Friday, September 23, 2011

The US Postal Service: My Thoughts for Profitability

Yesterday I uploaded a photo of a post office I visited but I neglected to finish the thought! The postal service is losing billions. What can they do to rectify the situation? For now, they've adopted an investment cash flow strategy to generate cash. Specifically, the US Postal Service will sell some of their properties in order to raise money. Some sales will be a sale leaseback. (You sell the property and lease it back under a long term lease.) That's a great way to generate cash in the short term and medium term, but what about the long term? The US Postal Service's operating model is currrently broken. They are hemorrhaging operational cash. Generating positive investment cash flow won't change that. This just buys time to fix the problem.

So how do they fix the problem? Some ideas:

  • Eliminate Saturday hours. I remember when postal delivery was only Monday - Friday. The USPS started Saturday delivery to make themselves more competitive. Well, it's not working anymore. We'll all adjust to not getting mail on Saturdays. This would save millions.
  • Install more postal processing kiosks in the lobby. You can weigh and send packages, certified mail, etc. from these but only the main locations and some branches have them. People understand self serve. And using these is so much faster than standing in line to get a postal agent.
  • Reduce personnel. It's always hard to lay off people but the USPS simply can't afford it. Utilizing options 1 and 2 will reduce personnel needs.

Additional ideas:

  • Partner with FedEx or UPS for next day delivery for small packages and letters. I used the post office twice to send next day air letters. One was delivered a day late, one was delivered hours late. While my experience may not be the norm, the USPS in numerous surveys does not meet the standards of its top two competitors. So partner with them and get a referral fee or do revenue sharing. This will help the USPS' perception also.
  • Analyze the cost of shipping for all non-first class mail items. For those that are losing money on an operational basis, eliminate the service, increase the price, or make significant process and management changes to reduce the internal cost. This is what cost accounting is all about. Make use of it.

That's my $0.44. Anyone have any other thoughts?

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