The mail is slowing down again, but it’s not clear how much. There’s good reason to be believe, though, that it will more than the Postal Service is saying.
The first slowdown took place in July 2012, when the Postal Service implemented phase one of the Network Rationalization plan, which closed about 150 mail processing plants and established interim service standards that eliminated overnight delivery for about 20 percent of the mail that had been getting it.
The mail slowed down again in March 2013, when the Postal Service implemented its Load Leveling plan, which added a day to the delivery of much Standard Mail so that ad mail normally delivered on Monday could be pushed to Tuesday.
Then on January 1, 2015, the Postal Service began implementing phase two of Network Rationalization. Service standards for First Class Mail were relaxed yet further — no more overnight delivery for any single-piece mail, and an extra day of delivery time for about half of all First Class Mail. The change paves the way for closing 82 more processing plants and eliminating thousands of jobs.
The Postal Service has not put out a lot of information about how much mail will be affected by the new service standards, and the estimates that have been provided are inconsistent and a little misleading. That may be because postal officials want to limit the damage the changes could have on mail volumes and revenues.
Relaxing service standards is, after all, another form of raising postal rates. It’s like when the candy bar gets smaller and the price stays the same. For mailers, such hikes usually mean they send less mail.
When the Postal Service was planning Network Rationalization back in 2011, it wanted to know how reducing service standards would affect mail volumes. It contracted with a market research company to survey mailers about how they would react.
The market research study showed that mailers would significantly curtail their volumes. The losses to the Postal Service could top $5 billion a year in gross revenues and $2 billion in profit, which would have erased the savings from the plant closures.
The Postal Service buried the study, had another one done instead, and tweaked the format and questions to come up with more palatable results.
Now the Postal Service is trying to downplay the scope of the changes in service standards in order to minimize the impact on mail volumes and revenues.
“The bottom line is this”
A USPS Fact Sheet issued in December 2014, shortly before the service changes went into effect, poses the question, “Won’t this slow down service?” and then provides this answer:
“Overall, the time it takes First-Class Mail to reach its destination will increase slightly from an overall average of 2.14 days to an overall average of 2.25 days.”
That makes it seem as if the mail is doing to slow down by just two or three hours when in reality much of the mail will be delivered a full day later. Providing an average delivery time like this is misleading and doesn’t really capture what the changes will mean.
Earlier this week, the Postmaster General tried to downplay the significance of the changes in another way. During the Q & A after his speech at the National Press Club on January 6, the PMG explained how it will be more efficient to operate fewer plants for more hours per day. The PMG then went on to say the following:
“The bottom line is this. With the exception of the holiday and your birthday, okay, you think about your own mail box. When is the last time you got a piece of mail that had a stamp on it? Yeah. You don’t get it. This whole change represents at most 4% of the mail. We think it’s closer to about 2.5%. So you can’t hold an entire system hostage and continue to run up debt and continue to avoid making investments over 2% to 4% of the mail, and that mail is, unfortunately, for us going away at the fastest pace.” (The video and transcript are here.)
Apparently the PMG did not get that USPS Fact Sheet. It says, “In January 2015, the Postal Service will change its First-Class Mail service standards, which will affect roughly 14 billion pieces of the total volume (or 9%) and up to 16% of First-Class Mail. The affected volume represents primarily single-piece First-Class Mail. The majority of this mail will be delivered in two days instead of one.”
So while the PMG was minimizing the delays and telling the Press Club that they would affect 2.5 to 4 percent of the mail, the Postal Service was acknowledging that it would impact 9 percent.
The bigger estimate is more realistic, but even it probably lowballs the numbers by a significant amount. As the following analysis will show, the changes in service standards could slow down 80 percent of single-piece mail, half of all First Class mail, and over 20 percent of total mail volumes — several times what the PMG told the Press Club.
Before & After Network Rationalization
Here’s a table showing the differences in delivery times before and after Mail Processing Network Rationalization (MPNR). It shows the final quarter of fiscal year 2011 — under the old service standards — and a projection for what would happen when the new service standards went into effect. The table comes from page 59 of the Advisory Opinion on Network Rationalization and Service Standards prepared by the Postal Regulatory Commission, and it’s based on testimony provided by the Postal Service (p. 191-193).
In August 2014, the Postal Service published a rule in the Federal Register modifying the criteria governing which delivery standard (1, 2 or 3-5 days) would apply to some types of mail, so these projections do not reflect exactly what effects the new standards will have. But the Postal Service has not completed an evaluation of what these impacts will be — which prompted the USPS Office of Inspector General to issue a critical report in October 2014 — so at this point, the 2012 estimates in this table are what we have to work with.
As the table shows, before the changes in service standards went into effect, almost 60 percent of single-piece First Class Mail was delivered overnight. None of that mail will be delivered overnight anymore. Before the changes, about 85 percent of single-piece mail was delivered in one or two days, and the remaining 15 percent was delivered in three to five days. Under the new standards, 36 percent of single-piece mail will be delivered in three to five days.
The situation with presort mail is more ambiguous. According to the new standards, overnight mail will continue for intra-SCF mail (i.e., mail originating and destinating within the same Sectional Center Facility) that is presented at the processing center before a particular time of day (the “critical entry time”) in the particular manner specified by the Postal Service (presorted, containerized, etc.). But it’s not clear how much mail will meet these specifications.
As the asterisked note on the PRC’s table indicates, the Postal Service did not want to offer an estimate for how much presort mail would qualify for overnight delivery, so the table uses zero.
Recently, however, the Postal Service put out a FAQ sheet stating that over 20 percent of First Class Mail would continue to be delivered overnight. This graphic from the FAQ shows the delivery times and percentages of First Class Mail under the new standards:
But projecting that 20 percent of First Class Mail will be delivered overnight is very optimistic and not consistent with the overall numbers, as shown by the following table.
The percentages with volumes
This table combines the percentages from the table shown above with actual mail volumes. It uses volumes from FY 2011 for the pre-service-standard period and volumes from FY 2014 for the post-changes period (you can see the reports here and here).
|Before and After the Changes in Service Standards for First Class Mail|
|(Volumes in billions)|
|Before the changes in service standards (using FY 2011 data)|
|Delivered in 1 day||Delivered in 2 days||Delivered in 3-5 days|
|Service Category||Annual Volume||Percent||Volume||Percent||Volume||Percent||Volume|
|% of FCM||44.4%||33.3%||21.5%|
|After the changes in service standards (using FY 2014 data)|
|% of FCM||13.7%||40.4%||44.6%|
As noted above, the FAQ sheet says that under the new service standards 20 percent of First Class Mail will be delivered overnight. But in order for that to happen, about 32 percent of presort mail would have to be delivered overnight. That’s just 6 percent less than in 2011, and it would mean that 85 percent of presort mail that used to qualify for overnight delivery will continue to qualify, even though it will become more difficult to do so. That doesn’t seem likely.
The numbers on presort mail are even more problematic. According to a recent news article in Direct Marketing, mailers had already been adjusting their behavior before the phase-2 changes went into effect “to the point that now only 11% of commercial First Class Mail is delivered overnight.” Even if 100 percent of this mail continues to be delivered overnight, it would mean that only 7 percent of all First Class Mail would get overnight delivery.
Back in September, USPS Vice President and Chief Operating Officer Megan Brennan gave a speech in which she commented on the future of overnight delivery: “Our future network,” said the new Postmaster General, “will preserve approximately 66 percent of current overnight delivery volumes, and Overnight Service Standards will remain available to commercial mail properly prepared, containerized and entered by critical entry times.” But these remarks don’t specify what current overnight delivery volumes were at the time. Had they fallen to 11 percent of presort mail, as reported in Direct Marketing?
Since there are no official estimates for presort mail, the table splits the difference between the two estimates of 11 and 32 percent and figures that 22 percent will be delivered overnight. (That’s also about 66 percent of what it was before Network Rationalization began, which would be consistent with the COO’s remarks.) The table also adjusts the estimate for 3-5 day delivery down from 69.6 percent (from the USPS testimony in the table above) to 50 percent, just to be conservative.
Overall, with these uncertainties in mind, it appears that the portion of First Class Mail being delivered overnight will drop from about 44 percent to about 14 percent, while the portion that takes three to five days will go from 22 percent to around 45 percent.
The following table uses the numbers in the previous table in order to estimate how much volume in each category could be impacted by the new standards.
|Impacts of the changes in service standards, 2011 vs. 2015 (projected)|
|(Volumes in billions)||Mail going from 1 to 2-day delivery||Mail going from 2 to 3-5-day delivery||Total amount slowing down|
|Service Category||Volume||Percent||Volume||Percent||Volume||Total Volume||Percent of category|
As this table shows, the impacts of the changes in service standards could be very significant. Nearly 80 percent of single-piece mail might slow down by a day, and over half of all First Class Mail could take an extra day.
Some of this mail has already slowed down as a result of the phase-1 changes that went into effect July 1, 2012, but the phase-2 impacts will be bigger. For example, the interim service standards preserved overnight delivery for 80 percent of the mail that had been enjoying it (i.e., the intra-SCF mail). Now most of that mail will take two days.
In any case, this analysis shows that it is very unlikely that only 2 to 4 percent of the mail will be affected by the new service standards. Even the estimate of 9 percent in the USPS FAQ Sheet seems doubtful. It’s possible that 34 billion pieces of mail — 53 percent of First Class, or 22 percent of total volumes — will slow down by a day.
One can find further evidence for this conclusion in a table that the Postal Service recently provided to business mailers showing what percentage of First Class Mail would be impacted as a result of each plant consolidation, one by one. It shows that for all the plants being consolidated an average of 44 percent of First Class Mail will be “unchanged or upgraded” — meaning that at these plants an average of 56 percent of First Class Mail will experience a downgrade.
Mapping the changes
The numbers on mail volumes are useful, but it also helps to look at the story geographically, in terms of how long it takes for a piece of mail to go from one part of the country to another.
This map shows the delivery times for mail originating in New York’s Hudson Valley, north of New York City (zip codes beginning with 125) before the changes in service standards began in 2012. The blue area shows where mail was being delivered overnight; the red shows the area that was receiving two-day delivery, and the green, three-day.
Here’s the new map that went into effect on January 1, 2015:
As you can see, on the new map there’s no blue area anymore — no more overnight delivery for mail sent within the Hudson Valley. Plus, much of the two-day red area has turned into three-day green. This shows that mail now sent from the Hudson Valley to Ohio, Maryland, Virginia, and West Virginia, as well as much of Maine, Pennsylvania, and North Carolina, will take an extra day.
The picture on Long Island
Here’s another pair of maps for the Long Island, New York (zip codes beginning 005). The first map shows the days of delivery before the service standard changed and the second shows the new standards.
Before Network Rationalization began, all of Long Island got overnight delivery, and most of the Northeast got two-day delivery. Under the new service standards, there’s no more overnight delivery on Long Island, and the area getting two-delivery is much smaller. It no longer includes most of upstate New York, Maine, northern Vermont, western Pennsylvania, North Carolina, and so on. Those areas are going from two-day to three-day delivery.
You can find the maps for the new service standards on the USPS RIBBS website here. There are about 900 of them, and if you could compare each of them with the corresponding map from before the new service standards, it would tell the same story — no more overnight delivery, and a larger area getting three-day delivery instead of two.
The data behind the maps
The data sets on which these maps are based can be found on the RIBBS website, which provides business mailers with spreadsheets showing the number of days for delivery from each three-digit zip code area in the country to every other three-digit zip code area.
This table summarizes the differences between 2012 (before the service standards were changed) and January 2015 (reflecting the phase-two changes).
|Zip-to-Zip Pairs for FCM, 2012 vs. 2015|
|Service Standard||Number of zip-to-zip pairs||Percent of total||Number of zip-to-zip pairs||Percent of total|
|Total zip-to-zip pairs||849,106||850,847|
There are about 915 three-digit zip codes and 850,000 zip-to-zip pairs. Before Network Rationalization began, about 23 percent of these combinations were receiving mail in one or two days. Under the new standards, that will be going down to about 10 percent. Before, about 77 percent of the pairs took 3 days or more; now 91 percent of them will take 3 to 5 days.
Slowing down the mail could have significant effects on mail volumes and revenues, and much of the savings the Postal Service is anticipating from plant closures and eliminating jobs may vanish, as suggested by the market research study that got buried.
The problem is compounded by the fact that the Postal Service did not complete and disclose an analysis of service standards impacts as part of its Area Mail Processing Feasibility Studies, which is required by the Postal Accountability and Enhancement Act. The USPS OIG’s report on this issue concluded that the lack of information could lead to delayed mail and “customer satisfaction, which could harm the Postal Service’s brand and affect future revenue.”
At this point, it’s almost impossible to know how much revenue will be lost due to Network Rationalization. Volumes are affected by many other factors, like rate increases, electronic diversion, and the economy. Isolating the effects of service standards is difficult, and the Postal Service doesn’t seem very interested in the question anyway. Postal officials seem more focused on reassuring customers that the changes in standards will have just a “slight” effect.
As the 82 plants are closed this year and thousands of jobs are cut, there’s not much reason to tell people how much mail is actually slowing down or to explore how much revenue is being lost.
It may not even matter. The leaders of the Postal Service have decided that slowing down First Class Mail will be beneficial to the bottom line. And these days that seems to be about all that does matter.
(Photo credit: Mid-Hudson mail processing plant in Newburgh, NY, one of the 82 facilities set to be closed)