Weekend Economists Stamp Out Ignorance December 27-29, 2013

[Demeter]

38. Current operations USPS

The United States Postal Service employs some 574,000 workers, making it the third-largest civilian employer in the United States behind the federal government and Wal-Mart. In a 2006 U.S. Supreme Court decision, the Court noted: "Each day, according to the Government's submissions here, the United States Postal Service delivers some 660 million pieces of mail to as many as 142 million delivery points." As of 2011, the USPS operates 31,000 post offices and locations in the U.S., and delivers 177 billion pieces of mail annually.

The USPS operates the largest civilian vehicle fleet in the world, with an estimated 218,684 vehicles, the majority of which are the easily identified Chevrolet/Grumman LLV (Long-Life Vehicle), and the newer Ford/Utilimaster FFV (Flex-Fuel Vehicle), originally also referred to as the "CRV" (Carrier Route Vehicle). For every penny increase in the national average price of gasoline, the USPS spends an extra $8 million per year to fuel its fleet.

The number of gallons of fuel used in 2009 was 444 million, at a cost of US$1.1 billion. The fleet is notable in that many of its vehicles are right-hand drive, an arrangement intended to give drivers the easiest access to roadside mailboxes. Some Rural Letter Carriers use personal vehicles. Standard postal-owned vehicles do not have license plates. These vehicles are identified by a seven digit number displayed on the front and rear.

The Department of Defense and the USPS jointly operate a postal system to deliver mail for the military; this is known as the Army Post Office (for Army and Air Force postal facilities) and the Fleet Post Office (for Navy, Marine Corps and Coast Guard postal facilities).

In February 2013, the Postal Service announced that it would no longer deliver mail on Saturdays, effective August 10, 2013. However, Saturday delivery of packages, mail-order medicines, Priority Mail, and Express Mail would continue. On March 21, 2013, Congress announced the USPS was required to continue Saturday mail delivery. On April 10, 2013, the USPS announced that Saturday mail will continue through at least September 30, 2013.

Five-year plans

In October 2008, the Postal Service released Vision 2013, a five-year plan required by law starting in 1993. One planned improvement is the introduction of the Intelligent Mail Barcode, which will allow pieces of mail to be tracked through the delivery system, as competitors like UPS and FedEx currently do.

Initiatives

In 2011, various media outlets reported that the USPS was going out of business. The USPS's strategy came under fire as new technologies emerged and the USPS was not finding ways to generate new sources of revenue.

On March 15, 2012, MIT held a Communications Forum called “The Future of the Post Office” with David C. Williams the Inspector General of the USPS. The forum was organized and moderated by MIT professor VA Shiva Ayyadurai, who had been openly critical of the USPS. In April 2012, at the PostalVision 2020 conference to USPS officials on new directions for the USPS, at which Ayyadurai presented a paper on why the USPS should embrace email. VA Shiva Ayyadurai's research center, the International Center for Integrative Systems (ICIS), was hired by the USPS-OIG to do a detailed analysis on how email and other initiatives could produce new revenues for the USPS. The analysis, which is the subject of ongoing research, projected that the USPS could potentially generate over $250 million per year through email servicing.

Budget-Revenue decline and planned cuts

First Class mail volume peaked in 2001 and has declined 29% from 1998 to 2008, due to the increasing use of email and the World Wide Web for correspondence and business transactions.

FedEx and United Parcel Service (UPS) directly compete with USPS express mail and package delivery services, making nationwide deliveries of urgent letters and packages.

Lower volume means lower revenues to support the fixed commitment to deliver to every address once a day, six days a week. In response, the USPS has increased productivity each year from 2000 to 2007, through increased automation, route re-optimization, and facility consolidation. Despite these efforts, the organization saw an $8.5 billion budget shortfall in 2010, and was losing money at a rate of about $3 billion per quarter in 2011.

On December 5, 2011 the USPS announced it would close more than half of its mail processing centers, eliminate 28,000 jobs and reduce overnight delivery of first-class mail. This will close down 252 of its 461 processing centers. (At peak mail volume in 2006, the USPS operated 673 facilities.) As of May 2012, the plan was to start the first round of consolidation in summer 2012, pause from September to December, and begin a second round in February 2014; 80% of first class mail would still be delivered overnight through the end of 2013.

In May 2012, the service announced it had modified its July 2011 plan to close about 3,700 small post offices. Instead, rural post offices would remain open with reduced retail hours (some as little as two hours per day) unless there was a community preference for a different option. In a survey of rural customers, 20% preferred the "Village Post Office" replacement (where a nearby private retail store would provide basic mail services with expanded hours), 15% preferred merger with another Post Office, and 11% preferred expanded rural delivery services. Approximately 40% of postal revenue already comes from online purchases or private retail partners including Walmart, Staples, Office Depot, Walgreens, Sam's Club, Costco, and grocery stores.

In February 2013, the service announced plans to eliminate Saturday delivery, beginning in August 2013. According to an official report on November 15, 2012, the U.S. Postal Service lost $15.9 billion its 2012 fiscal year. The U.S. Postal Service projects that cutting Saturday delivery will save them $1.9 billion annually.

Critics of the budget cuts say readjustments and closing "will be a mess", may not obtain projected savings, will cause severe dislocations, will run afoul of obligations under various collective bargaining agreements, and will disproportionately affect employees who are veterans and minorities.