February 9, 2015
From Flats Sequencing to Network Rationalization, many of the U.S. Postal Service’s recent cost-cutting programs have not been living up to the agency’s projections, a multi-industry mailers group says.
Worse, the programs have shifted costs to mailers without apparently benefiting USPS, the Association for Postal Commerce (PostCom) wrote in a recent filing with the Postal Regulatory Commission.
“While PostCom applauds the Postal Service’s attention to reducing costs, the information presented [in a recent USPS report] suggests that these efforts have not been as effective as the Postal Service projected,” PostCom wrote. Judging by some questions the PRC has posed to USPS the past couple of weeks, the regulatory body seems inclined to agree with PostCom’s assessment.
PostCom pointed out that USPS recently estimated only about $900 million annual savings, versus its projected $1.2 billion, from Phase I of its Network Rationalization plan that closed scores of mail-processing centers.
It also noted that, in 2013, increases in mail-processing costs caused by the new Flats Sequencing System were offset by lower delivery costs. Yet in 2014, both PostCom and the PRC pointed out, delivery costs for Standard-class flat mail (the main type of mail sorted with FSS machines) increased 8% while processing costs increased 9%.
“As mailers have incurred additional costs to prepare mail to meet FSS standards, the Postal Service has not seen a reduction in either processing or delivery costs from the implementation of this initiative,” PostCom wrote.
FSS productivity down
USPS acknowledged on Friday that FSS productivity declined last year, because of lower mail volumes and some operational issues.
“A high turnover rate was experienced in the operations for both the Supervisors and employees, resulting in a lack of understanding of the approved methods and metrics needed to drive the performance during the declines,” USPS wrote in a response to pointed questions from the PRC about FSS costs.
“To address these deficiencies, the Postal Service provided on-site training at 5 Select FSS locations during August and September 2014. A minimum of two Supervisors from every FSS site nationally attended these training sessions. The sessions provided the supervisors with information regarding accepted methods and metrics used in the FSS operation to use and train others in their home sites.”
PostCom also questioned whether USPS’s Load Leveling Initiative is paying off.
Load Leveling is supposed to reduce the agency’s cost for handling Standard mail by spreading the workload more evenly throughout the week, resulting in slower delivery of some mail. But USPS has released no analysis of the program’s financial impact, and Standard costs keep rising.
“Without better data, . . . it is impossible to tell whether the Load Leveling strategy has limited these increases or furthered them,” PostCom said. In fact, the organization indicated, USPS’s lack of analysis or transparency about it costs makes it difficult to assess the success of any of its cost-cutting measures.
More accountability needed
The Postal Service, PostCom wrote, needs to be “more accountable to the industry in reporting how its strategies are reducing costs, how the cost reductions will support a more effective and efficient USPS, and how these reductions will benefit the overall mailing industry.”
“In general, PostCom supports the Postal Service’s efforts to reduce costs. But the Postal Service, and the Commission, must understand that much of what is described as ‘cost cutting’ is really ‘cost shifting.’”
“When additional costs are placed on mailers, and the Postal Service does not experience concurrent reductions in its costs, something is amiss.”
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