Opinion: Reforming the United States Postal Service
By John Capanelli
I>President
R Donelley Logistics
These days, the hot topic of conversation in the mailing industry is the urgent need to reform the United States Postal Service. So what is postal reform all about? In essence it all goes back to the Postal Reorganization Act of 1970, which is the governing structure that regulates how postal rates are made. It also requires the Postal Service to provide delivery to virtually all addresses in the nation, defined as the Universal Service Obligation. Unfortunately, the structure is outdated and in desperate need of reform.The commitment to universal service is what has made the Postal Service a cornerstone of our democracy. However, over the past several decades, the distribution landscape has changed dramatically. An entire industry has evolved to serve the delivery needs of the people, leveraging the Postal Service’s unique ability to provide distribution for all, regardless of whether the merchandise to be delivered is a letter, magazine or consumer good.
Although there are many changes mailers would like to see come from postal reform, there is much about the U.S. Postal Service that works well and that should not be changed. Generally speaking, it does an effective job of delivering hard-copy information and consumer goods to every household in the nation six days a week.
Preserving these capabilities depends largely upon the Postal Service’s retaining the exclusive right of access to all mailboxes. By maintaining all current services, the postal service is able to provide convenience, privacy and security. Protecting its unrivaled “last mile” is essential to its ability to continue to serve the public.
And yet, despite the clear advantages that the Postal Service’s last-mile capabilities provide, there are limitations in the current operating model. For instance, the Postal Service struggles with operational problems, including failure to achieve acceptable productivity increases; inability to optimize the upstream distribution; lack of support for optimizing the retail network; sporadic use of information technology and business data to pinpoint operating inefficiencies; and inconsistent or suboptimal use of its assets.
Operationally, the mailing industry wants to see the same dynamic take hold of the Postal Service as we see in private businesses. Over time, initiatives should be launched that would improve the quality of service while decreasing costs.
Service improvements are another area in need of immediate attention. Delivery needs to become faster, with a more precise delivery window that could make using the postal service as predictable as using some of its private-sector competitors.
Better information systems are critical for many reasons. First, better data integrity would be a key driver of service improvements. Second, electronic filing capabilities would reduce paperwork and eliminate errors. Finally, information systems need to be improved to provide greater visibility of the entire postal stream, letting the postal service pinpoint service issues and establish points of accountability.
While the Postal Service is building up its technology infrastructure, it should also be streamlining its upstream network. Inefficient facilities should be closed and the work consolidated or outsourced to private industry.
Several financial changes would let the Postal Service serve its constituents yet remain financially strong. Regulatory changes should shift how it views revenue, efficiencies and continuous improvement, and a mandate for financial transparency should hold it accountable to the same standards as its private-sector counterparts.
Changes must be made to current ratemaking processes that would establish solid limitations and create a structure that will make rates more predictable. Additionally, the “politics” of rate-making must be eliminated in order to streamline the process. Caps should be set to tie rates to the Consumer Price Index. Whenever rate increases exceed pre-established business rules, the rate case would be subject to regulatory review.
No discussion of relaxing ratemaking should be undertaken without ensuring that rate controls don’t come at the expense of service. Not only should service standards be clearly defined, but performance to standards should be publicly reported. Management incentives should be established to hold rates in check through increased efficiencies.
New lines of business also should be reviewed to guarantee they represent a natural extension of the core mission, that adequate market testing has been done to prove the new product viable and self-sustaining and that appropriate public review has taken place to protect free trade and prevent the Postal Service from unfairly leveraging its monopoly status.
We chose to submit testimony to the President’s Commission on the United States Postal Service because we believe in the mission of the Postal Service and support changes that will ensure its continued health and viability well into the 21st century.
The writer delivered these comments at an April 4 field hearing in Los Angeles of the President’s Commission on the United States Postal Service. R.R. Donnelly Logistics, Willowbrook, Ill., specializes in mailing services and package delivery among other services.
This article appears in the April 14 print edition of Transport Topics. Subscribe today.
