The U.S. Postal Service is apparently backing away from an attempt to use one-time payments to mailers as justification for permanent price increases.
As Dead Tree Edition reported last month, USPS proposed to offer large mailers a one-time “Technology Credit” and then to have those credits considered a price decrease for purposes of calculating its inflation-based rate cap. That would result in permanent price increases that would eventually cost mailers far more than the maximum $5,000 credit per mailer.
USPS clarified – or changed – its position this week in response to questions from PRC Chairman Ruth Goldway:
“Revenue forgone from the Technology Credit Promotion for each class of mail will be subtracted from revenue in calculating price cap authority in the upcoming annual price change, and then the same amount will be added back to revenue in calculating price cap authority in the subsequent annual price change,” USPS wrote. In other words, any price increases resulting from the Technology Credits would be temporary.
I’m told that postal officials have claimed during a meeting with mailers that the Dead Tree Edition article misinterpreted the price-cap issue. But several private-sector postal experts have told me they agreed with my interpretation of the Postal Service’s original request, which said nothing about reversing the price increase. And Goldway apparently agreed as well.
“The Postal Service appears to propose the creation of permanent price cap authority,” Goldway wrote to USPS last week. “However, the Technology Credit Promotion is proposed as a temporary, one-time offer. How does the Postal Service intend to reflect the expiration of the Technology Credit Promotion in subsequent . . . rate adjustments?”
The PRC’s Public Representative staff had a similar interpretation, warning the commission about “the danger of creating permanent price cap authority from temporary price reductions” because that could lead to “price cap avoidance tactics.”
USPS estimates it will pay out $61.6 million (down from the original $66 million estimate) in Technology Credits to major mailers that use the Full-Service barcodes during the 12 months that begin June 1. Both Goldway and the Public Representative noted that USPS’s original filing did not show how the payouts were calculated.
In fact, the Public Representative indicated that USPS tried to game the system by presenting “bare bones initial filings without the data necessary to evaluate its request,” making it difficult for anyone to challenge the proposal before the PRC must decide the case.
The Postal Service has already admitted to significant math errors in that initial filing. It now estimates the potential price increase for Standard mail will be 0.231% instead of 0.158% and for Periodicals will be 0.165% instead of 0.244%. It also tweaked the estimated increases for First-Class Mail (0.084%) and Package Services (0.015%).
Because the PRC is requesting so much additional information from USPS on the proposal, it has extended the deadline for commenting until May 17.
Showing posts with label Ruth Goldway. Show all posts
Showing posts with label Ruth Goldway. Show all posts
Wednesday, May 8, 2013
Monday, October 1, 2012
Five-Day Delivery and Reduced USPS Service Standards Could Face Legal Barrier
The U.S. Postal Service’s plans to eliminate Saturday delivery and to lower its delivery standards could face a significant legal obstacle, according to the Postal Regulatory Commission.
In its advisory opinion last week on USPS’s plan to close nearly half of its mail-processing centers, the commission seemed to side with witnesses who said reducing service standards could run afoul of the Congressionally-imposed price cap on postal rates.
“Two expert witnesses . . . presented persuasive testimony that a relationship exists between price and quality, and that lowering quality is equivalent to raising the price,” wrote Chairman Ruth Goldway in an addendum to the PRC’s document.
Under USPS’s Network Rationalization plan, “Eighty percent of all First-Class Mail . . . will be delayed by at least one day,” Goldway wrote. “Much of 2-day mail will become 3-day mail. Rural and remote communities that already receive slower delivery may be impacted even further when weekend and holiday delays are factored in.”
In its advisory opinion last week on USPS’s plan to close nearly half of its mail-processing centers, the commission seemed to side with witnesses who said reducing service standards could run afoul of the Congressionally-imposed price cap on postal rates.
“Two expert witnesses . . . presented persuasive testimony that a relationship exists between price and quality, and that lowering quality is equivalent to raising the price,” wrote Chairman Ruth Goldway in an addendum to the PRC’s document.
Under USPS’s Network Rationalization plan, “Eighty percent of all First-Class Mail . . . will be delayed by at least one day,” Goldway wrote. “Much of 2-day mail will become 3-day mail. Rural and remote communities that already receive slower delivery may be impacted even further when weekend and holiday delays are factored in.”
Tuesday, November 15, 2011
7 Reasons the Jury Is Still Out on Flats Sequencing
It's still not clear whether the U.S. Postal Service's $1.4 billion investment in the Flats Sequencing System will pay off, according to the chairman of the Postal Regulatory Commission says.
"The full batch of 100 FSS machines has been deployed, but it still remains to be seen whether FSS will produce economic benefits," Ruth Goldway told Multichannel Merchant recently in a wide-ranging interview about USPS's future. She indicated that postal officials had provided extensive information to the PRC about "its experiences and challenges in the deployment and operation of the FSS equipment."
"These extremely complex machines have experienced many problems. Mailers have expressed frustration with mail preparation changes necessary to accommodate FSS requirements, changes in Critical Entry Times, and service degradation," she told the publication.
Mailers had hoped FSS would reduce the Postal Service's costs of handling catalogs, magazines and other flat mail. But, more than ever, USPS claims it is losing money on the two main sources of mail sorted by FSS -- Periodicals and Standard flats.
The football-field-sized machines have helped USPS reduce costs by reducing the manual handling of mail by letter carriers, clerks, and other postal workers. But for at least seven reasons, it may be many months or even years before postal officials will know whether the investment will pay off:
Related articles:
"The full batch of 100 FSS machines has been deployed, but it still remains to be seen whether FSS will produce economic benefits," Ruth Goldway told Multichannel Merchant recently in a wide-ranging interview about USPS's future. She indicated that postal officials had provided extensive information to the PRC about "its experiences and challenges in the deployment and operation of the FSS equipment."
"These extremely complex machines have experienced many problems. Mailers have expressed frustration with mail preparation changes necessary to accommodate FSS requirements, changes in Critical Entry Times, and service degradation," she told the publication.
Mailers had hoped FSS would reduce the Postal Service's costs of handling catalogs, magazines and other flat mail. But, more than ever, USPS claims it is losing money on the two main sources of mail sorted by FSS -- Periodicals and Standard flats.
The football-field-sized machines have helped USPS reduce costs by reducing the manual handling of mail by letter carriers, clerks, and other postal workers. But for at least seven reasons, it may be many months or even years before postal officials will know whether the investment will pay off:
- Declining Volume: The FSS system was designed for a relatively fixed volume of mail, but the machines are already serving larger-than-optimal territories because of decreases in the number of catalogs and publications being mailed. Further significant volume declines would hurt efficiency even more.
- Start-Up Woes: Reports from the field indicate recurring problems with shredded mail and machine breakdowns, but some of these problems may dissipate after USPS gets more experience with the complex machines.
- Wear and Tear: FSS is supposed to eliminate manual casing of flat mail, thereby enabling letter carriers to serve more addresses. But what will increases in "street time" do to maintenance costs of USPS's aging delivery fleet -- not to mention the healthcare and workers compensation costs for the carriers?
- Peaks and Valleys: One challenge is having machines that can sort all of the mail for their designated ZIP codes during peak periods but can also operate efficiently during slow months. Many of the machines have not been through a Christmas mailing season yet.
- Packaging: The rules governing how customers bundle and palletize flat mail were not written with FSS in mind. Implementing a different set of rules for FSS facilities could enable those operations to run more efficiently, but testing of alternative bundle and pallet standards has been limited.
- Consolidation: The Postal Service's ambitious plan to close more than half of its 400-plus mail-processing facilities would apparently result in a higher percentage of flat mail being served by FSS, as explained in USPS Consolidation Plan Means Moving or Closing Some FSS Machines. But it's not clear whether the plan will run into Congressional delays or other roadblocks.
- Shifting Equipment: When an FSS machine completes its shakedown, some other mail-processing equipment is freed up to be used in non-FSS facilities. But with the consolidation plans on the books, it may take years for the Postal Service to see the full benefit of moving such equipment around.
Related articles:
Tuesday, May 10, 2011
Postal Watchdogs Trying to Unleash USPS Innovation
The watchdogs that keep an eye on the U.S. Postal Service have taken on an unusual role – dreaming up new products and other innovations for the Postal Service.
The trend is highlighted by the USPS Office of Inspector General’s release yesterday of a request for proposals to determine how the Postal Service can innovate. The selected consulting company would “benchmark the Postal Service against ten successful companies” to identify best practices and processes in “innovation management” that can be adopted by USPS.
Just last month, the OIG suggested the Postal Service consider such new lines of business as electronic mailboxes, financial services for the “unbanked,” and facilitation of online and international commerce. (See The United States Postal-Online Ordering-eMailbox-Bank Service?)
But it’s not the only Postal Service watchdog that is suggesting as well as barking. The Forever Stamp was championed by Ruth Goldway, chairman of the Postal Regulatory Commission.
And Ms. Goldway's chief counsel, Michael Ravnitzky, has shown that the Postal Service could serve a variety of customers by mounting mobile sensors on delivery trucks. (See How About A Drug-Sniffing, Meter-Reading, Photo-Taking, Bug-Spraying Postal Service?) In another research project conducted outside of his work for the PRC, he concluded that the Postal Service could pay for new electric delivery vehicles partly by entering the "vehicle-to-grid" electricity market.
“Innovation is the development of new products, services and processes,” says yesterday’s RFP. But why then are so many of the proposals for new postal products and services coming from outside the Postal Service?
Some critics claim that the Postal Service is too bureaucratic to innovate, but that’s not completely fair. “If it fits, it ships” has been not only a clever slogan; it represents new thinking about simplifying postage for customers. And the Flats Sequencing System would be a significant innovation if it turns out to be successful. (The jury is still out on that one.)
Hindering innovation has probably been the “bunker mentality” adopted by postal management the past few years as declining mail volume and Congressional budget games lead USPS from one financial crisis to another.
Out of necessity, its energies have been focused on downsizing and cost cutting. Has any major government agency ever reduced costs as rapidly as the Postal Service has in the past few years?
The Postal Service's size and complexity are also barriers to innovation. Even in the management ranks, USPS is made up mostly of specialists who lack the broad understanding of processes and customers necessary to implement meaningful change (or, in many cases, to write proposed regulations that would work in the real world). And insiders talk about “brain drain” – the loss to early retirement of some of the most knowledgeable people.
Then there’s the Bernstock Affair. Robert F. Bernstock was the head of mailing and shipping services who was brought in from the private sector to revolutionize the Postal Service’s marketing efforts.
But mostly what he became known for during his brief and checkered stint with USPS was awarding no-bid contracts to his buddies and using USPS staff to conduct personal business. After the firestorm of criticism that accompanied Bernstock’s departure, it was only natural for postal executives to focus on efficiency while leaving to others the generation of wild ideas and the floating of trial balloons.
Related articles:
The trend is highlighted by the USPS Office of Inspector General’s release yesterday of a request for proposals to determine how the Postal Service can innovate. The selected consulting company would “benchmark the Postal Service against ten successful companies” to identify best practices and processes in “innovation management” that can be adopted by USPS.
Just last month, the OIG suggested the Postal Service consider such new lines of business as electronic mailboxes, financial services for the “unbanked,” and facilitation of online and international commerce. (See The United States Postal-Online Ordering-eMailbox-Bank Service?)
But it’s not the only Postal Service watchdog that is suggesting as well as barking. The Forever Stamp was championed by Ruth Goldway, chairman of the Postal Regulatory Commission.
And Ms. Goldway's chief counsel, Michael Ravnitzky, has shown that the Postal Service could serve a variety of customers by mounting mobile sensors on delivery trucks. (See How About A Drug-Sniffing, Meter-Reading, Photo-Taking, Bug-Spraying Postal Service?) In another research project conducted outside of his work for the PRC, he concluded that the Postal Service could pay for new electric delivery vehicles partly by entering the "vehicle-to-grid" electricity market.
“Innovation is the development of new products, services and processes,” says yesterday’s RFP. But why then are so many of the proposals for new postal products and services coming from outside the Postal Service?
Some critics claim that the Postal Service is too bureaucratic to innovate, but that’s not completely fair. “If it fits, it ships” has been not only a clever slogan; it represents new thinking about simplifying postage for customers. And the Flats Sequencing System would be a significant innovation if it turns out to be successful. (The jury is still out on that one.)
Hindering innovation has probably been the “bunker mentality” adopted by postal management the past few years as declining mail volume and Congressional budget games lead USPS from one financial crisis to another.
Out of necessity, its energies have been focused on downsizing and cost cutting. Has any major government agency ever reduced costs as rapidly as the Postal Service has in the past few years?
The Postal Service's size and complexity are also barriers to innovation. Even in the management ranks, USPS is made up mostly of specialists who lack the broad understanding of processes and customers necessary to implement meaningful change (or, in many cases, to write proposed regulations that would work in the real world). And insiders talk about “brain drain” – the loss to early retirement of some of the most knowledgeable people.
Then there’s the Bernstock Affair. Robert F. Bernstock was the head of mailing and shipping services who was brought in from the private sector to revolutionize the Postal Service’s marketing efforts.
But mostly what he became known for during his brief and checkered stint with USPS was awarding no-bid contracts to his buddies and using USPS staff to conduct personal business. After the firestorm of criticism that accompanied Bernstock’s departure, it was only natural for postal executives to focus on efficiency while leaving to others the generation of wild ideas and the floating of trial balloons.
Related articles:
- How USPS Could Bypass Congress on Saturday Delivery: The USPS Office of Inspector General suggested the Postal Service could get out from under Congressional meddling by going "off budget".
- Pensions: Another Government Rip-off of the Postal Service: The OIG also brought to light how USPS had paid more than its share into a federal pension fund.
- A New Slogan for the Postal Service: "Just Say No": The Postmaster General expressed skepticism last week about any proposed lines of business for the Postal Service that do not involve its core strength of delivering.
Thursday, March 18, 2010
Increased Efficiency Led to Higher Periodicals and Catalog Costs, Goldway Says
Is the head of the Postal Regulatory Commission really falling for the Postal Service’s nonsensical accounting methods for periodicals and catalogs?
In her speech last week to a Federal Trade Commission workshop on journalism in the Internet age, Ruth Goldway tried to explain why Standard flats (mostly catalogs) and Periodicals mail (magazines and newspapers) had become increasingly unprofitable for the Postal Service in the past decade despite rate hikes and increased mailer work sharing.
“Part of the reason is that the Postal Service actually created a system of great savings and efficiency for letter mail, and so letter mail became automated,” she said, referring to delivery-point sequencing of letters. “But magazines -- Periodicals -- were not automated, so a greater share of the labor costs for the Postal Service … was then attributable to magazines and newspapers because they still had to be handled manually.”
That’s like an auto company saying it has to raise the price of its trucks because it figured how to reduce the cost of making cars. Automating the sortation of letters had no impact on the true cost of sorting flat mail.
In defense of Ms. Goldway, she did refer several times to “attributable costs,” suggesting that she realized the issue was that the USPS’s broken cost-accounting system was assigning greater costs to flats, not that the actual cost of handling flats had increased so rapidly. But she also mentioned that publishers get a $641 million annual subsidy because “it appears that cost coverage for Periodicals is now at 76%.”
Ms. Goldway works in a world where "cost" refers to a number determined by the Postal Service when it follows a consistent (and flawed) methodology that is in accordance with the law. She seems smart enough to see past that, but let's hope that hours of perusing mind-numbing Postal Service reports doesn't make her forget that, in the real world, the cost of providing a service is calculated by determining how much money would be saved if that service were not provided.
Without stating it directly, Ms. Goldway’s informal speech confirmed what magazine publishers and other mailers have been saying for years: The automation of letter mail turned many postal employees into “automation refugees” who were then assigned to unnecessary manual handling of flat mail. The Postal Service’s accounting system mis-assigns these costs to Periodicals and Standard flats rather than treating them as overhead.
It’s clear that automation and declining mail volumes have left the Postal Service with too many employees. The USPS’s new transformation plan mostly dodges the issue, saying the service will gradually downsize through attrition. It seems penny wise and pound foolish not to do what private industry would do to shrink its workforce in the face of declining revenue: Offer a decent early-retirement package ($15,000 is chicken feed in this context) to selected employees so that the Postal Service can rightsize now.
Ms. Goldway’s speech had some other interesting comments about periodicals:
In her speech last week to a Federal Trade Commission workshop on journalism in the Internet age, Ruth Goldway tried to explain why Standard flats (mostly catalogs) and Periodicals mail (magazines and newspapers) had become increasingly unprofitable for the Postal Service in the past decade despite rate hikes and increased mailer work sharing.
“Part of the reason is that the Postal Service actually created a system of great savings and efficiency for letter mail, and so letter mail became automated,” she said, referring to delivery-point sequencing of letters. “But magazines -- Periodicals -- were not automated, so a greater share of the labor costs for the Postal Service … was then attributable to magazines and newspapers because they still had to be handled manually.”
That’s like an auto company saying it has to raise the price of its trucks because it figured how to reduce the cost of making cars. Automating the sortation of letters had no impact on the true cost of sorting flat mail.
In defense of Ms. Goldway, she did refer several times to “attributable costs,” suggesting that she realized the issue was that the USPS’s broken cost-accounting system was assigning greater costs to flats, not that the actual cost of handling flats had increased so rapidly. But she also mentioned that publishers get a $641 million annual subsidy because “it appears that cost coverage for Periodicals is now at 76%.”
Ms. Goldway works in a world where "cost" refers to a number determined by the Postal Service when it follows a consistent (and flawed) methodology that is in accordance with the law. She seems smart enough to see past that, but let's hope that hours of perusing mind-numbing Postal Service reports doesn't make her forget that, in the real world, the cost of providing a service is calculated by determining how much money would be saved if that service were not provided.
Without stating it directly, Ms. Goldway’s informal speech confirmed what magazine publishers and other mailers have been saying for years: The automation of letter mail turned many postal employees into “automation refugees” who were then assigned to unnecessary manual handling of flat mail. The Postal Service’s accounting system mis-assigns these costs to Periodicals and Standard flats rather than treating them as overhead.
It’s clear that automation and declining mail volumes have left the Postal Service with too many employees. The USPS’s new transformation plan mostly dodges the issue, saying the service will gradually downsize through attrition. It seems penny wise and pound foolish not to do what private industry would do to shrink its workforce in the face of declining revenue: Offer a decent early-retirement package ($15,000 is chicken feed in this context) to selected employees so that the Postal Service can rightsize now.
Ms. Goldway’s speech had some other interesting comments about periodicals:
- "After the year 2000, there's only one year in which Periodicals appeared to have covered their costs, and that was in 2003."
- "In 2007, there was a big rate increase for Periodicals. And while periodicals were shocked by it and troubled by it, it was, from the Rate Commission's point of view, the only fair thing to do, because, after all, we had single-piece users of the mail, people who are paying bills and using correspondence, who are subsidizing other uses of the mail unwittingly. And under the law, that's our obligation, to try and spread the responsibility for the costs more fairly."
- "The lowest work-sharing groups, those with the smallest circulation, and with the highest editorial content, actually, cost the Postal Service on average about 19 cents apiece. And those periodicals are often the ones that journalists are most concerned about, those are often the periodicals of opinion, and they're the ones who are distributed nationwide, as opposed to a particular region."
- She hopes that the Flats Sequencing System “will actually be able to have some really documented cost savings, so that there will be less of a . . . cost requirement for Periodicals to meet in the future." (Question: If FSS creates more automation refugees, to what class will the costs of those employees be allocated?)
- There’s a “symbiotic relationship” between publishers and the Postal Service, going all the way back to the first Postmaster General, Ben Franklin. "I think if the Congress understands this unique relationship, arguments can be made for finding financial support in one way or another, that may address both of our concerns. I think together we have a case for what is an essential part of American infrastructure, and something that the Congress really does want to maintain. If only for its own personal desire to get reelected every year, they want to make sure that there's a vibrant political dialogue in the country."
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