USPS – In Need of a Life Line

April 16, 2020


Once again, the U.S. Postal Service (USPS) is in the hot seat, politically that is, as the cash-strapped entity announced recently it would run out of money by September. The coronavirus outbreak has severely impacted the post office and without government assistance, it could shut operations.

According to Rep. Gerry Connolly, D-Va., chairman of the House Subcommittee on Government Operations, which has jurisdiction over the Postal Service, the USPS experienced a 5.3% decline in overall mail volume in early March. But, by the end of the month, mail volume fell 30%.

USPS Delivered Half of the World's Mail in 2019

The USPS delivered 143 billion items last year, almost half the world’s mail. Revenue in 2019 was $71 billion, which the Postal Service says would have made it No. 44 on the Fortune 500 if it were a private-sector company. However, the postal operator has lost $69 billion over the past 11 fiscal years, including $8.8 billion in 2019.

Declining mail volumes and the 2006 Postal Accountability and Enhancement Act have been the major culprits for its financial woes. The 2006 Act requires the postal operator to pre-fund its retiree health benefits 75 years into the future with $5.5 billion annual payments for 10 years.  According to Philip Rubio, a history professor at North Carolina A&T State University and a former letter carrier, no other government agency is required to pre-fund (it should be noted that the USPS is a quasi-government entity).

According to Bloomberg, the White House has agreed only to permit the USPS to borrow an additional $10 billion from the U.S. Department of the Treasury to cover its COVID-19 related shortfall. The chairman of the Postal Service Board of Governors and a Trump appointee, called the $10 billion loan “a nice start” but cautioned that it wouldn’t be enough. The USPS recently told Congress that because of the virus, it sees mail volume falling by 50% in the third quarter of the fiscal year that ends in September and 57% in the fourth.

Our CEO, John Haber, has been following the postal developments and recently commented on LinkedIn, “…this is a huge issue that needs to be addressed...…. both sides need to compromise before it's too late.”

Collaboration Needed

Indeed, collaboration is desperately needed particularly as Amazon, FedEx and UPS pull parcel volumes away from the postal network to handle in their own respected networks. Once a bright spot, parcel volumes are in a similar danger as that of mail.

With limited nationwide options for last mile delivery services, a clear and well thought out plan, not politics, is needed for the survival of the USPS.

 


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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USPS – In Need of a Life Line

April 16, 2020


Once again, the U.S. Postal Service (USPS) is in the hot seat, politically that is, as the cash-strapped entity announced recently it would run out of money by September. The coronavirus outbreak has severely impacted the post office and without government assistance, it could shut operations. According to Rep. Gerry Connolly, D-Va., chairman of the House Subcommittee on Government Operations, which has jurisdiction over the Postal Service, the USPS experienced a 5.3% decline in overall mail volume in early March. But, by the end of the month, mail volume fell 30%.

USPS Delivered Half of the World's Mail in 2019

The USPS delivered 143 billion items last year, almost half the world’s mail. Revenue in 2019 was $71 billion, which the Postal Service says would have made it No. 44 on the Fortune 500 if it were a private-sector company. However, the postal operator has lost $69 billion over the past 11 fiscal years, including $8.8 billion in 2019. Declining mail volumes and the 2006 Postal Accountability and Enhancement Act have been the major culprits for its financial woes. The 2006 Act requires the postal operator to pre-fund its retiree health benefits 75 years into the future with $5.5 billion annual payments for 10 years.  According to Philip Rubio, a history professor at North Carolina A&T State University and a former letter carrier, no other government agency is required to pre-fund (it should be noted that the USPS is a quasi-government entity). According to Bloomberg, the White House has agreed only to permit the USPS to borrow an additional $10 billion from the U.S. Department of the Treasury to cover its COVID-19 related shortfall. The chairman of the Postal Service Board of Governors and a Trump appointee, called the $10 billion loan “a nice start” but cautioned that it wouldn’t be enough. The USPS recently told Congress that because of the virus, it sees mail volume falling by 50% in the third quarter of the fiscal year that ends in September and 57% in the fourth. Our CEO, John Haber, has been following the postal developments and recently commented on LinkedIn, “…this is a huge issue that needs to be addressed...…. both sides need to compromise before it's too late.”

Collaboration Needed

Indeed, collaboration is desperately needed particularly as Amazon, FedEx and UPS pull parcel volumes away from the postal network to handle in their own respected networks. Once a bright spot, parcel volumes are in a similar danger as that of mail. With limited nationwide options for last mile delivery services, a clear and well thought out plan, not politics, is needed for the survival of the USPS.  
ABOUT SPEND MANAGEMENT EXPERTS Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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