivity has improved by 10% in the past decade, according to the report. That has come despite the cards being stacked against the Postal Service -- in the form of decreasing volume, increasing delivery points, and benefits costs that are skyrocketing largely because of Congressional mandates.

But with spending constraints implemented two years ago, USPS’s capital investment has dropped to less than half of its depreciation costs and is one-third to one-sixth the level that is typical for private competitor UPS.

“A continuing freeze in capital investment, while saving the Postal Service in the short term, may paradoxically lead to higher costs in the future, as it defers projects that could potentially improve productivity, such as information technology (IT) upgrades, network rightsizing, and the purchase of energy efficient vehicles. Rightsizing the network to meet decreasing demand is vital to the future viability of the Postal Service.”

Much of the blame for the Postal Service’s financial problems, the report says, comes from its unusual prefunding of retiree health benefits. Congress established those multibillion-dollar annual payments “to secure the Postal Service’s long-term financial viability” but they “are ironically undermining efforts to keep the Postal Service solvent in the near term."

The report concludes: "The Postal Service is at a critical juncture in its history. Only through a combination of continued cost reductions including a rightsizing of the network to meet declining demand, legislative action to deal with cost burdens, and investing in select projects that continue its long history of productivity increases can the Postal Service return to economic viability."

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Just Saying said...

"But with spending constraints implemented two years ago, USPS’s capital investment has dropped to less than half of its depreciation costs and is one-third to one-sixth the level that is typical for private competitor UPS"

Here is the answer to the question of why USPS's labor costs are at 80%, while the competition's are at only at 70%. It's not about inflated union labor costs, it's about not spending enough on capital investment.

Anonymous said...

What competitor are you speaking of? I know of no other business that has to stop at every house in rural America daily in case someone mailed something. I can only imagine what the "competitors" labor cost would be if they did that.

Anonymous said...

If the USPS really wants to reduce the aging workforce- ALL they have to do is offer 5 years of credible service and waive the 2% penalty for each year under under 55 years of age and there would be a mass exit. This would not cost the USPS or the taxpayer anything- as the USPS has prefunded the retirements 70+ years in advance. That money is in the bank- in return they could hire lower cost employees and save alot of money.

The Wizard said...

The USPS only has to go to every house that gets a piece of mail on a particular day, just as any competitor. It is time we faced it the USPS should have offered more back then, too late now.

Anonymous said...

Wizard, how often do you get a piece of mail from the Post Office? How many from the other delivery services?

I might not get mail about once a month. UPS or Fed EX, might stop at my house twice a year.

Post Office stops at nearly every house every day. Wake up.

Anonymous said...

The reality is that the postal network and schedule is geared towards a reality that no longer exists. Crucial communications and bills come mostly electronically and most of the payments are made that way, too. Forget about switching to five day a week delivery - go the three day a week delivery. Businesses can get mail M-W-F, and consumers T-T-S.

This is not unprecedented - mail actually used to be delivered twice a day until 1950.

fedupfed said...

Retirement incentive will lead to cost savings and employee reductions. Consolidations of plants are a cluster such as Daytona Beach P&DF Florida into Mid FL P&DC on 6/24/11 where no incentive was offerred. Management & craft lost jobs but all got indefinite details. Some management are in on the job 'training' details that will cost estimated $20,000 + each to learn new areas. Isn't that the amount of incentive offered at other times? But with no reduction of work force here. Almost all craft employees are receiving complete out of schedule pay and mileage for details outside of closed Daytona P&DF. Processing same mail in Daytona P&DF was regular pay and none of the above extras. There was no reduction in work hours with consolidation nor was an incentive offerred to leave usps.

Anonymous said...

Fire all the postal slugs, no retirement for them! At $40+ an hour, they should have saved up enough!!!!!!!

Anonymous said...

there are no craft employees that I know of making $40.00 per hour or anywhere near that. And not ALL postal employees are slugs any more than any other employee in any other work force. A lot of us have and will continue to have very good work ethics.

Anonymous said...

Yes, there are slugs in the Post Office. I work in an area in the Post Office were three people are needed, but what is the working situation. One of my co[workers fell out of her chai June 2010 and has not returned to work yet, but job slot can not be refilled because this person that is home as a lock on the job. Now we are dwon from three people working to two people workinh. OH! let me tell you that my other worker is a person that walks with a can so she can not do 95% of the work need in our work area. So I am doing the work of three people while the two slugs that are suppose to work with me get full pay and do little or no work.

Overworked Postal Worker

Anonymous said...

I agree with ananymous, just offer me the remaining 4yrs to reach 30yrs of service. Since I have reached my minimum retirement age, I am ready to leave! Keep your money and start giving me my FULL pension without the 2% deduction. See Ya!!!