Ensuring a Viable Postal Service for America

From: Joe's Blog / Quad Graphics (http://www.qg.com/joesblog.asp)

Those of us that attended the USPS briefing last Tuesday were encouraged that the Postal Service was finally laying out their plans for the future. Given their fragile financial position and the rapidly changing environment in the way that content is being delivered to consumers, many of us were expecting to hear something innovative and far-reaching. Instead we heard more of the same. I'm not going to go through all the issues that were discussed. Instead I'll focus on those big-ticket items that will impact Quad and our customers to the greatest extent.

We were told that Congress needs to allow the USPS to manage their business without interference as it relates to their ability to close and/or consolidate postal facilities. I, along with my colleagues, have stated this numerous times in the past. So we agree with the Postal Service.

We were told that Congress needs to correct the required prefunding payments for retiree healthcare that has crippled the Postal Service over the last few years. Agreed, and many in the mailing industry along with their associations are actively lobbying for that to happen.

We were told that the USPS must be allowed to reduce mail delivery to 5 days as soon as possible. In this case, the majority of the mailing industry (Quad included) is not so quick to agree. At this time we neither support nor oppose the idea. We just want to ensure that the Postal Service is considering all businesses and the impact on mail as an effective method of delivering content before making what equates to a major change in processing and delivery. And we also want to be convinced of the actual net savings (minus loss of business - current and potential).


We were told that the USPS must be successful in negotiating the next contracts with the labor unions. I'm not sure what the USPS considers successful, but I would hope that it is in line with what the mailing industry is expecting. However the agreements are structured, they must reduce labor costs to something less than the 80% of all costs that it has represented for as long as anyone can remember.


We were told that if the aforementioned actions were not successful, the only way to manage the finances would be through pricing and new products. In very simple terms, that means that mailers will be asked (or should I say forced) to pay higher postal prices to prop up all the other stakeholders. The Postmaster General made it very clear that this process will start with an exigent price increase in early 2011 (assume January)...unavoidable it was called. I also call it potentially illegal since the exigency clause in the law (PAEA - Postal Accountability and Enhancement Act of 2006) was meant to apply to real emergencies....read: catastrophic events like Hurricane Katrina and the anthrax attack. Remember that in an exigent filing, the Postal Regulatory Commission has the authority to change the numbers which could result in increases much different from what the USPS proposes.


It was also announced that the Postal Service will start correcting cost coverage issues for classes of mail that aren't covering their costs (i.e., Periodicals, Standard Mail Flats, Media & Library Mail and Nonprofits). Again, in simple terms that means even greater price increases for those classes/categories of mail. Those of us that follow these mind-numbing details are well aware that there is an argument to make about the USPS' costing methodology. We also know that many times the Postal Service will process mail in a way that serves them well at a particular time, not necessarily processing mail as we are lead to believe to be the most efficient manner. A prime example would be moving carrier route presorted flats to automated processing because volumes are low. That is the prerogative of the USPS, but it should not be counted against flats as an extra cost. Correct the costing problem before penalizing mailers.

My message on what to do:

1) It's all about lobbying Congress for adjustments to the payment schedule for retiree healthcare and allowing the USPS to close and/or consolidate postal facilities where it makes good business sense.


2) I wouldn't recommend lobbying for 5-day delivery, but if you feel that you can adjust your business to fit a 5-day environment without too much pain, make that known to your Congressional reps. Otherwise stay neutral on that issue for now (neither support or oppose). We'll understand this a lot better after we see the USPS filing with the Postal Regulatory Commission later this month.

3) You should also be communicating to the USPS that we don't believe their costing methodology to be accurate, and therefore mailers (Nonprofits and Flats in particular) should not be penalized until that is reconciled.

4) And, finally, we should be challenging the legality of an exigent price increase resulting from the poor economy.

One of the disturbing comments made was that "no one was at fault" for the problems the Postal Service was experiencing. Maybe that was because there is enough blame to go around for everyone involved. In any event, somebody needs to be accountable. I'll let you decide who that should be.

All documents related to the briefing (background and presentations) can be found on the USPS website: http://www.usps.com/strategicplanning/futurepostalservice.htm.