USPS gets to work on putting 10-year plan into action

Earlier this week, the United States Postal Service (USPS) rolled out various network infrastructure investments, as part of its recently announced 10-year plan focused on achieving financial sustainability and service excellence, in order to meet customer and business needs, in advance of the 2021 holiday season.

USPS said that these investments and efforts are comprised of the following:

• an accelerated investment and procurement of 138 package processing sorters that will be operational ahead of the 2021 peak holiday season, with plans to purchase additional processing machines over the next 18 months as package volume grows. USPS said as it expands its role in the e-commerce marketplace, it will deploy and maintain a diverse suite of package sorters and material handling equipment to optimize processing throughputs. In March, USPS said customer demand for package deliveries was up 28% annually;
• the leasing of an additional 45 annex facilities located near processing centers in key locations to support surges and overflow of packages; and
• the movement of mail processing operations at 18 facilities previously paused in 2015, with those select moves to follow USPS’ existing contractual process and be completed by November 2021

USPS said that due to the decline in mail volume, it will relocate or remove unnecessary letter and flat sorting equipment as appropriate to make space for much needed package processing.

“The Postal Service’s future depends on its ability to adapt to the evolving demands of our customers,” said Postmaster General and CEO Louis DeJoy in a statement. “These initiatives and investments give our employees the infrastructure and technology they need to serve today’s e-commerce marketplace reliably and efficiently. This optimization will lead to more efficient and reliable performance in our plants, which in turn will enhance our ability to predictably and reliably deliver mail to the more than 161 million addresses we serve each day.”

In late March, the USPS released its 10-year plan focused on being financially sustainable and also provide top-level service.

The plan, entitled “Delivering for America,” takes an ambitious approach focused on helping the USPS get on solid financial footing, as the organization has been in the red over the last 14 years and incurred a net loss of $9.2 billion in the last fiscal year.

The plan calls for the USPS to continue its universal six-day mail delivery, as well as expanding seven-day package delivery, with the latter being a major revenue source for the organization. And a key part of the plan stated that the USPS will generate $24 billion in net revenue, partly from enhanced package delivery services for business customers, including same-day, one-day, and two-day delivery offerings.   

Other key objectives outlined in the plan include:

improving cash flow for the investment of $40 billion in workforce, new vehicles, improved Post Offices, technology improvements, and infrastructure upgrades;

a move to an electric vehicle delivery fleet with Congressional support;

• adjusting select delivery standards to improve efficiency and reliability;
• enhancing customer experience through a new suite of consumer and small business tools;
• stabilizing the workforce with a goal of cutting non-career employee turnover in half, and creating more opportunity for growth, including more predictable progression into career workforce;
• align pricing to reflect market dynamics; and
• ask for bipartisan legislation in Congress to repeal retiree health benefit pre-funding mandate and to maximize future retiree participation in Medicare

USPS officials said that this plan represents a combination of technology investments, training, Post Offices and a new vehicle fleet, modernizing the USPS processing network, adopting best-in-class logistics across delivery and transportation operations, creating new revenue-generating offerings in the “rapidly expanding e-commerce marketplace and pricing changes as authorized by the Postal Regulatory Commission (PRC), an independent Federal agency that provides transparency and accountability of all USPS operations.

Gordon Glazer, senior consultant for San Diego-based parcel consultancy Shipware LLC, recently told LM there is much to like in the USPS’s 10-year plan, with the caveat that the devil is in the details.

“However, I’m concerned this blueprint will be halted in its tracks and put on hold until President Biden’s nominations to fill empty seats to complete the Board of Governors are confirmed,” he said. “It’s even possible that the new Board of Governors votes to elect a new Postmaster General.  Once this process plays itself out, the new leadership can review the 10-year plan and selectively decide which aspects are cut, which are maintained, and what gets added. In my opinion, the USPS is the most trusted government organization ever, routinely beating all others by a wide margin.  We believe in the USPS, we value our Postal system. We recognize and are proud of having the most efficient and respected Post Office in the world.  We love how our Postal system creates an equality of sorts, that Americans can receive Universal Service at fair prices regardless of where we live.  This was the vision of the Post’s founding fathers.” 

Glazer added that while it appears this plan beneficially leaves in place the "universal service standard,” it also detrimentally lowers transit times across the board. 

“There is much left unanswered,” he said. “If FCPS (First-Class Package Service) is lumped in with the reduced service standards for FCM, then how will the gap for low-cost, fast-transit of under a pound be served?  Will Priority Mail be expanded to offer ounce-based pricing?  That might make the change more acceptable, along with defined transit times based upon zip code pairings.”   

And a blog posting from Atlanta-based Spend Management Experts observed that the USPS’s goal is viewed as a tall order for the organization that has struggled for years with mounting debt and service level delays.

“The biggest goal facing the USPS will actually be getting buy into this ambitious plan,” it said. “A big lesson learned throughout COVID-19 has been the need for shippers to diversify their last-mile carriers due to rising shipping costs and capacity constraints and limits set by the two largest carriers, FedEx and UPS, that allowed them to focus more on growing their profits versus increasing volumes. However, USPS's plan is estimated to take ten years to implement, and operating during such an extensive overhaul will likely see the operator experience blips and delays along the way. Will shippers be forgiving during this period, or will they look elsewhere?”

As reported by LM, the USPS has long been hindered by commonly cited reasons related to its ongoing revenue declines in First Class and Marketing Mail, which each continue to see declining volumes, coupled with volumes expected to fall further in the future, due to what the USPS has called the “migration to electronic communication and transactional alternatives resulting from technological changes.” Things like e-mail, texting, and other electronic communications channels continue to hinder First-Class Mail, too.

While the COVID-19 pandemic has had a major impact on all delivery players, it has had a positive impact for the USPS’s Shipping and Packages Group, which saw e-commerce-driven volume gains related to the pandemic, in the fiscal first quarter, rising 25% annually, to $2.173 billion packages, and operating revenue was up 42.1%, to $9.378 billion. For the same period, USPS’s Parcel Services revenue saw a 25.4% annual gain, to $2.741 billion, with volume up 12.6% annually, to 1.022 billion pieces.