US Postal Service Losses Threaten Service Levels

Mail deliveries may no longer occur in a timely manner

We have been hearing for the past few years about the financial troubles with the US Postal Service and the continuing operating losses with no end in sight. Current plans are talking about reducing the losses, but not doing anything to move to profitability. Businesses can only survive for a few years with mounting losses such as what is being reported by the Postal Service. The 4th quarter loss was reported as $3.3 billion with no signs of being corrected.

There have been talks about closing some distribution centers and local post offices which will result in delays. People get up in arms and say that the Post Office cannot do that as they must deliver the mail as it is currently being done. Unions complain loudly as it will result in a loss of members. But, here we are in the middle of the year and we still do not have concrete solutions to implement. All of this is because the Post Office is being over seen by Congress. And it is precisely that oversight which makes it all but impossible for them to make the adjustments to the changing technologies which are impacting their future.

There is talk of changing how first class mail is being delivered today to add a day or two to the time to get a letter delivered. But the bureaucracy surrounding the Postal Service means that nothing is going to get decided quickly on this. And that is exactly where the problem is. How can any business turn around when they have to answer to an authority which does not decide pretty much anything in a timely manner?

For the Post Office to survive in these changing times, it is going to require freedom from the constraints that they are currently under. If closing distribution centers is going to save them money to get closer to profitability, then they need to do that and do it now. If closing local post offices is necessary because there are too many in an area and are not being utilized, then close those locations. The post office is a business which enjoys a monopoly and for that business to survive, it needs to operate as a business and make decisions for their survival.

Changing technology has created a declining business model and will continue to decline without change. Email has replaced letters. Bills being delivered to the home and paid by mail are being replaced by “Bill Pay”. And those are going to continue to increase while the Post Office continues to decline.

If they are not given the freedom to make the needed changes, then Congress is going to have to provide funding for the post office to prop them up so they can continue operating to serve the US population. Raising rates is an alternative, but the legislative requirements to get one are far too cumbersome for any business. Competition from the likes of UPS and FedEx make it even more challenging for the Postal Service.

It is time for radical changes and there is talk of completely reorganizing the Postal Service which would be a good thing. But, if it involves legislative oversight by Congress, it will take years to complete and will probably not meet the needs for the long term outlook for the service.

The Postal Service needs to have a radical overhaul proposed and completed by the end of the year. Anything else is going to result in continued losses and rising deficits.