Postal Pain Continues With First-Class Mail Changes

Don Landis, vice president of postal affairs for catalog printer Arandell Corp., has seen it all in the mailing industry. That is until the U.S. Postal Service filed for change of standards that will dramatically alter the First-Class Mail process and also close 252 of 487 mail processing facilities in the next two years.

“From someone who has been in the mailing industry for over 40 years, I am sorry to see this,” Landis says. “Yet, the reality is First-Class volume is declining at an alarming rate. The system is designed around First-Class C mail so obviously something has to be done by postal management since Congress seems to be reluctant to act. I am afraid this action will speed up the decline in First-Class volume, which could cause a decline in volume for all classes.”

While Congress sits and debates the potentially devastating postal issues, members are already calling for Postmaster General Patrick Donahoe’s job – a position he’s only for just over a year.

“I find it somewhat amusing when a congressman wants PMG Donahoe fired when it is Congress that will not act,” Landis says. “What do they expect PMG to do? It is time for the American public to decide what kind of postal service they want and are willing to pay for.”

The U.S. Postal Service must reduce its operating costs by $20 billion by 2015 in order to return to profitability, said David Williams, vice president of network operations for the USPS. “The proposed changes to service standards will allow for significant consolidation of the postal network in terms of facilities, processing equipment, vehicles and employee workforce and will generate projected net annual savings of approximately $2.1 billion.”

This is part of the overall savings expected from the network optimization initiative, which is projected to save up to $3 billion by 2015.

Through its filing, the USPS is proposing to move First-Class Mail to a 2-3 day standard for contiguous U.S. destinations; however, there would be an opportunity for mailers who properly prepare and enter mail at the destinating processing facility prior to the day’s critical entry time to have their mail delivered the following delivery day.

What’s more, overnight service for significant portions of First-Class Mail and periodicals will be eliminated. Two-day delivery would be greatly expanded and some current two-day service would be moved to the three-day delivery range.

How will these changes affect multichannel merchants?

“It all depends how well the USPS communicates network changes and service changes to the mailing industry,” Landis says. “What they are trying to accomplish are the biggest changes in the history of the USPS. If it is not well thought out, organized, and well commutated to the industry, it will be a disaster causing so much chaos the mailing industry will find other means to communicate with their customers.”

Donahoe has said that in 2000, about 5% of Americans paid their bills online; that figure now stands at 60%.

Besides ridding the USPS of the annual prepayments for retiree health benefits, Donahoe hopes the Postal Service can create a new health insurance plan for employees at the start of fiscal year 2013 at a cost of about $1.3 billion.

Sinking mail volume, massive annual payments for retiree health benefits, and an entirely unhealthy fiscal situation have placed the USPS in a precarious position – whereby it’s forced to further reduce costs because of an oversized network and little help from Congress.

The Postal Regulatory Commission will submit an advisory opinion to the USPS regarding the service standard changes associated with a significant rationalization of its mail processing network.

In the USPS filing, the Postal Service does not expect first-class mail volume to reverse its decline in the foreseeable future,” USPS lawyers wrote. “While an economic recovery could slow its rate of decline, the growing use of the Internet and other forms of electronic communication will likely ensure that the class continues to lose volume each year.”

Closing up to 252 processing plants will mean a loss of about 28,000 jobs. Included in the filing is the following line that says the law “does not require that long-standing products, service features, and operational practices be maintained primarily for the purpose of preserving a tangible link to an iconic past, or to perpetuate a nostalgic image of the agency or its employees.”

NALC (National Association of Letter Carriers) President Fredric Rolando responded to the Postal Service’s announcement that it plans to reduce delivery standards with the following statement:

“We are very concerned about the proposal to reduce delivery standards. High-quality service is essential to preserving the value of our networks and to any future growth strategy. Degrading standards not only hurts the public and the businesses we serve, it’s also counter-productive for the Postal Service because it will drive more people away from using the mail. Changes in service need to be part of a coherent business plan that takes advantage of new opportunities, such as delivering the items people increasingly order online. We urge the Postal Regulatory Commission to review the proposal carefully and act to protect the long-term viability of America’s Postal Service.”

Sen. Tom Carper, D-Del., chairman of the Senate subcommittee that oversees the Postal Service, was disappointed by the news and views it as “another grim reminder that we must act quickly if we want to save the Postal Service and the 8 million jobs that rely on it. The few measures that the Postal Service can adopt on its own — such as closing distribution centers and slowing down first-class mail delivery times — to extend its survival and avoid insolvency will also potentially further erode its declining business.”

Joe Schick, director of postal affairs for printer
Quad/Graphics, says the USPS network needs to be right-sized. “Since First-Class overnight delivery is the driver for postal processing and transportation, it has to be changed to facilitate the needed reduction in sorting equipment, transportation, facilities and unfortunately, people.”

Schick adds: “Are we concerned about delivery and service in general while Network Optimization is being implemented? Definitely. Delivery has been slow and inconsistent for the past few months, and unfortunately, we can only anticipate that continuing. There is hope that the USPS will get their arms around it and minimize the disruptions in service in 2012. But then we all know that hope is not a good business strategy.”