Staying Alive: Tribulations of the United States Postal Service - Network Week

By Zachary Schepis

Photo courtesy of Aranami.

For nearly three hundred years, the United States Postal Service has delivered mail into the outstretched and never-ending hands of its citizens. Beginning with the revolutionary stirrings of first postmaster general Benjamin Franklin, the system has since become one of the nation’s largest civilian employers. It operates with a staggering force of nearly 400,000 employees who collectively transport more than 44 percent of the world’s cards and letters. In a single year, this figure mushrooms to approximately 212 billion pieces of mail. For a 44 cent stamp you can send a letter anywhere within the border: they’ll even carry it to the bottom of the Grand Canyon by pack mule.

Imagine what would happen if this gargantuan web of connectivity suddenly split. What kind of world would we be left with?

It may seem inconceivable. We have grown so accustomed to seeing the trucks line up like clockwork along the streets. The mailman shows up, drops off the mail, and we don’t even bat an eye. The possibility of such collapse, however, is far from outlandish.

Over the past decade a series of crippling blows have been dealt to the pillars of this seemingly indomitable system. To start, USPS draws the majority of its funding from first-class mail. Despite this in 2005, after a steady decline, it fell beneath junk mail for the first time. This marked a considerable turning point for the postal service, as it takes nearly three pieces of junk mail to compensate for the lost profit of a single stamp-marked parcel.

Two years later the USPS lost its ability to cover annual expenses. In fact, the only reason why it’s still breathing is due to the mercy of the US Treasury, which lent the dying organization over $12 billion. But even this daunting sum wasn’t enough to keep the sprawling infrastructure from teetering closer and closer towards collapse.

BTR talks with a current USPS employee who has been a letter carrier for over 25 years. He moved to New Hampshire from Puerto Rico in 1984 and began work immediately. Today he delivers mail in Fort Myers, Florida. To ensure the safety of his job he has decided to retain his anonymity. For the purpose of this article he will be referred to as Robert.

“Everything has changed,” he tells BTR. “It didn’t use to be so automated. We used to sort through loads of mail before going out on routes, organizing it all on different racks. But people don’t send bills as much as they used to with the internet. Same with letters. We don’t process nearly as much mail anymore.”

As of August the USPS reported its yearly losses to have reached $3.9 billion. The majority of this is a direct result of a requirement for the agency to prepay for future retiree healthcare. It’s a bill no other company or agency in the country is required to pay.

“Nobody else does that,” says Robert. “This is the only organization that is not government funded – they raise pennies. But we make these payments for years; if it wasn’t for that we wouldn’t be in the red. The postmaster asks Congress to give all of the retiree fund money back, but personally I think the government is spending it.”

In an attempt to stave off more debt, Postmaster General Pat Donahue proposed a plan to reduce $20 billion worth of costs by 2015. Unfortunately, this entails the cutting of 150,000 jobs over the next few years, along with the elimination of Saturday delivery and delays to local mail. Furthermore, back in November of 2010 President Obama halted pay for the majority of two million federal employees for two years. The estimated loss will be $60 million in pay and benefits over the course of the decade.

The bad news keeps piling up, and Brian Sheehan dutifully sorts through it all. Born out of his interest in tracking postal news to share with coworkers, Sheehan started the USPS informational database in 1998. He worked for the USPS for 31 years before retiring in 2010. His site remains up to date with the latest in USPS developments.

“The first thing that needs to happen to get the USPS back on track is to reform the retirement funding issue,” Sheehan tells BTR. “The PAEA trust fund issue is the biggest financial impediment the system faces right now.”

Without this requirement, which exists as little more than an accounting entry, the USPS would have pulled in a profit of $330 million so far this year alone. But the system, by law, cannot turn a profit. They are under a strict break-even mandate.

Sheehan is quick to point out that this isn’t the only immediate problem in need of remedy.
“The long term future of the USPS depends on the agency adapting to rapidly shrinking first class mail, volatile advertising mail, and a growing package delivery segment,” he explains. “The big problem is that the package segment, while lucrative, is still a lot smaller than first class. In the future there won’t be a relatively stable, high margin first-class revenue stream to underwrite the system’s infrastructure.”

So where do FedEx and UPS play into this? During comparable periods, FedEx domestic values continue to grow while the USPS flat line and drop. This is because FedEx has focused its business on providing for the growing demand of business to consumer (B-2-C) deliveries. By going after the e-tailing business they guarantee that they will have a product for customers who will choose from all types of shipments.

As part of their standard operating model, FedEx ground delivery utilizes the Postal Service to deliver lighter-weight home-delivery parcels. Because the parcels are sent by price-wary shippers to price-wary customers, who are in-turn drawn to free delivery, these parcels are the least profitable for FedEx and its contractors to handle.

Recent news regarding a secret financial agreement could buy the USPS negotiating leverage with both UPS and FedEx. In a bold financial leap revealed last month, USPS announced a partnership with that will include Sunday package delivery starting in New York and Los Angeles. The deal was negotiated in complete secrecy under a seal from the Postal Regulatory Commission. Neither party is willing to disclose details.

“We have a longstanding partnership with the US Postal Service,” Amazon Corporate Communications spokeswoman Kelly Cheeseman tells BTR. “We feel like our customers will love Sunday delivery and we’re excited to roll it out to a large portion of the US population in 2014.”

Will this new arrangement be enough to compensate for all of the steadily accruing debt? Even ignoring the monetary mountains that must be conquered before progress can be made, there are more hurdles ahead. A stamp released by the postal service in 2011, which was meant to depict the Statue of Liberty, was instead based on a similar but distinctly different replica located outside the New York-New York Hotel and Casino in Las Vegas. The sculptor is currently suing the government for copyright infringement.

Sheehan maintains that the deal offers potential for improvement, but the likelihood of real success seems doubtful.

“The Amazon deal could be profitable for the USPS if it’s planned and implemented properly,” he says, “but I wouldn’t expect any USPS profits to be significant. It’s a very small segment, at this point at least, and Amazon won’t pay the USPS a premium price indefinitely. If it becomes an ongoing service they’ll look for providers who can do it cheaper than USPS.”

Florida postal-worker Robert doubts the process for an entirely different set of reasons.

“It’s an experiment,” he tells BTR, “and I’m a little skeptical. You get spoiled with convenience. I know they’re going to hire part-timers to deliver the Sunday packages. Are these new guys going to be the most qualified for the job? I’m not so sure about that. There could be mis-deliveries. In my location we have a lot of streets that sound the same, and if you’re not paying complete attention or know the area then you can easily miss or confuse drops. We’re already well-trained, and more importantly, already familiar.”

Photo courtesy of Wikipedia Commons.

“I just don’t see what the rush is,” he continues. “If you need to go shopping for Christmas, why not just do it early?”

Only time will tell if this new decision will prove lucrative. For a country that has benefited from its service since the inception of its very first colonies, many Americans will be crossing their fingers for the USPS to shine through.

“I’m entirely sure how the USPS can pull itself up by its boot-straps,” Sheehan reflects. “It would have to involve a smaller but more flexible infrastructure, more deals like the Amazon arrangement, and less favorable salaries and benefits for employees.”

“That last item is the one I find most disagreeable, but it’s an unfortunate fact of life in a country where the middle class continues to lose ground as the rich get richer,” Sheehan tells BTR.

“I just don’t see that changing for postal workers until the rest of the country wakes up to what’s happening.”