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Question: Can the USPS afford the high-priced Transformation Plan?
By T.L. Righter, April 29, 2002
First, I’d like to offer a little observation. Many people think that for the U.S. Postal Service (USPS) to be viable, it must be profitable. I’m not sure that Benjamin Franklin, the nation’s first postmaster, ever really thought that the nation’s postal service could truly be profitable. He viewed the creation of the nation’s postal system as a government service that was necessary to bind the nation together. In recent years, America has been fortunate that, through the hard work of all postal employees (from Casuals to the Postmaster General), the postal service has been profitable and self sustaining. It’s been profitable despite the fact that the postal service delivers to every inner city address and every far flung rural farm six days a week. Six days – a luxury in my opinion! The Postal Service is a $67 billion a year enterprise. I believe, that although the USPS could take steps to become profitable once again, that a $2 or $3 billion dollar annual deficit is not such a scandal, especially considering that the postal service facilitates trillions of dollars of American trade. (The mailing industry itself is a $900 billion industry, according to the USPS.) It’s true that the Postal Service has some shortcomings. However, it’s also true that it does an over-the-top job of delivering billions of pieces of mail a day to millions of delivery points.

Over the weekend I finally had the opportunity to fully review the U.S. Postal Service’s highly touted Transformation Plan. The plan sounds good, - when you read it. It uses all the latest management buzzwords I learned in college – particularly words I learned in my Strategies and Problems in Management class. But look between the lines and you will see dollar signs oozing from the pages. The proposals will cost money, just like everything else in the post office – and there are a lot of proposals in the plan. After reading between the lines I searched the document for how the Postal Service planned to pay for the transformation to the preferred “Commercial Government Enterprise” model. I saw some projected cost savings, but no real considerations as to the costs of the projects. I’m just a little curious: How does the USPS intend to pay for and finance the multitude of proposals outlined in the plan?

Consignia, the British equivalent to the USPS, recently found itself in dire straights. Like the USPS, it needs to transform. Labor issues, declining mail volumes and the like have contributed to declining revenues. Unfortunately, Consignia failed to act in time, and now it does not have the financial assets to effect needed reform. It’s in a death spiral, a term that some have used to describe the U.S. Postal Service’s plight. The clock is ticking – can the USPS effect needed changes while it still has the financial resources to do so? Moreover, are the proposals found in the Transformation Plan the right ones (proposals) to restore the Postal Service’s financial viability and to maintain its economic and societal relevance?

The proposals found in the Transformation Plan are high on ideals and, in many cases, apparently high in costs. I invite you to take a look at the Transformation Plan. It’s available at the Postal Service’s Website – www.usps.com. What you will find are proposals such as the following. Consider the many costs when reviewing each item and remember that for each of the examples below, there are twenty more such proposals in the Transformation Plan. (Quoted sections are from the Transformation Plan.) Among the proposals:

- The installation of commercial ATMS in post office lobbies. (“This proposal would give customers the ability to conduct their banking business as they would at any other ATM, and also provide self-service for stamp purchases.”)

- A national database of the approximately 38,000 post offices, stations, and branches. (“The database will contain all operating costs, revenue, productivity, market penetration, customer valuation, logistics, demographics, and technology connectivity. The baseline review will be the foundation for decision-support modeling of network optimization and restructuring scenarios.”)

- Enhanced and expanded training programs (“For critical line supervisor positions, the Associate Supervisor Program will be the standard for retaining and recruiting the best talent. For other critical positions in the field and at headquarters, the Postal Service is introducing new Management Intern (MI) and Professional Specialist Intern (PSI) programs open to internal and external applicants to build a strong bench for hard-to-fill positions. The MI program will provide two years of training and outplacement to a field manager position.”)

- Expansion of the Postal Service’s Website: (“The site has the potential to handle most of the transactions that commonly take place in post offices, especially when combined with carrier pickup directly from the home or office.”)

- Delivery Point Package System: (“The long-term vision for delivery operations is a seamless operation that culminates in one bundle of mixed letters and flats for each delivery point, called the Delivery Point Package (DPP). This vision is dependent on having high-speed mail sorting and packaging equipment that will efficiently sort and merge the letter and flat mailstreams in delivery sequence for the letter carrier with the addresses on all of the pieces properly oriented. If the processing equipment can be designed, the labor-intensive manual preparation of mail in sequence for street delivery would be reduced using state-of-the-art packaging technology. The packaged volume would then be made available at a central carrier point or location, making the need for delivery unit sortation obsolete.”)

- Segway Human Transporter: (Currently under evaluation – “If successful, use of the HT would reduce the carrier’s time on the street and allow the expansion of the number of delivery points per route. This device is being tested on a variety of routes, terrain and climates. Tests will continue through 2002, and if successful, deployment could begin in 2003.”)

- Expand Information and Technology Network: (“To raise the efficiency of postal operations and develop a performance-based culture, the Postal Service must make more effective use of information technology. Using industry-accepted practices and building on its current, robust technology infrastructure, the Postal Service will continue to reengineer its infrastructure and systems to take advantage of new technology and better business processes. Although the current technology environment is adequate to run today’s business, the Postal Service has deferred investment in new technology infrastructure. The Postal Service is actively working toward development of an “Information Platform” that will provide high-value, reliable, and accurate information to improve service and productivity for its internal customers. To build this Information Platform, the Postal Service is focusing on standardization and speed to market, eliminating costs wherever possible. The Information Platform will integrate applications and data, encapsulating it within a secure environment in order to deliver value-added capabilities to internal and external customers.”)

I’ve listed just a few of the many, expensive proposals outlined in the plan. It’s true that some of the proposals could be funded and managed by redeploying existing assets and personnel. Some can be funded by replacing current programs with new programs. And some can be afforded by future costs savings. However, for examples, the USPS can barely afford a barebones Associate Supervisor Program now. How can it afford an expanded program in the future? The USPS can barely afford to maintain its fleet of vehicles now. How can it afford a fleet of Segways in 2003? The USPS can barely afford its information and technology infrastructures now. How can it afford an expanded version in the future?

Most troubling however, is that these many proposals do not adequately and realistically address the core problem facing the U.S. Postal Service – declining mail volumes and expanding delivery points. The problem is simple, and the solutions are simple (see editorial). Yet, the Transformation Plan is exceedingly complex and prohibitively costly.

The old cliché “You can’t see the forest for the trees” comes to mind. Consider the following example about how the Postal Service is missing the point, and the mark. The USPS is currently installing a Delivery Operations Information System (DOIS) nationwide. DOIS is a Web based information platform for use by frontline letter carrier delivery supervisors to assist them in operating their units. DOIS calculates, among many other things, carrier workloads based on mail volume, deliveries, personal work performance, and other factors. Actually, DOIS is a powerful tool. It can analyze and give reports on a multitude of factors in a number of ways. And because the system is Web based, the Area Manager has access to the information, the District Manager has access to the information, and the Area Vice President has access to the information. The Area Vice President, could – if he or she wanted to, pull up Joe Blow’s office performance data for Route Twelve in Zone Eight for the first week of Accounting Period Six. He can see the tree, but he may not be able to see the forest, because his head is in the computer screen, just like the area manager’s, and the delivery supervisor’s. The delivery supervisor, for example, may know from DOIS reports that Joe Blow is using an extra fifteen minutes a day of unauthorized overtime. But because the supervisor is beholden to the computer because of DOIS and a number of other computer-based reports, the supervisor does not actually have the time to supervise the carrier on the street and correct the shortcoming. The Area Manager may know that a certain post office is underperforming in office (mail sorting) time. Yet, because the manager is beholden to the computer, the manager does not have time to visit the post office and remedy the situation. The Postal Service is already drowning in information and reports, yet it wants more information and reports. How about pulling someone from Operations Support, the department and people who manage this myriad of information systems, and put them to work in a core duty (carrying mail, frontline supervision etc.)? That would be a start.

The Postal Service needs to transform in many areas. But it needs to transform in ways that are cost-conscious and cost effective with a focus on managing core problems. Let’s hope, that among the many proposals found in the Transformation Plan, that the proposals that address core problems in cost-effective ways are the ones that actually come into fruition. It’s all the USPS can afford.


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