Solving the USPS Dilemma

Tags: Logistics

In 1775, the first postmaster general was appointed for the United Colonies, and since 1775, the United States Postal Service (USPS) has operated on the principle that every person, no matter who or where, has the right to equal access to secure efficient and affordable mail service.

The agency has changed a number of times through the years and in 1970 the Postal Reorganization Act was signed. It replaced the cabinet-level Post Office Department with the independent United States Postal Service on July 1, 1971. The regulatory role of the postal services was then transferred to the Postal Regulatory Commission.

Time to Privatize?

A semi-autonomous government agency, the USPS funds itself, but as its largest division, first-class mail, declines, it is faced with a rocky future.

Added to this, in 2006, Congress required the Postal Service to “pre-fund” 75 years of its retirees’ health benefits. Is it time to take the next logical step and privatize the USPS?

According to the White House, “A privatized Postal Service would have a substantially lower cost structure, be able to adapt to changing customer needs, make business decisions free from political interference and have access to private capital markets to fund operational improvements without burdening taxpayers. The private operation would be incentivized to innovate and improve services to Americans in every community.”

However, on the flip side:

The American Postal Workers Union strongly objects to the idea of privatizing the agency by saying it “would end regular mail and package services at an affordable cost” and hurt rural Americans and e-commerce.

Amid growing concerns of USPS’ increasing financial losses and Amazon ‘taking unfair advantage’ of USPS pricing, President Trump commissioned a postal reform task force in 2018. Recommendations were made public in December.

According to the task force, the USPS troubles are from providing delivery for commercial entities at below-market rates, lagging volumes of mail delivery and high labor costs, both in compensation and retiree health benefits.

Stopping short of privatization, the major recommendations of the task force were that the U.S. Postal Service eliminate the ability of employees to negotiate their compensation and to develop a dual-tiered pricing model—one for essential services and another for deliveries deemed to have a profit motive.

Hybrid Solution

Is there a happy medium? Postal organizations around the world are faced with a similar situation and for some, such as Deutsche Post, a reinvention has occurred with the added DHL logistics services. Japan Post has tried a similar approach by acquiring Australia’s Toll Group and others such as the U.K.’s Royal Mail have opted for a public offering.

The role of postal services entities is evolving and as such they are coming up against a fierce, highly competitive global market where adaptation is difficult particularly when many postal entities are either too closely aligned to governmental structures or the opposite; forced to fend for themselves without a ‘parent company’ for any type of support.

The solution may be a hybrid of the two options; consider the USPS as a start-up and have the U.S. government serve as the ‘parent company,’ providing the USPS the opportunity and support to reinvent itself. Perhaps, choose to have it led by an innovative business person with no postal experience. Examples of this option are few but NBC Universal (owner of NBC and Universal Studios) and News Corporation (owner of the Fox Broadcasting Company and 20th Century Fox) did this exact same thing and the result was Hulu. After the successful 2007 launch, investment firms such as Providence Equity Partners, were encouraged to invest in the firm. Today, Hulu has 25 million subscribers and nearly $1.5 billion in ad revenue.

Regardless, what can be agreed upon by all is that the USPS needs to be overhauled. How it is done remains the topic of much debate but the time is fast approaching that the talk must end and action begin.

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