USPS Takes a $3 Billion Bath while Congress Watches

May 11, 2012
The U.S. Postal Service certainly is making it more and more difficult to root for them in their current struggles. Whoever is in charge of public relations or strategy for the USPS might want to adopt a new tactic, because the steady stream of layoff ...

The U.S. Postal Service certainly is making it more and more difficult to root for them in their current struggles. Whoever is in charge of public relations or strategy for the USPS might want to adopt a new tactic, because the steady stream of layoff announcements, service cutbacks, post office closings and calls for legislative protections probably isn’t winning them any new friends.

For the first three months of 2012, the USPS posted a loss of $3.2 billion, which in the convoluted inner circles of Washington could be seen as an improvement since they posted a $3.3 billion loss for the last three months of 2011. But compared to a year ago, when the USPS lost “only” $2.2 billion for the same period, that extra billion in losses doesn’t look so good.

The USPS is also putting Congress on notice that unless they pass legislation offering some relief from all the troubles currently ailing them, the USPS will most likely default on payments due to the Federal Government. Not quite sure why the USPS wants to draw attention from the IRS with a statement like that, but there you go.

One of the problems with running a quasi-government agency (the USPS notes in every press release that they receive no tax dollars for operating expenses and that they rely on the sale of stamps and other products and services for their revenues) is that there’s only so much you can do before some bureaucrat or politician steps in to tell you, “nope, can’t do that.” For instance, the USPS originally said it was going to close as many as 3,700 post offices (mostly in rural areas), while consolidating some of the smallest post offices into regional branches. This sent various politicians into fits of apoplexy, leading to predictable outcries from people fearful that their entire communities could vanish if they didn’t have a post office anymore.

So, the USPS backed completely off that idea, and now says that instead of closing all those POs, they’ll instead just shorten the hours that the retail windows are open. No citizen will have to feel threatened that their ZIP Codes will be eliminated.

The USPS has also tossed out various other ideas to remain solvent, such as a reduction of its workforce by 220,000 employees by 2015, elimination of Saturday delivery and slowing down First-Class delivery so that mail would take an extra day to be delivered (effectively redefining the very concept of “first class”).

Meanwhile, total mail volume for the first three months of 2012 was down 4.1% from the same period a year ago – that’s a decrease of 1.7 billion pieces. Revenues were basically flat, while expenses were up 5%, mostly because of “expenses related to the legally mandated prefunding of retiree health benefit payments,” i.e., the payments that the USPS has warned Congress it will probably default on.

I’ll admit my bias: I like the USPS. I’m one of those guys who always looks forward to the mail arriving, even if I’m not expecting a thing, just on that off-chance that something unexpectedly will show up. Even an inveterate blogger like me enjoys getting magazines delivered through the mail. There’s just something about the tactile sensation of words-on-paper that makes physical magazines a great pleasure to look at and read, especially when they’re done well. Based on the passionate outcries whenever the USPS threatens some level of service diminishment, I’m hardly alone in my regard for the Postal Service.

But as various USPS officials remind us all the time, the Internet and mobile technologies (to say nothing of the likes of FedEx and UPS) have cut dramatically, and probably permanently, into the dependence on daily mail deliveries. The supply chain of 2012 still has a place for the USPS, but it’s not the same place it had just a decade ago, or even five years ago, when texting and tweeting and Facebooking and Skypeing became this century’s version of the fax machine (you remember the Fax; it was going to put the USPS out of business back in the 1980s).

As this article reminds us, the USPS has threatened to drop Saturday delivery at least once per decade or so since the end of World War Two, and while digital technologies certainly have redefined the way that people communicate, the good ol’ Postal Service still delivers 554 million pieces of mail per day, or nearly 168 billion pieces per year. It’s not like nobody is using the daily mail anymore, so clearly there’s a lot of posturing going on in Washington over exactly how the USPS should be run and funded. But with the USPS already losing $6.5 billion in its current fiscal year, the time for posturing seems to have expired, and what is needed now is a concrete plan to move forward. The USPS says such a plan is in the works and will be revealed soon; whether or not Congress allows any of it to happen remains to be seen.

About the Author

Dave Blanchard Blog | Senior Editor

Focus: Supply Chain

Email: [email protected]

Follow on Twitter @supplychainDave

Call: 216-931-9794

Contributing Editor Dave Blanchard provides the IndustryWeek audience his expertise in lean supply chain, reporting on topics from logistics, procurement and inventory management to warehousing and distribution. He also specializes in business finance news and analysis, writing on such topics as corporate finance and tax, cost management, governance, risk and compliance, and budgeting and reporting.

Dave is also the chief editor of Penton Media’s Business Finance and editorial director of Material Handling & Logistics.

With over 25 years of experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2010), and is a frequent speaker at industry events. Dave is an award-winning journalist and has been twice named one of the nation’s top columnists by the American Society of Business Publications Editors.

Dave received his B.A. in English from Northern Illinois University, and was a high school teacher prior to his joining the publishing industry. He is married and has two daughters.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!