Thursday, May 28, 2009

Why USPS Must Consolidate Its Mail-Processing Network

Some have questioned my assertion yesterday that consolidation of the U.S. Postal Service’s mail-handling network is much needed.

But I’m backed up by no less an authority than the Government Accountability Office, which last week reiterated its long-standing advocacy of such downsizing. Its latest report on the subject is titled “Network Rightsizing Needed to Help Keep USPS Financially Viable”. Some highlights:

  • “It is important for USPS to make significant progress in consolidating its networks and reducing excess capacity or it may face more drastic cost-cutting options and have less time to achieve necessary cost reductions.” With 160,000 employees eligible for retirement this year and another 130,000 in the next four years, the Postal Service can accomplish much of its downsizing via attrition rather than layoffs, the report indicates.
  • “We reported in 2005 that USPS had substantial excess capacity in its mail processing network. Long-term trends have further increased excess capacity in the processing network such as continuing automation, declining volume of single-piece First-Class Mail (e.g., bill payments, personal correspondence), and destination entry of Standard Mail . . . that reduces the need for USPS mail processing and long-distance transportation of mail."
  • “New automation equipment enables USPS to sort mail faster and more efficiently, a development that, with declining mail volumes, has resulted in more equipment downtime. In addition, new equipment, referred to as the Flats Sequencing System, will sort flat-sized mail (e.g., large envelopes, catalogs, and magazines) into delivery order, which is expected to reduce the need for space-intensive manual sorting at delivery units. Because delivery units are often co-located with post offices, branches, and stations, eliminating the excess space could involve relocating or consolidating retail activities.”
  • “However, USPS has closed only 1 of its approximately 400 major mail processing facilities. USPS has often faced resistance from employees, affected communities, and Members of Congress when it has attempted to consolidate its operations and networks. In enacting PAEA [postal reform], Congress recognized USPS had more facilities than it needs and strongly encouraged streamlining its networks, noting this can pave the way for eliminating excess costs. Continued congressional support for necessary closures would be helpful to facilitate progress in this area."


Dr. Monk said...

The question to address is not why the USPS must consolidate its mail processing network, but instead the question to address is how it is done.

Over the past twenty years, the USPS has generally planned to consolidate mail processing operations without genuine input from the management associations and union organizations. In recent years, it has done so with the intent of privatizing core mail processing operations, both of which the Government Accountability Office (GAO) has not endorsed.

In fact, the GAO has expressed its misgivings on how in the past the USPS intended to consolidate it mail processing network. It has also specified in its recent report that the USPS needs to fully take in account the input from the national management and union organizations in any of its mail processing consolidations planning.

Anonymous said...

I agree the USPS must downsize. However, if it is to attain lasting economic viability they must eliminate "workshare" discounts. The major mailers' are given big discounts for pre-sorting by "carrier route" or in some cases in "DPS" order. Why, when we then must add it to our raw mail so it will all be in delivery sequence. They get a discount and we perform the same function with the mail as if it came from "Joe Public". Encouraging volumn by discounts only props up a money losing operation by keeping it larger than it needs to be.

Unknown said...

Mr. Postman, Yhe post office oved our post office two years ago. Down the road is another post office only 3 miles away but on the same road. It was a poor neighborhood into a rich neighborhood but 3 miles apart. The other was 6 miles apart which helped us poor people but again who cares for the poor? This was a waste of money and us poor have no was to get to the new one.

Anonymous said...

I agree, the USPS must begin to find ways to save money, consolidations are one way of doing that but not always the best way.

I believe that the USPS should start by looking at all the levels of management it has. Most of these levels just pull the strings of the lower level. We have area who tells the district who instructs the plants. Why can't area just skip the district, what a huge savings that would be. Then in a year the USPS lost $2.8 billion PFP bonuses were still given from the PM down.

Whether, the USPS wants to admit it or not most consolidations do reduce service to the public. There may be some instances it does not but in most cases it does.

Workshare is another money loser as already stated, and it is true mailers get discounts to pre-sort mail and then the workers are directed to unband them and throw them in the mail stream with everything else.

If you were an employee and you saw all this money being thrown out the window would you want to see your facility closed to save a little cash?

Anonymous said...

The USPS looses billions of dollars every year by giving exhorbitant discounts that are in excess of costs avoided.

For example; It costs the USPS less than one penny to barcaode and sort a letter. Why then does the USPS give a ten cent discount to a mailer who applies the barcode themselves?

The USPS entered a contract with FedEx to transport mail. The GAO has found that this deal costs $150 million more per year than if the USPS used comercial airlines.

The NetFlix company pays a machinable mail discount rate for its DVD mailers. The USPS enigineering dept. found that these mailers are not machinable mailpieces. They stated that NetFlix should not get a machinable discount. In fact, they should pay a non-machinable surcharge. The Inspector General found that 80% of NetFlix "machinable" DVDs are sorted manually. These unrecovered surcharges amount to $64 million per year.

The USPS can survive, and thrive, if the people at the top stop making poor decisions to contract out postal work when it can be done cheaper in-house. We need to close pre-sort houses and bring that volume back to the plants. This will solve the under-utilization problem.

The USPS says 130,000 will be eligible for retirement. There are 80,000 eligible this year. Hopw many have actually retired? about 15,000.

Anonymous said...

I am so tired of hearing how the USPS "loses" money. How can you lose money you never had? The USPS picks a number it would like to make, and then when they don't they lost it. Remarkably, my SDO once told me never to spend my check before I got it, and don't live beyond my means. (LOL smart for an SDO!) Yet the USPS does just that. How familiar are the "BONUSES" that the upper echelions of USPS management get, the layers and layers of managers,
many really not needed at all, which is what makes the USPS like other private companies, too many chiefs and not enough indians. As I work at a P&DC, I am seeing first hand how the mail volume has changed. But if National and International companies like GM and Dodge are going to come back stronger than ever, it's too early to just go slashing facilities without a great deal of study. This is for the long run after all.