Post Office: We Could Save Money By Making Customer Service Even Crappier

The Postal Service believes it can save itself by making service worse. Something about that doesn't compute.

According to a new study, the Post Office could save as much as $1.5 billion a year by cutting back on the quality of its service:

Think snail mail is too slow? Imagine if it got slower.

The U.S. Postal Service could save about $1.5 billion a year if it relaxed its two-to-three-day delivery schedules for first-class and Priority Mail deliveries by a day, according to a new study.

Postal executives are seriously considering the idea and are expected to announce plans regarding delivery schedules after Labor Day, according to USPS officials.

Currently the Postal Service advises customers that first-class and Priority Mail deliveries will arrive, on average, in two or three days.

But relaxing the schedule by a day would cut about $336 million in premium pay for employees working overnight and Sundays to meet current delivery schedules, according to the study. Adding one day to the schedule would put less emphasis on speed and allow the USPS to save at least an additional $1.1 billion by delivering some long-haul Priority Mail shipments by ground instead of air, consolidating mail-processing facilities and employing fewer workers, the study said.

The Postal Service’s inspector general commissioned the study, which was authored by the economic analysis firm Christensen Associates.

The study said the USPS spends about $2.5 billion annually on mail processing, transportation and other delivery-related functions. It estimates that first-class mail volume will drop to about 50 billion pieces annually in 2020, down substantially from the 78 billion pieces delivered last year. Volume for standard mail, a cheaper delivery option, is expected to remain flat at about 150 billion pieces annually.

Isn’t this roughly the equivalent of a restaurant reducing the quality of the food it serves in order to cut back on costs? A smart business decision in the short term perhaps, even arguably a necessary one given the seriousness of the situation USPS faces and the fact that may run out of money in just over a month. However, it strikes me that in the long term reducing the quality and speed of service is likely to force more customers to seek alternatives to the Postal Service, whether its other delivery services, or other methods of communicating. Email has already killed the personal letter, online payment services have made mailing in a check every month a thing of the past for many people. At this point, most of the mail I get is of the commercial variety, and the vast majority of it ends up in the garbage within minutes of getting into the house. Cutting back on service like this is only going to lead people to figure out that they don’t really need to mail things anymore, and that’s bad news for the Postal Service.

As I’ve noted before, there are plenty of alternatives to what USPS is being forced to do now in order to get its finances in order. If only Congress would let them do it.

The Postal Service should be set free of its ties to the Federal Government and forced to compete with other companies. It is fundamentally absurd that they should need to go to Congress to get permission to do something like eliminating Saturday delivery. A private company doesn’t need to get permission to engage in a cost-cutting move like that, and USPS would clearly, in the long run, be a much healthier company if it had the freedom to make these kinds of decisions with the heavy hand of Congress interfering (there’s already been talk about Congress stepping to prevent the Post Office closures that were recently announced). Postal privatization has been done in other countries, quite successfully, and I don’t see any reason why it can’t happen here.

Will it mean significant changes to an institution that used to be a big part of American life? Absolutely, but the alternative is to have the government subsidize a failing business in the name of “tradition” and, of course, to protect the interests of the Postal Workers Union. In an era where we’re talking about across the board budget cuts in order to bring an out of control deficit under control, that simply isn’t an option.

FILED UNDER: Economics and Business, US Politics,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. Console says:

    Why should the post office be looked at as a business? There is no reason it shouldn’t be run entirely off the general fund in the first place. Sure, we probably save money in forcing the Post Office to run as a business, but that’s not the be all end all of why it exists. Whether or not it loses money based off whatever business model it uses is immaterial to the fact people believe it should provide the service it provides.

  2. john personna says:

    I’m pretty sure you meandered enough in this piece that you hold all, mutually contradictory, opinions 😉

  3. Ben Wolf says:

    @Doug,

    The problem with a competition model is that there’s a whole hell of a lot of the country private businesses aren’t going to deliver to: it wouldn’t be worth their time to maintain routes to deep rural areas to service a handful of people. As with health insurance, this is an area where the market can’t deliver guaranteed 100% coverage. I have no problem allowing competition with the Post Office as it currently exists, but the Constitution pretty much requires the feds to ensure everyone in the country have access.

  4. @Ben Wolf:

    As with health insurance, this is an area where the market can’t deliver guaranteed 100% coverage.

    And as wih health insurance, if market only covers 90%, the government should be looking for a 10% solution, not a 100% solution. When people can’t afford food, we create things look food stamps or food banks. We don’t nationalize the grocery stores.

  5. michael reynolds says:

    Isn’t this roughly the equivalent of a restaurant reducing the quality of the food it serves in order to cut back on costs?

    Of course this is exactly what restaurants do all the time. I can cite you chapter and verse on this, especially at the big national chains. It’s also what retailers do — if you want help in a Macy’s you have to wave a security tag at a security scanner and set off the alarm. Even then it’s hit or miss. Other examples: cable, car dealers, Best Buy, cell phone services. Make stuff worse to save money is almost the standard response of businesses.

    So the Post Office is very much in line with the business model.

  6. James Joyner says:

    @michael reynolds: Hell, grocery stores have managed to demote us all to cashier and bag boy.

  7. Moosebreath says:

    Michael Reynolds,

    Exactly. Years ago, I dated someone who was a food chemist for Chef-Boy-Ar-Dee. She told me that she was in the middle of a large scale taste test to see if customers could tell the difference between having their canned ravioli be 5% or 6% beef (my memory is by weight). If they could not, guess which they would sell? This is the sort of thing all businesses do — cut the quality of low end goods and services to save costs.

  8. Rob in CT says:

    Doug,

    While “cutting them loose” might be a way to save the USPS (I doubt it – mail is just dying), it almost assuredly would result in the service cuts & job losses they’re talking about now. That’s exactly what a private company would do to try and stop the bleeding.

  9. Franklin says:

    It’s worked out great for the airline industry.

  10. jan says:

    …..but the alternative is to have the government subsidize a failing business in the name of “tradition” and, of course, to protect the interests of the Postal Workers Union.

    Isn’t this the mainstay of the government anyway? Subsidizing a business model that is failing, while keeping worker benefits high which may be contributing to it’s failure, is what makes the government’s day!

    They did this to the auto industry, the housing market, the green movement. It’s robbing Peter to pay Paul syndrome, and then blaming the mess that’s created on Peter. Displacing blame is what the progressives and their devotion to government has perfected.

    BTW, rural routes would be fine under a private sector management. I live in an off-the-map place, and while the postal service doesn’t deliver here (we have a PO Box in town), I get appliances and merchandize from across the country delivered here all the time.

  11. 11B40 says:

    Greetings:

    When I first started in the printing industry, Ben Franklin taught me to come into the shop in the morning through the shipping door and do a walk-through all the way to the front office, basically, to see what product was moving and what needed to move. Thus inclined, when I look at the Postal Service’s continuing problems, I begin with what are they delivering.

    These days, it seems that my mail is made up, in the very large part, of direct advertisement mail, bills, and magazines, nothing that would need delivery day handling. Now, to me, delivering a higher level of service than a customer wants to pay for is not good business. I would recommend that the Postal Service first discontinue Saturday deliveries and then announce that regular delivery service will be evolving to a Monday, Wednesday, Friday schedule in a year or so, to be supplemented by “special delivery” and “five-day delivery” services. Those last two should be able to handle things of greater than usual urgency. The additional fees for businesses, organizations, or residences needing daily service would provide an opportunity for both the consumers and the Postal Service to assess if there is actually a market, meaning consumers with money who are willing to pay the cost or more for the services they desire.

    One of my teaching tools during my printing career, was what I referred to as “The Parable of the Leg of Lamb”. A mother is at her daughter’s house for a nice leg of lamb dinner. As the daughter is respectfully preparing the dead animal flesh, she saws through the bone and bends it back before putting it in the roasting pan. Her mother asks why she is doing that. “Maaa,” the daughter intones dramatically, “that’s the way you always did it.” To which, the mother responds, “Yes, but we only had a very small roasting pan.”

    As important as it is to remember what one need to do to satisfy one’s customers, it is also important to remember the why. If there ever was a substantial reason for six-day mail delivery, I believe it has long past us by. Bringing service levels into line with the product and its costs may require a good bit of customer education and even hand holding, but what the Postal Service is now doing is continuing to saw through that leg bone.

  12. PD Shaw says:

    I agree completely with Console:

    Why should the post office be looked at as a business? There is no reason it shouldn’t be run entirely off the general fund in the first place. Sure, we probably save money in forcing the Post Office to run as a business, but that’s not the be all end all of why it exists.

    A national postal system is an underlying assumption of a host of laws and regulations from the tax system to the court system to licensing. The private competition is not regulated except by a contract that most people don’t ever read or understand its limitations. True privatization of delivery would require IMHO new regulatory oversight of the private mail carriers and then we’ll say how effficient they remain.

  13. john personna says:

    @PD Shaw:

    A national postal system is an underlying assumption of a host of laws and regulations from the tax system to the court system to licensing.

    To borrow style from Steven … “this.”

  14. Barry says:

    @James Joyner: Yes – in this case, the USPS is actually following private enterprise ‘best practices’.

  15. Barry says:

    @jan: “BTW, rural routes would be fine under a private sector management. I live in an off-the-map place, and while the postal service doesn’t deliver here (we have a PO Box in town), I get appliances and merchandize from across the country delivered here all the time. ”

    Perhaps you should discuss with some friends, who could point out your logical errors.

  16. jan says:

    @Barry:

    A pointless reply.

  17. WR says:

    @jan: Really? Are you back in California, where you claimed to live at one point? Or in the midwest, where you’ve claimed to live at other times? Or are you just going to claim whatever will make your story sound more authentic?

  18. @WR:

    I thought she was pretending to be a nurse/business owner in Virginia now.

  19. Wayne says:

    What is needed is to allow competition in all the mail delivery areas. Let the open markets decide. It can be specified that if you deliver local mail mail than you must deliver anywhere in the country. As long as everyone plays by the same rules let them compete.

  20. Ben Wolf says:

    @Stormy Dragon:

    When people can’t afford food, we create things look food stamps or food banks. We don’t nationalize the grocery stores.

    What the hell are you talking about? What’s being nationalized? You are aware the Constitution mandates creation of a Post Office by government, and that a national grocer is not. They aren’t the same thing, and exactly how do you expect the government to subsidize private sector deliveries without being fleeced as it is every time a service gets privatized?

  21. john personna says:

    @Wayne:

    As PD notes, and as I have done in the past, the key is that many systems depend on *universal* delivery. Once you pay anyone else to maintain a system of universal delivery, their costs and prices will start to resemble those of the USPS.

    You cannot say, put out ballot delivery, and then tax form delivery, to separate bids, and expect the total to somehow be below a background service.

  22. @Ben Wolf:

    I was thinking more of having the government run just the unprofitable post offices with a universal service charge to the rest.

  23. WR says:

    @Stormy Dragon: I thought it was Indiana, but it might well have been fictional Virginia instead…

  24. J. Stephen says:

    Even with raised parcel rates, forcing the USPS to truly transition to a model where they were competing with private carriers would require a massive reorganization of their current physical operations, to include substantial consolidation of services (i.e. the closure of many more post offices than have recently been on the chopping block).

    That means lots of lost USPS jobs, which in turn means political inexpediency.

  25. Barry says:

    @J. Stephen: Probably more importantly, it’d mean fewer services and higher prices for rural areas.