An agency of the federal government, the United States Postal Service (USPS) is responsible for providing postal service to citizens at a uniform cost regardless of geography. Founded in 1775 in Philadelphia during the Second Continental Congress, the USPS appointed Benjamin Franklin as the first Postmaster General. USPS has not received any taxpayer funds since the early 1980s, with the exception of minor subsidies for costs associated with overseas voters. USPS hit an all-time high in mail volume in 2006. As of 2012, the USPS employs more than 574,000 workers and operates more than 218,000 vehicles, which makes USPS the largest operator of a single vehicle fleet in the world. The USPS fiscal year ends on September 30.
USPS is the only delivery service that reaches every address in the nation, 151 million residences, businesses, and post office boxes. USPS receives no tax dollars for operating expenses and relies on the sale of postage, products, and services to fund its operations. With 32,000 retail locations and the most frequently visited website in the federal government ( usps.com ), USPS has an annual revenue of more than $65 billion and delivers nearly 40 percent of the world’s mail.
USPS is the third-largest civilian employer in the USA, trailing only the federal government and Walmart. USPS delivers around 660 million pieces of mail to 142 million delivery points each day. USPS operates 31,000 post offices and has more than 218,000 vehicles currently in operation. However, USPS recorded a loss of $15.9 billion in its fiscal year 2012 that ended September 2012. Of that amount, the accrual for mandated retiree health benefits payments accounted for a whopping $11.1 billion. USPS has defaulted on these obligations to conserve cash to fund operations, demonstrating the depth and urgency of its current financial predicament.
In August 2013, the USPS launched major changes to its Priority Mail services, with improved features including free insurance, improved USPS Tracking™ and 1-, 2-, or 3-day-specific delivery. These new services are expected to generate more than a half a billion dollars in new revenue over the next year.
Copyright by Fred David Books LLC. (Written by Forest R. David)
After being founded in 1775, the USPS grew steadily, mainly distributing mail by horseback, stagecoach, and steam engine in the early years. Steamboats were used as early as 1813 to carry mail between locations where roads did not exist. With the growing railroad industry, USPS began using the Pennsylvania Line in 1832, and by 1838, rail became the primary means of long distance travel of mail.
The first stamps were issued in 1847, and the 5-cent stamp paid for a letter with a weight of 1 ounce or less and traveling less than 300 miles. The 10-cent postage stamp would mail a letter greater than 300 miles or up to two ounces. Also in 1847, the U.S. Mail Steamship Company acquired the rights to deliver mail from New York City to New Orleans and Havana. In the following years, other steamship companies obtained rights to deliver mail along with several railroads.
In 1896, USPS started rural free delivery and with the inauguration of parcel post in 1913, significantly increased the volume of mail shipped nationwide and also increased the efficiency of mail shipments. The new developments led to mail-order business increasing and allowed customers in rural areas access to many products they otherwise would have had to travel to a city to obtain. In 1918, USPS started air-mail service, which previously was handled by the U.S. Army Air Service. This service started with 4 pilots and expanded to 36 pilots within the first year of operation. Domestic air mail was abandoned in 1975 and international air mail in 1995 because air mail became standard for most all long-distance mail.
A few key USPS dates:
· 1775—Benjamin Franklin appointed first Postmaster General by the Continental Congress
· 1847—U.S. postage stamps issued
· 1860—Pony Express began
· 1963—ZIP code inaugurated
· 1970—Express Mail® began experimentally
· 1971—United States Postal Service® began operations
· 1983—ZIP+4® code began
· 1992—Self-adhesive stamps introduced nationwide
· 1994—USPS launched public Internet site
· 2006—Postal Accountability and Enhancement Act signed
· 2007—“Forever” stamp issued
· 2008—Competitive pricing for expedited mail began
Vision and Mission
USPS has a mission statement posted on its website:
· The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities.
The organization has no vision statement.
USPS uses a divisional-by-geographic organizational structure, as illustrated in Exhibit 1 . Note there are seven regions that report to the USPS Chief Operations Officer.
The USPS has an 11-member Board of Governors that functions as its governing body. The Board has responsibilities comparable to the board of directors of a publicly held corporation. The USPS Board is made up of nine Governors appointed by the President of the USA with the advice and consent of the Senate. No more than five Governors can be members of the same political party. The Board currently has three seats vacant. The other two members of the Board are the Postmaster General and the Deputy Postmaster General. The Governors appoint the Postmaster General, who serves at their pleasure without a specific term of office. The Governors, together with the Postmaster General, appoint the Deputy Postmaster General.
By law, USPS is divided into two categories termed market-dominate and competitive. However, in practice, USPS operates as one integrated network throughout the USA, accounting for 95 percent of all revenue with only 5 percent being generated internationally. In analyzing revenue sources, it is best to compare the different services USPS offers. The bulk of all revenue is generated from three different services: (1) First Class Mail, (2) Standard Mail, and (3) Packages. Minority revenue sources are international, periodicals, mailboxes, money orders, insurance on packages, delivery confirmation, and other add-on fees for shipping letters and parcels.
Exhibit 2 reveals revenues based on product categories. The largest generator of revenue for USPS comes from First Class Mail, generating around 45 percent. Like most product categories, First Class Mail has experienced declining revenues for the last several years, falling another 4 percent in 2012. First Class Mail is an option for customers wishing to send letters, bill payments, postcards, or any other flat-letter object up to 13 ounces for both domestic and international delivery.
EXHIBIT 1 USPS’s Organizational Structure
Source: Based on information at www.usps.com .
EXHIBIT 2 A Product Breakdown of USPS Revenues
|Operating Revenue by Service Line * (Dollars in millions)||2012||2011||2010|
|First-Class Mail 1||$ 28,867||$ 30,030||$ 32,111|
|Standard Mail 2||16,428||17,175||16,728|
|Shipping & Packages 3||11,596||10,670||10,156|
|Total Operating Revenue by Service Line||$ 65,223||$ 65,711||$ 67,052|
Note: The totals for certain mail categories for the prior year have been reclassified to better reflect classifications used in the current year. These reclassifications did not impact total operating revenue for the prior year.
1Excludes First-Class Mail Parcels.
2Excludes Standard Mail Parcels.
3Includes Priority Mail, Parcel Select Mail, Parcel Return Service Mail, Standard Parcels, Package Service Mail, First-Class Mail Parcels, First-Class Package Service, and Express Mail.
4Includes P.O. Box Services, Certified Mail, Return Receipts, Insurance, Other Ancillary Fees, Shipping and Mailing Supplies, and other operating revenue.
Source: Annual Report, page 26 .
Standard Mail accounts for around 25 percent of total revenue for the USPS and is the second-largest source of sales. Unlike First Class Mail, Standard Mail has not experienced volume declines in each of the last several years. In fact, Standard Mail actually saw a marginal increase in revenue from 2010 to 2011 but experienced a small decrease from 2011 to 2012 as revealed in Exhibit 2 . Standard Mail includes all mail weighing less than 16 ounces that is not required to be sent first class. Generally Standard Mail (sometimes called bulk) is limited to advertising and is considered by many to be junk mail. Interestingly enough, even though this category of mail has held constant revenues, the USPS often will delay delivery of such mailings to better manage overtime for postal employees.
Lastly, shipping and packages make up approximately 18 percent of total revenue and has experienced marginal sales growth in each of the last three years. Competing in the parcel business is one of the USPS strategic objectives and an area it is actively trying to increase its market share in respect to three primary competitors: (1) United Parcel Service (UPS), (2) FedEx, and (3) DHL. The parcel business is broken down into several subcategories: First Class Packages, Priority Mail, and Express Mail. First Class Packages, sometimes simply called “Package Services” are available for parcels up to 70 pounds and include library mail and media mail that are shipped at a discounted rate. Priority Mail is offered for both domestic and 190 international destinations. Domestic Priority Mail is marketed to have packages delivered in two to three business days and is also available for packages up to 70 pounds. Customers may also select several flat rate boxes under the USPS’s policy “if it fits, it ships.”
The USPS international category includes all services that are shipped to destinations outside the USA, and its revenues are recorded under this single category, instead of under the other categories to avoid duplication of revenues. As indicated in Exhibit 2 , international services account for around 4 percent of all revenue in 2012. Periodicals accounted for 2.5 percent of all revenues in 2012 and miscellaneous services such as post office boxes, insurance, delivery confirmation, money orders, and others accounted for close to 6 percent of total revenues in 2012.
Exhibit 3 reveals total volume of each of the respective service categories. Note that Standard Mail, or junk mail, accounts for around 50 percent of all volume done by the USPS. This mail ships at a reduced rate and increases stops at residential homes who may not be receiving any First Class Mail or packages on the particular day they receive Standard Mail. Compounding this problem, First Class Mail volume is expected to continue to decline as people increasingly use e-mail, text messages, and pay bills online. First Class Mail still remains the most profitable category for the USPS, but for each unit drop in First Class Mail it is expected Standard Mail volume will have to increase by three units to breakeven. One area that the USPS is actively attempting to expand on is that of packages, which currently only account for 2 percent of all volume done yet make up 18 percent of revenue.
EXHIBIT 3 A Product Breakdown of USPS Volume (pieces in millions)
|Volume by Service Line * (pieces in millions)||2012||2011||2010|
|First-Class Mail 1||68,696||72,522||77,592|
|Standard Mail 2||79,496||83,957||81,841|
|Shipping & Packages 3||3,502||3,258||3,057|
|Total Volume by Service Line||159,859||168,297||170,859|
Note: The totals for certain mail categories for the prior year have been reclassified to better reflect classifications used in the current year. These reclassifications did not impact total mail volume for the prior year.
1Excludes First-Class Mail Parcels.
2Excludes Standard Mail Parcels.
3Includes Priority Mail, Parcel Select Mail, Parcel Return Service Mail, Standard Parcels, Package Service Mail, First-Class Mail Parcels, First-Class Package Service, and Express Mail.
4Includes the U.S. Postal Service’s Mail and Free Mail provided to certain groups.
Source: Annual Report, page 27 .
USPS employees are grouped into three major categories: (1) mail carriers, (2) mail handlers, and (3) clerks. Mail carriers, broken down into city and rural carriers, often called mailmen; they prepare and deliver mail to city and rural areas alike. City carriers work 40 hours a week and are paid automatic overtime for any hours more than 40. At times, they are required to work “under time” when mail demand is not as high and supervisors predict the carriers designated route will take less than 8 hours. In avoiding overtime fees, it is common for supervisors to use a technique called “pivoting” in which bulk mail and advertisements are set aside for a day or two if mail loads are expected to be below the normal 8-hour work day those days.
Rural carriers do not operate under a 40-hour work week because their mail demand is more difficult to predict. Instead, they are evaluated on a period of two to four weeks, and overtime assessments are made after completion of the period. Both city and rural carriers are required to work during daylight and darkness in any kind of weather and be able to carry parcels up to 80 pounds, although the maximum shipment weight the USPS allows is 70 pounds.
The other two principle jobs employed by the USPS are mail handlers and clerks. Mail handlers are the people behind the scenes who separate, load, and unload mail and parcels based on ZIP code and station. They generally work at the plants or larger mail facilities. Clerks are the individuals one will encounter on a trip to the post office. They handle customer service and sort mail at the local post office for the carriers.
The USPS workforce is heavily unionized and is represented by four labor unions: (1) American Postal Workers Union (APWU), (2) National Association of Letter Carriers (NALC), (3) National Rural Letter Carriers Association (NRLCA) and (4) National Postal Mail Handlers Union (NPMHU). All jobs at USPS that do not fall in one of the three main categories of employment are covered with the clerks by the APWU. Some union policies are quite restrictive on the postal service. For example it is standard policy after a letter carrier has served 360 days, they can be represented by the NALC for reduced working hours, or for “just cause” any issue determined to be unfavorable by the union member. As mail volume continues to decrease to the increased use of e-mail, bank draft billing, and the transition from junk mail advertising to Internet, USPS is constantly downsizing operations, replacing many positions with machines and consolidating mail routes.
The number of career USPS full-time employees dropped from 583,908 in 2010, to 557,251 in 2011, and then to 528,458 in 2012. That is a 4.6- and 5.2-percent drop in the number of employees annually.
Chief Financial Officer Joseph Corbett said: “Our recent work hour reductions reflect our efforts to improve productivity and to respond to the decline in mail volume. Since 2000, we have reduced work hours by a cumulative total of 504 million work hours, equivalent to 286,000 employees, or $21 billion in expense savings each year. At the end of 2012 fiscal year, we (USPS) have reached our statutory debt ceiling of $15 billion for the first time. “Our liquidity continues to be a major concern and underscores the need for passage of legislation that gives the Postal Service a more flexible business model to improve its cash flow,” said Corbett. “Despite reaching the debt limit, the Postal Service mail operations and delivery continue as usual and employees and suppliers continue to be paid on-time.”
The USPS 2012 Annual Report states: “In the absence of legislative reform that enables meaningful operational changes and cost reductions, the Postal Service could incur annual losses as great as $18.2 billion by 2015. Fortunately, such an undesirable outcome is avoidable.”
As revealed in Exhibit 4 , USPS reported a record net loss of $15.9 billion in its fiscal year ending September 2012, but $11.1 billion were payments to prefund retiree healthcare benefits, a policy that USPS—but no other government agency—is required to do. Setting aside the $11.1 billion in prefunded retiree healthcare benefits, the $15.9 billion loss would have totaled a $4.8 billion loss, which came on the heels of a $5.1 billion loss in fiscal 2011. Note in Exhibit 5 that USPS owns about $44 billion in buildings and equipment.
In line with the five-year plan, the USPS was able to grow its package services business by $926 million or 8.7 percent. Despite the gains the package business, revenues derived from first class mail and standard mail dropped 3.9 and 4.3 percent, respectively. USPS did mention that the rate of the decline in First Class Mail did slow in 2012 possibly as a result of the strategy to encourage increased First Class postal usage. In total, operating revenue change over the two most recent years was relatively stable, totaling $65.2 billion in 2012 compared to $65.7 billion in 2011.
EXHIBIT 4 The USPS Income Statements
|Years Ended September 30,|
|(Dollars in millions)||2012||2011||2010|
|Operating revenue||$ 65,223||$ 65,711||$ 67,052|
|Compensation and benefits||47,689||48,310||48,909|
|Retiree health benefits||13,729||2,441||7,747|
|Total operating expenses||80,964||70,634||75,426|
|Loss from operations||(15,741)||(4,923)||(8,374)|
|Interest and investment income||25||28||25|
|Net loss||$ (15,906)||$ (5,067)||$ (8,505)|
Source: 2012 Annual Report, page 78.
EXHIBIT 5 The USPS Balance Sheets
|(Dollars in millions)||2012||2011|
|Cash and cash equivalents||$ 2,319||$ 1,488|
|Receivables before allowances||959||1,078|
|Less: Allowance for doubtful accounts||41||37|
|Total receivables, net||918||1,041|
|Supplies, advances and prepayments||126||120|
|Total Current Assets||3,363||2,649|
|Property and Equipment, at Cost|
|Less: Allowances for depreciation and amortization||30,187||29,023|
|Construction in progress||328||624|
|Total Property and Equipment, Net||18,863||20,337|
|Other Assets—Principally Revenue Forgone Receivable||385||427|
|Total Noncurrent Assets||19,248||20,764|
|Total Assets||$ 22,611||$ 23,413|
|Compensation and benefits||$ 1,856||$ 2,390|
|Retiree health benefits||11,205||7|
|Payables and accrued expenses:|
|Trade payables and accrued expenses||1,159||1,041|
|Total payables and accrued expenses||1,835||1,812|
|Deferred revenue-prepaid postage||4,014||3,497|
|Customer deposit accounts||1,210||1,386|
|Outstanding postal money orders||677||688|
|Prepaid box rent and other deferred revenue||475||502|
|Total Current Liabilities||32,109||19,037|
|Workers’ compensation costs||16,230||13,887|
|Employees’ accumulated leave||1,855||2,030|
|Deferred appropriation and other revenue||194||326|
|Long-term portion capital lease obligations||410||460|
|Deferred gains on sales of property||313||345|
|Contingent liabilities and other||846||768|
|Total Noncurrent Liabilities||25,348||23,316|
|Capital contributions of the U.S. government||3,132||3,132|
|Deficit since 1971 reorganization||(37,978)||(22,072)|
|Total Net Deficiency||(34,846)||(18,940)|
|Total Liabilities and Net Deficiency||$ 22,611||$ 23,413|
Source: 2012 Annual Report, page 79.
Exhibit 6 provides a breakdown of operating expenses for the USPS over the three most recent years. Compensation and benefits alone accounted for 73 percent of 2012 revenues. Of the $47.7 billon in compensation and benefits expense, around 12.3 percent or $5.9 billion were paid to USPS retirees. Also note, the $11.1 billion prefunding for workers’ health benefits accounted for 17 percent of total revenue in 2012; however no payments were made to this category in 2011. In total, the $15.9 billion loss in 2012 accounted for 125 percent of total revenues.
In 2011, the Postmaster General outlined the following key objectives to improve the financial position of USPS: “1) become a leaner, smarter, faster organization, 2) compete for the package business, 3) strengthen our business-to-customer channel, and 4) improve our customers experience.” To better execute on the objectives, in 2012 USPS released a five-year plan on how to achieve the stated objectives.
EXHIBIT 6 USPS Breakdown of Expenses
|Operating Expenses (dollars in millions)||2012||2011||2010|
|Compensation and Benefits||$ 47,689||$ 48,310||$ 48,909|
|Retiree Health Benefit Premiums||2,629||2,441||2,247|
|Total Operating Expenses||$ 80,964||$ 70,634||$ 75,426|
Source: 2012 Annual Report, page 31.
Become Leaner, Smarter, and Faster
In an attempt to become leaner, smarter, and faster, USPS plans to redesign its operating network by closing many of its mail-processing facilities and distribution plants as well as rescheduling of transportation routes. Currently there are 461 mail-processing locations considered for consolidation. The first phase of 140 consolidations through 2013 and a second phase expected to begin in 2014 of 89 additional consolidations is expected to save $2.1 billion annually. Also, USPS plans to reduce retail window hours at local post offices but currently it does not plan on eliminating any post office locations. This strategy is aimed mostly at smaller post offices in rural areas. Around 13,000 such rural post offices are expected to become part-time post offices, operating with the reduced hours. Once the plan of reducing operating hours in rural post offices is fully implemented in 2014, savings are expected to total $500 million annually. In addition, USPS plans to increase private sector partnerships such as its current partnership with UPS and use tools such as Six Sigma to help better train employees on methods of reducing waste and improving customer service. In total, direct savings of $2.6 billion annual are expected under the strategies in this category.
Compete for the Package Business
USPS is increasing its efforts to compete for the more profitable package business by improving its tracking of packages and scanning of barcodes, so that every package has 100 percent visibility. Currently, customers can track UPS and FedEx packages in close to real time. However, USPS customers experience long delays, and it is not uncommon for a package to show it left the facility and the next update not be available until it arrives at its final destination. In addition to tracking, USPS plans to fully implement package intercept technologies in which commercial customers can request packages be redirected or returned before the final day of delivery is made. USPS also plans to better market its flat-rate package options to customers and introduce MetroPost, which will offer same-day delivery in select metro areas.
Strengthen the Business-to-Customer Channel
USPS plans to strengthen its business-to-customer channels, but no specifics are available other than “to develop new platforms” that will help small businesses more effectively manage its direct-mail campaigns, but USPS does not state what these programs are, what they cost, or any time table. Other ideas include the continuation of marketing of the Every Door Direct Mail campaign and a continuation of encouraging businesses to use the mail as a means of communication.
Improve Customers’ Experience
To improve customer service, USPS plans to offer better mobile applications to facilitate online shopping through usps.com . In addition, USPS hopes to implement what it calls Village Post Offices, which are partnerships with retailers in which customers can pick up their packages there, reducing the dependence on the traditional post office.
Besides the movement away from mail to e-mail, other external issues harming the USPS bottom line include the economic recession, increased number of delivery points, increasing fuel prices, increasing healthcare premiums, and the increasing use of other electronic communications reducing the volume of First Class Mail. Union relations and obligations are severely hurting USPS, as is increasing competition from traditional competitors such as DHL, UPS, and FedEx. Competition also is coming from growing wireless communication networks around the world including e-mail, text messages, television, radio, electronic funds transfers, and much more. It is expected that First Class and Standard Mail volumes will continue to decreases in the presence of growing wireless communication networks, and the package business is expected to remain highly competitive.
With USPS being a government agency, it faces heavy regulatory requirements. Often the variety of stakeholders USPS serves has interests that are in conflict with one other. However, in the latest review of the Oxford Strategic Consulting ranking of best post offices in the world, USPS ranked number one overall for providing ease of access to service, efficiency, and public trust.
USPS faces many challenges in respect to governmental oversight. Laws such as the Postal Accountability and Enhancement Act, which became law in 2006, dictate and limit USPS’s ability to institute new services or products, develop new revenue streams, and manage its cost structure. One of the key price limit issues is based on the rate of inflation measured by the consumer price index (CPI). Many of the USPS higher costs such as wages, health benefit programs, and retirement benefits tend to rise more quickly than the CPI and thus place tremendous pressure on USPS because it is unable to effectively keep pace with increased costs. Further limiting management in its development of new services or products also cuts into the bottom line.
USPS’s business plan includes the following actions that require legislative action:
· • Allowing the Postal Service to determine delivery frequency
· • Allowing the Postal Service to offer non-postal products and services
· • Developing a more streamlined governance model for the Postal Service that would allow for quicker pricing and product decisions
· • Instructing arbitrators that, during labor negotiations, they must take into account the
· financial condition of the Postal Service when rendering decisions
· • Resolving the overfunding of the Postal Service’s obligation to the Federal Employees’ Retirement System (FERS).
Virtually all employees of the USPS are represented by labor unions, which represent employees heavily on cost of living adjustments. Unions also limit the ability of the USPS to reduce the size of the labor force despite declining volumes and less workers being needed. The USPS is thus forced to offer early retirement or reduce time worked and avoid paying overtime at all costs. USPS is under constant threat of union strikes and has no assurances that contracts will be able to be negotiated even though arbitration.
As indicated in Exhibit 7 , USPS competes with UPS and FedEx. Note that Exhibit 7 reveals that UPS generates more revenue per employee than either the USPS or FedEx. Note how low the USPS ratio is regarding revenue per employee, suggesting high inefficiency.
Headquartered in Atlanta, Georgia, UPS is the largest logistics company in the world based on revenue and package volume. Operating in the air delivery and freight services industry, UPS delivers packages up to 150 pounds across the USA and to 220 countries worldwide. Serving customers since 1907, UPS operates a fleet of more than 100,000 cars, vans, trucks, tractors, and motorcycles and more than 530 aircraft and uses 35,000 transport cargo containers. In addition, UPS has 40,000 drop boxes, 1,000 customer centers, 4,700 independently owned UPS stores, and perhaps most importantly, 86,300 drivers.
EXHIBIT 7 A Financial Synopsis of USPS, UPS, and FedEx
|Number of Employees||551K||222K||230K|
|Net Income ($)||—||3.26B||2.02B|
|EPS Ratio ($)||—||3.38||6.40|
EPS, earnings per share.
UPS global air network is headquartered in Louisville, Kentucky, where the company can process 416,000 packages per hour! UPS has numerous other airport hubs across the USA and in Germany, Canada, Hong Kong, Singapore, Taiwan, and China. A member of both the Dow Jones 30 Composite and Dow Transportation indexes, UPS employs more than 220,000 full-time employees. UPS operates under three principle segments: (1) U.S. Domestic Package, (2) International Package, and the newer and much smaller (3) Supply Chain and Freight segment. UPS’s major competitors are FedEx and the USPS.
Headquartered in Memphis, Tennessee, FedEx is the world’s number-1 express transportation provider, delivering about 3.5 million packages daily to more than 220 countries and territories from about 2,000 FedEx Office shops. FedEx owns and operates a fleet of about 690 aircraft and more than 50,000 motor vehicles and trailers. To complement its express delivery business, FedEx Ground provides small-package ground delivery in North America, and less-than-truckload (LTL) carrier FedEx Freight hauls larger shipments. FedEx Office stores offer a variety of document-related and other business services and serve as retail hubs for other FedEx units.
FedEx is expanding its services across the USA, Canada, and Mexico. The company is expanding its Priority next-day services in its FedEx Freight segment by opening a new service center in Rochester, New York, that will cater to 13 U.S. and Canadian markets dealing in cross-border shipments to and from Toronto and Montreal. In Mexico, FedEx recently added two new service centers—one each in Culiacán and Silao—to strengthen its freight network in northwestern and north central part of Mexico. FedEx is building a new hub in Guangzhou, China, for catering to 100 new Chinese cities within the next five years.
Although headquartered in Germany and privately held, DHL is a gigantic package delivery company that constitutes the express delivery and logistics business segments of its parent, Deutsche Post. DHL is a leader in the worldwide market for express delivery services, operating through four divisions: Express, Global Forwarding and Freight Forwarding, Mail, and Supply Chain. (Mail service in Germany is handled by the Deutsche Post brand; DHL handles all of the Global Mail business). DHL’s Express courier service network spans more than 220 countries and territories using a fleet of 32,000 vehicles and about 250 aircraft. DHL’s supply chain division maintains some 23 million square meters (almost 250 million square feet) of warehouse space.
To combat massive losses, the USPS desires to cut 150,000 workers through 2015, reduce existing staffers’ work hours, and hike the price on first-class stamps by three cents to 49 cents. USPS officials are also considering a scale back of delivery service to five days, ceasing its low-volume, low-revenue, Saturday service, saving $3 billion annually. The notion of five-day service however is unpopular in Congress and unlikely to prevail. Various USPS unions also oppose that and other similar moves.
Some analysts suggest that USPS needs a strategy to eventually require Americans to go to the local post office to obtain their mail, rather than USPS bringing mail to everybody everywhere, and to require many of those persons to also have post office boxes. Delivering mail to everyone’s home at the top of every mountain and the end of every river perhaps is just not necessary in this day and time of e-mail and wireless communication. Some analysts believe a transition to phasing out USPS drivers and requiring everyone to have their own post office box could enable a drop in first class stamps to 17 cents, in contrast to USPS’s current strategy of seemingly going up annually on postage rates. Analysis is needed to determine the feasibility of such as strategy. The actual number of post offices in the USA has dropped minutely from 27,077 in 2010 to 26,755 at fiscal year end 2012.
A recent bill introduced in Congress by Rep. Darrell Issa (R-Calif.) proposes a USPS centralized delivery system to transition away from traditional curbside or door-to-door delivery to mandate that Americans pick up their mail in personal boxes at their residences. USPS has already begun offering centralized mail delivery for new community developments, industrial parks, and shopping malls. Some of the following facts are prompting this transition:
· • Currently 35 million residences and businesses get mail delivered to their doorstep.
· • It costs $353 per stop for a delivery in most American cities, taking into account such things as salaries and cost of transport. In contrast, curbside mail box delivery costs $224, while cluster boxes cost $160.
· • Delivering mail is the agency’s largest fixed cost—$30 billion. Ending such door deliveries would save $4.5 billion a year.
A bill may eventually be passed because the USPS continues to bleed. The agency lost $1.9 billion in Q2 of 2013, and $1.3 billion the previous quarter, compounding the problem of its considerable existing debt obligations.
USPS needs a clear strategic plan for the next three to six years to reverse monumental losses being incurred every quarter.