Fixing The Postal Service Debacle

The United States Postal Service announced a staggering loss for fiscal 2011: $5.1 billion. Plus $5.5 billion for retiree health benefits that it should have paid in 2011 but deferred to the next fiscal year. The payment is due November 18. But there’s no money. Default? Nope. Congress will find a way to stick it to the taxpayer.

The rest of the report wasn’t actually that grim. Revenues declined 2.6% to $64 billion. First-class mail declined 5.8% to $32.2 billion. Total mail volume dipped 1.7%. Expenses were down too, but not enough. A company should be able to manage those kinds of predictable declines without plunging into a series of huge losses.

Part of the problem is Congress, which is running the business. Among the “solutions” is legislation by a bipartisan group of senators that would force the Postal Service against its will (!) to maintain six-day-a-week delivery for two years. It also includes cost-cutting measures, like closing post offices and eliminating 100,000 jobs.

The other part of the problem is operations. As an outsider with business operations expertise, I see on a daily basis just how screwed up operations are. Here are some basic observations and fixes.

Package delivery: a growth area linked to e-commerce. The Postal Service should focus on it. But there is a long list of efficiency issues—ancient delivery vehicles, employees who stand around waiting near their trucks at distribution centers, lack of mobile and tracking technologies, etc. I don’t have to be inside a distribution center. I can see from the outside how bad it is!

Post offices: sending a package from the post office is a time-consuming affair that involves waiting in line and filling out little pieces of paper. The line regularly sends me to the UPS Store, though UPS is more expensive. And to buy stamps, you wait in the same line. OK, you can do some of it via the Internet, but that’s not an excuse to run a shoddy retail operation.

There used to be stamp vending machines by the entrance. But in an ingenious cost-cutting tactic, they were removed because it was too expensive to maintain these old things. Get some new ones and place them in every post office, and also place them in banks and grocery stores. No government employee should ever be paid to hand out stamps.

Sending a package should also be automated: a device with a scale, a keyboard, a screen, a printer, and easy-to-use software. You put your package on the scale, enter your data, and pay (cash or card). The printer prints a bar-coded label and receipt. You stick the label on the package and pocket the receipt (the tracking number will allow you to follow the package via the Internet). And the package goes down the chute. Done.

Ten years ago, they had one of these machines at the post office I used in Manhattan. But the software wasn’t user-friendly and reminded me of the infamously complicated ticket vending machines in German railroad stations. So what happened to this effort? Did the American Postal Workers Union kill the project to protect some jobs?

It’s the 21st century! Most transactions performed in a post office can be handled more efficiently by machines. There should be enough of them, with extended hours. Certainly, they won’t be any grumpier than the employees behind the counter. And while you’re at it, take down promotional posters and other clutter from six years ago.

Junk mail is an environmental issue. Yet, 95% of the mail by weight in my mailbox is junk. After I drop it into the recycle bin under my mailbox, it reenters the wasteful cycle of being turned into pristine paper, only to be reprinted with the same messages that then re-show up in my mailbox. So make advertisers pay, not the taxpayer. Raise rates so high that volumes collapse. People will love you for it.

Number of employees: if junk mail volume takes a hit, adjust the workforce accordingly. Switch to five deliveries a week, then four. Prepare for a future without first-class mail delivery.

Vehicles: replace the aging fleet of Grummans with modern, natural-gas-powered or electric vehicles. This will cut fuel and maintenance expenses and offer operational efficiencies (but don’t forget to lay off the maintenance employees that are no longer needed). And there is another benefit: It will create all sorts of jobs in the auto industry.

Bailing out the Postal Service without fixing its operations is like bailing out Greece: there won’t be an end. For 2012, it forecast a record loss of $14.1 billion, plus $5.6 billion in retiree health payments. Laying off a bunch of people and closing post offices in a wholesale manner might look good on paper, but if it ruins what little customer service there is, it can be counterproductive. Fortunately, the Postal Service is not in a bad business per se. Package delivery is in the sweet spot of a growth industry. Most of the rest will decline, but that can be managed. So get on with it.

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