Can the USPS survive?
AS THE SAYING GOES: “NEITHER SNOW NOR RAIN NOR HEAT
nor gloom of night stays these couriers from the swift completion of
their appointed rounds.” But what about insolvency? We may find out
in the months ahead.
As this issue went to press, U.S. Postmaster General Patrick
Donahoe was slated to appear before the Senate Homeland Security
and Governmental Affairs Committee, where he was expected to seek
congressional permission to override anti-layoff language in the
agency’s collective bargaining agreement with postal workers. That
would pave the way for substantial reductions in staffing.
That’s just one of several cost-cutting measures the
U.S. Postal Service (USPS) has proposed in recent
months. It has also offered up such suggestions as
suspending Saturday deliveries and closing several
thousand branch offices. Such drastic measures are
said to be necessary to keep the postal service from
essentially going under before the end of the year.
The fiscal crisis facing the postal service has been
brewing for the better part of a decade, but the
problem now appears to be coming to a head.
According to published reports, the venerable
agency that touches almost every American nearly
every day is so cash poor that it’s on the brink of
defaulting on a pending $5 billion-plus payment to
pre-fund retiree health benefits.
This is no temporary setback. A number of independent analysts
have reviewed the USPS’s projected profit-and-loss profile over the
next eight to 10 years, and the results could only be described as dismal. For example, a recent study by McKinsey & Co. concluded that
without significant changes, the postal service faces a cumulative net
loss of $238 billion by 2020.
It’s clear that the USPS’s centuries-old business model is no longer
sustainable in a digital world. Its customers have abandoned “snail
mail” for e-mail in droves. It will have to look elsewhere for revenue
if it hopes to stay afloat.
So what options does the USPS have? What are its strengths, and
how can it use them to its best advantage? What many see as the
agency’s most valuable asset is its enormous and underutilized
ground delivery network, which reaches every node within the postal
infrastructure. The nodes include not only every business and residential address in the United States, but also a vast network of regional distribution centers, bulk mail centers, and destination delivery
units (i.e., local post offices).
In fact, the USPS has already leveraged this network with some success. For instance, it has
carved out a profitable niche providing “last
mile” delivery and “first mile” pickups of returns
on behalf of private parcel service companies like
FedEx and UPS in places where the private carriers lack the package density to justify sending out
a truck.
So is this the agency’s ticket to sustainable,
long-term success? Could the
USPS reinvent itself as primarily a provider of parcel services?
The short answer is, not without a great deal of difficulty.
Such a step would require overcoming considerable hurdles.
Right now, the postal service
faces severe regulatory constraints. Congress essentially
micro-manages the USPS’s
operations. For instance, it tells
the postal service which post
offices it must keep open and
which it can close, which days it
can and/or must deliver, and so forth. The bottom line is that the USPS is subject to a vast array
of governmental and political imperatives, while
its private sector rivals operate free from any such
constraints.
What that means is that in order to reinvent
itself as primarily a parcel delivery provider, the
USPS would first have to convince Congress to
free it from the regulatory yoke it wears as a
quasi-government agency. Otherwise, it most
assuredly would be unable to compete and ultimately, to survive.
