Cost Cutting at the US Postal Service

by Emily on December 13, 2011

Starting in Spring of 2012, the US Postal Service has plans which call for eliminating more than 250 processing centers, which will make first class U.S. mail even slower. This plan could lead to 30,000 US Postal workers losing their jobs. The post office has been struggling due to the shift in technology with online communication and bill payments.

These cuts are part of a $3 billion plan in reductions that are aimed at helping the agency avert a possible bankruptcy within the next year. These cuts are going to eliminate the option of stamped letters arriving the next day. The first class delivery standard for next day mail was set in 1971.  The plan is still pending, awaiting an advisory opinion for the Postal Regulatory Commission. This advisory opinion is scheduled for March 2012. Although the plan must await this advisory opinion, the opinion is non binding which means the US Postal Service does not have to follow the opinion of the Postal Regulatory Commission. Experts believe that only with significant pressure from Congress, the business sector or the public would it deter these extensive cuts.

David Williams, the postal vice president stated that the post office needs to move quickly to cut costs as it seeks to stem five years of red ink amid steadily decreasing mail volume. In 2006, first class mail was at a volume of 98 billion, and now in 2011 the volume is less than 78 billion. Projections are calling for the volume to be half of the current volume by 2020. The US Postal Service is increasing the cost of first class mail on January 22 by 1 cent to 45 cents.

With these cuts occurring, David Williams stated that it may still be possible for first class mail to be delivered the next day, only in certain scenarios. Newspapers, magazines and other bulk mail shippers would be able to get next day delivery service if they were able to meet the new, tighter deadlines and bring shipments directly to the remaining processing centers. It seems though that in the majority of cases, those who use first class mail will see delays in delivery. Users of Netflix were angered a few months back by increases in rates. With the post office cuts, this will change Netflix service even more. Users can typically get 3 DVDs per week, and it is predicted with these cuts users will only be able to receive 1 DVD per week if Netflix stays with the same mailing service.  If Netflix chooses to use a different delivery service system, their costs are likely to rise and would translate to an increase of costs to customers.  Even more customers, may choose to eliminate or downgrade their Netflix account if costs rise again or if delivery is slower.

The cuts will delay everything from check payments and possibly add on costs to mail order prescription drugs. Many worry that time sensitive communications such as newspapers and magazines delivered by the US Postal Service will be delayed to sprawling suburban communities and rural areas. Currently the US Postal service is about to default on a debt of $5.5 billion annual payment to the Treasury for future retiree health benefits and is projecting a loss of $14.1 billion, which would be the greatest loss for the agency to date.

The cuts would result in closing 252 of the country’s 461 mail processing centers starting in Spring 2012. Each of these facilities has between 50 to 2000 employees all of which would lose their jobs. The closing of the processing centers would result in lengthening the distance that the mail travels from the post office to the processing center, and there is a possibility that delivery standards could be lowered. Typically, US first class mail is to be delivered anywhere from 1-3 days to homes within the continental United States. The closures would increase the time of delivery from 1-3 days to about 2-3 days. What this means for consumers is that if you mail a letter in your community on Monday, it will no longer be there on Tuesday, and will be delivered on Wednesday. Next day mail within towns and communities will not be possible. It is predicted that periodical publications could take as little as 2 days or as long as 9 days to be delivered.

Currently 42% of US first class mail is delivered the following day. 27% arrives in 2 days and 31% arrives in 3 days. Less than 1% of first class mail is delivered in 4-5 days. With the change in Spring of 2012, it is predicted that 51% of first class mail will arrive in 2 days, with the remaining 49% to be delivered in 3 plus days.  Many catalogue companies and small businesses have expressed concerns about their products arriving and how the increased amount of time that merchandise and payments will be in transit from one location to another.

Many believe that neither the House of Representatives nor Senate will act on any bills before the changes are set to take place. This belief stems from the fact that 2012 is an election year and the bills may be seen as promotion layoffs and cutting neighborhood post offices. The Postal Service does not receive any tax money from the government and is an independent agency of the government. The changes that are proposed do not need the approval of Congress to go into effect.

Many are wondering if these cuts will encourage consumers to utilize online bill payments and increase their use of private carries such as UPS and Fed Ex. If consumers turn toward the private sector for mail and package delivery, this will result in even lower revenue for the US Postal Service. If you own a small business, these may be decisions you have to consider and evaluate before the changes go into effect this coming spring. You may want to set up your online bill payments now and if your employer offers the option of direct deposit utilize it, so you receive your check on time and your bills are paid on time, avoiding late fees.

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