What a difference a day makes: The Postal Service slows down the mail

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Back in the day (circa 1755), it could take six weeks for a letter to go from Philadelphia to Boston if the weather was bad.  “It having been found very inconvenient to persons concerned in trade” for the mail to take so long, Postmaster General Ben Franklin gave orders to pick up the pace, and the delivery time was cut in half.  Thanks to innovation — from the Pony Express to auto-trucks and airmail — the speed with which the mail is delivered has improved year after year for the past two and a half centuries.  But if the current Postmaster General has his way, that’s going to change, and the mail is going to slow down.

Postcom reported yesterday that “the Postal Service will be filing its service changes with the PRC on 12/5.  Among the changes — an adherence to the principle of servicing mail in strict accord with delivery standards, and the abandonment of the targeted ‘in-home day of delivery’ practice within Standard Mail.”

The somewhat cryptic note presumably means that next week the Postal Service will submit a request to the Postal Regulatory Commission (PRC) for another Advisory Opinion.  Given the reference to “service changes,” this one will apparently be about the Postal Service’s proposal to consolidate the mail-processing network and about the effects this will have on how fast the mail is delivered.

The announcement came at a meeting of the Mailers’ Technical Advisory Committee (MTAC), a group of representatives of the direct-mail business, who protect the interests of the industry by making recommendations to the Postal Service.  These meetings, we learn today, will apparently henceforth be restricted to industry insiders.  (More on that to come.)

Expect a press release from the Postal Service early next week and maybe an interview with the Postmaster General about how relaxing delivery standards is regrettable but inevitable because mail volumes and revenues are dropping through the floor.  There will probably also be a response from the unions about what a disaster the whole plan is.

 

One Advisory Opinion almost done, so it’s time for another

Since consolidations on the scale the Postal Service is envisioning will inevitably result in slower delivery of First-Class mail and periodicals, with impacts on standard mail as well, the Postal Service is required by law to go to the PRC for an opinion about whether the changes comply with laws like Title 39 (e.g., section 3691) and the Postal Accountability and Enhancement Act (PAEA, e.g., Title III).  (The PRC’s role in setting “service standards” is discussed in this George Mason study on the “Universal Service Obligation,” pp. 240ff.)

This new request for an Advisory Opinion follows the March 2010 “Advisory Opinion Concerning the Process for Evaluating Closing Stations and Branches” (the SBOC initiative); the March 2011 “Advisory Opinion on Elimination of Saturday Delivery,” and the Advisory Opinion on the Retail Access Optimization Initiative to close 3,650 post offices, due out in a couple of weeks or so.

It’s been clear for a while now that the Postal Service had already begun consolidating the processing network, so it was only a matter of time before it would go to the PRC for yet another Advisory Opinion.  It probably should have done so months ago, but it may have been waiting for the RAOI opinion to be completed.

The brief note in Postcom doesn’t say how the Postal Service will articulate its Request (and it’s possible the “service changes” referenced in the Postcom note aren’t directly related to the plant consolidations), but in September of this year, the Postal Service gave a pretty good indication of where things are headed.  In a press release and in a notice published in the Federal Register under the title “Proposal To Revise Service Standards for First-Class Mail, Periodicals, and Standard Mail,” the Postal Service explained what it wanted to do.

The Postal Service proposes cutting its network of processing facilities by more than half, from 500 to around 200.  It estimates that this would save up to $3 billion a year.  Some of that cost saving would come from not needing to pay rent, maintenance, and utilities for the 300 facilities it closes, but most of the savings would come from cuts to the workforce — the changes would eliminate “as many as 35,000 positions.”  In its notice in the Federal Register, the Postal Service concludes by saying that should it “decide to move forward with the Proposal . . . it would request an advisory opinion from the Postal Regulatory Commission,” so it looks like that time has come.

 

Impacts on Service Standards: Slow and Slower

The consolidation plan will have a direct, observable impact on how fast the mail is delivered, and First-Class mail would be the most affected.  Currently, 40% of First-Class mail is delivered overnight — it gets where it’s going the next day.  About a fourth of First-Class mail is delivered in two days, the rest in three days.  According to the new service standards, no First-Class mail would be delivered next day.  Instead, half the mail would arrive in two days and the other half in three days.  In other words, instead of a 1-to-3 day window, the new standard would become 2-to-3 days.

Delivery of periodicals would also slow down: Instead of a 1-to-9 day window, the new standard would be 2-to-9 days.  That probably won’t please publishers, since those periodicals are time-sensitive.  But many may prefer slower delivery to an increase in rates — although they may get both.

The Postcom note mentions that the Advisory Opinion will encompass “the abandonment of the targeted ‘in-home day of delivery’ practice within Standard Mail.”  That refers to the fact that the Postal Service currently offers bulk mailers an opportunity to designate the date they want their mail delivered to your house.

The Postal Service wants to abandon this practice, and it now looks like it won’t be waiting for the Advisory Opinion to implement the change.  In a letter dated Nov. 29, the Postal Service advises mailers that “we will no longer be able to stage and deliver mail using In-Home-Date windows.”

Some advertising mailers aren’t going to like that.  Generally speaking, the direct mail industry prefers lower cost and consistency to speed, but many times, a mailer wants its catalog or circular in your home on a particular day because, say, there’s a sale going on.  If the mailing gets to your house too soon, you may forget about it and even discard it before the day of the sale.  If it gets to your house too late, it’s obviously useless.

Standard mail generally takes 3 to 10 days to deliver (and it’s sometimes delayed beyond that — and the standard for mail outside the continental U.S. can be up to 22 days), so it’s not easy timing the delivery date without an “in-home day of delivery” target.  Eliminating this practice will make it easier for the Postal Service to move mail through the network without worrying about holding mail back, waiting for the targeted delivery date, and it will also help the Postal Service meet its delivery standards and improve its performance scores.  But that will put the burden on the mailers to time the system and figure out when it would be wise to enter the mail into the network.

The proposal outlined in the Federal Register has many other details that will be of interest to mailers, like “the elimination of some facilities at which Standard Mail users currently enter mail.”  That in itself may slow delivery of some standard mail because mailers will need to travel further to an entry unit.

In general, standard mail will probably slow down by about a day, like First-Class and periodicals, but that may not matter much to most large stakeholders — so long as costs are down and the Postal Service is consistent in its delivery times.

The postal workers unions announced their opposition to the proposed changes months ago. “If adopted, this proposal would deprive postal customers of needed service, damage the economy, and drive customers away from the Postal Service,” wrote APWU President Cliff Guffey in a letter dated Oct. 5. [PDF]

“The Postal Service cannot eliminate hundreds of mail processing facilities and meet its current service commitments,” said APWU Executive Vice President Greg Bell. “Despite management’s reassurances to community leaders and lawmakers, wholesale facility consolidation would devastate mail service — and that is what the Postal Service is planning.”

“In doing so, the proposal would degrade existing USPS products, limit the Postal Service’s ability to introduce new products, place the USPS at a distinct competitive disadvantage, and severely hamper its ability to accommodate growth.  Consequently, the proposal virtually guarantees continued mail volume declines and further cutbacks in service.”

 

From big-bang to incremental plans

Although the large-scale consolidation of the network is coming to a head now, the push to “right-size” has a long history, and a number of reports by the GAO, the OIG, and the Postal Service have weighed in on the matter.  Just to mention a couple:

In July 2011, the USPS OIG published a report entitled “A Strategy for a Future Mail Processing & Transportation Network.”  The report notes that at least a decade ago, there were “big bang” proposals to radically downsize the processing network, but with mail volumes increasing, there wasn’t much incentive to implement them.  When volumes started to fall, however, the Postal Service started working on “rationalizing” the network in an “incremental” fashion.  Over the past few years, several Air Mail Centers have been closed, many Area Mail Processing plants have been consolidated, and a total of about 145 facilities have been shut down.

In the July report, the OIG report presented a plan to reduce the 500 remaining processing plants to 135.  That’s a much bigger consolidation effort than the Postal Service is currently proposing.  It may be that the Postal Service would ultimately like to go from 500 to 250 to 135, but it doesn’t want to put the larger downsizing plan on the table all at once.  That’s the same strategy it’s using with closing post offices, where the plan is ultimately to close 15,000, but instead of seeking an Advisory Opinion on that, the Postal Service has put forward its RAOI plan to close only 3,650 for now.

As the OIG report makes clear, most of the attention on relaxing service standards pertains to First-Class mail.  That’s because, as the report says, “It is important to note that the national 1-to-3 day standard for First-Class Mail is a primary factor that drives the number of facilities needed in the network as well as determining if the mail travels by highway or air.”

In August 2011, the USPS OIG issued a second report, this one entitled “Cost of Service Standards.”  This report is based on the observation that “some of the Postal Service’s largest business mailers have stated that they value consistency over speed and they would tolerate slightly slower service to save costs.”  The OIG contracted with Christensen Associates to conduct basic research to identify and measure service-related costs.

Christensen found that relaxing service standards by one day would realize significant service-related cost savings for preferential mail (First-Class Mail, Priority Mail, and Periodicals).  The research showed that up to $1.5 billion would be saved if one day of delivery time were added a day to each category, so First-Class went from 1-3 to 2-4, and standard went from 3-10 to 4-11.

 

Previews of coming attractions

As we’ve seen in the Advisory Opinion process for the two plans to close post offices (SBOC and RAOI) and for five-day delivery, the process will start with the Postal Service presenting its “request” for an Advisory Opinion.  This document will explain what the Postal Service wants to do and why, and it will probably have a few charts and graphs showing how volumes and revenues are declining and how an “optimized” processing network will save billions of dollars.

The postmasters associations, the unions, mail industry stakeholders, and the PRC’s public representative will weigh in with “interrogatories” (the questions they want to ask each other), and there will be testimony, cross-examination, briefs, reply briefs, and so on.  The management associations and unions will oppose the change, Valpak will probably weigh in (it always does) with its approval of the plan (anything to keep costs down), and the newspapers will oppose the changes (as they did on five-day delivery).  As in other Advisory Opinions, the Commissioners themselves will also file several information requests for additional materials.

There will also be efforts to analyze the numbers to determine if the Postal Service’s estimates of cost savings and the new service standards are accurate.  Studies may be introduced contesting the Postal Service’s claims, like this provocative and extremely technical analysis commissioned by the PRC, which concludes that “simply consolidating plants is not likely to be an effective strategy for restructuring the USPS network with the object of increasing aggregate productivity.  Most plant consolidations will actually decrease the volume that can be processed by the same equipment and labor force in the consolidated plants.”

Sometime in the spring, the Postal Service should issue its Advisory Opinion.  By then, the Postal Service will probably have closed a couple of thousand post offices — unless there’s a moratorium on closings while the Postal Service comes up with service standards for post offices, just as it now has for delivery times.  Such a moratorium is part of the Senate bill, but not the House bill, so we don’t now yet if it will be a part of the legislation that comes out of Congress.

The cumulative effect of everything that the Postal Service wants to do — close half the nation’s post offices, consolidate away more than half of the processing facilities, eliminate Saturday delivery, shrink the workforce by 220,000 — will end up doing a lot more than “relaxing” service standards.  It will turn the country’s postal system into something only a Third-World country could be proud of.  It will be an ignominious chapter in the history of one of the country’s greatest institutions.

* * * * * * *

(For more background on the history of recent efforts to consolidate the processing network, there’s a good report by Phillip Herr of the GAO, here.  The PRC’s Annual Compliance Determination Report for 2011 discusses the Postal Service’s performance in meeting its service standards.  For more on AMP studies, the Postal Service provides information about its “streamlining” plans here, and the APWU keeps its updates hereHere’s the official USPS list of the facilities being studied for consolidation and the facilities that will “gain” the mail.  Here’s the Save the Post Office list of the facilities currently proposed for consolidation, and here’s a map view.  And finally, if you are into history and want to read about an earlier proposal to realign First-Class delivery standards, check out this 1990 Advisory Opinion by the Postal Rate Commission, as the PRC was known then.)

[UPDATE, Dec. 3: It took a couple of days, but here’s Fox news reporting on the service standards changes.] [UPDATE, Dec. 5: As promised, here’s the USPS press release.  (Correction: The press release says there are currently 487 plants, and 252 will be studied for closure.)  And here’s the press release from the APWU.]

(Image credits: Time’s slideshow on the history of the postal system : Ben Franklin, Pony Express, auto-truck, airmail, missile mail.)

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