Delivery Dichotomy – Phase II Network Consolidation’s Impact on Delivery of Mail

Network_Rationalization_Phase_2(September 5, 2014) Since the Postal Service announced their plan to move forward with Phase II of Network Consolidation, I’ve been asked by a number of people how it will impact the delivery of mail (Market Dominant Products). The answer, according to the USPS:

  • First Class Mail will lose overnight delivery (with a few exceptions)
  • Standard Mail should not experience any changes (although they added a day to delivery this April as a result of their Load Leveling Plan)
  • Periodicals won’t see a negative impact as long as entry of drop ship mail can be done earlier in the day to coincide with the change in Critical Entry Time (CET). Unfortunately, that is easier said than done, and the net result for most periodicals will be an extra day of delivery.

Depending on what you mail and how time critical the delivery is, this could be a non-issue as long as there is predictability and consistency. On the other hand, if delivery is time/day critical, it could lead you to consider non-mail alternatives.

Phase I of Network Consolidation was managed very well by the USPS. Delivery, for the most part, was maintained and service issues were rare. The consolidation was supported by the majority of the mailing community because there was over capacity created by volume losses incurred since 2007. This resulted in an unnecessary cost burden for mailers. The capacity issue parallels what we are experiencing in the printing industry, and the need for continued reduction is ongoing. However, at some point, the elimination of postal processing facilities creates wide gaps in the distance to delivery units and service does start to become a concern. Load Leveling and moving CETs earlier in the day are ways to compensate for the distance/mileage concern. Just adding another day to the service standards for delivery would be another approach.

The problem with any or all of those actions is that, at some point, delivery will be degraded to a level that is not effective enough to sustain doing business through the mail. This at a time when all other competing marketing channels can reach consumers 24/7. Why would the USPS risk losing more business and its associated volume? For mailers, it boils down to the cost of service, and their willingness to pay the price. It should be noted that when service standards for all classes of mail were mutually developed after the 2006 postal law was finalized, the agreed upon days of delivery were supposed to reflect “normal processing time” so as to not add cost to achieve extraordinary delivery.

The other side of the coin is what’s happening with parcels/packages in Competitive Products. There, the USPS is responding to market demands, volume growth and competition by offering 7-day delivery as well as same-day delivery in test markets. The questions being raised as a result of that strategy revolve around the cost of the infrastructure to support that level of service, and whether the market for that service is sustainable. It goes back to the question of what anyone is willing to pay for the service. In this case, that means what the consumer is willing to pay. Everyone in the logistics and delivery business knows that you can deliver almost anytime and anyplace as long as someone’s willing to pay for it. And I remember when FedEx meant overnight, and everyone was using that service.

The USPS is determined to go ahead with Phase II of Network Consolidation. We’re still supportive of their efforts, but cautious as to the impact. As with Phase I, continuous communication with postal facilities, employees, and the mailing industry is required to help ensure a successful process. At this point, the only thing that would prevent it from happening is Congressional action, either as part of a comprehensive legislative reform package or as a separate action attached to some other appropriation bill. We’ll be monitoring that situation. And if Phase II is implemented in 2015, we’ll be closely monitoring mail delivery.

Joe Schick, Quad/Graphics’ Vice President of Postal Affairs is an advocate for mailers and the print industry and works closely with the USPS and Congress to achieve effective postal reform.

via Delivery Dichotomy.

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