Can the USPS regulate itself into good health?

The Domestic Mail Manual is the USPS bible. Once upon a time, it was written in “postalese,” understood by only a handful of postal career types. Today, it’s written in English, but it’s still tedious to digest. The real issue is that the rules keep changing —and not to the end users’ benefit. Three of the latest changes necessitate graphic redesigns, technology upgrades and production line reconfiguration — more about those later.

Any company or organization that must deal with a regulatory agency understands the economic impact of massive rule changes. First, someone needs to fully understand and grasp the new rules. Second, a corporate response strategy must be researched, and clients need to be educated and brought up to speed about how the changes will affect them and any modifications they must make. Third, all additional costs must be analyzed and planned for going forward. The questions that usually follow rule changes are: Can we absorb the extra costs? How much will these changes delay the process? Will our customers stand for us passing along some, or all, of the extra costs? OK, this seems like fairly normal business thinking, but not as far as the postal mindset is concerned.

The powers that be at the USPS seem to have their own unique sense of logic, which is, at best, illogical. Here’s how they think: “The economy is bad, so let’s raise our postage rates…Our sorting machines can’t sort the mail fast enough, so let’s force our clients to produce only mail that we can run faster…Our letter carriers must have everything facing the same direction, so let’s make our customers redesign their catalogs to accommodate our carriers…We haven’t figured out how to keep track of our mail, so let’s create a whole new system and force everyone to use it.”

Even a novice business person can recognize that this way of thinking is a prescription for failure. In case you haven’t noticed, the USPS is controlled by executives who clearly don’t get it. When the government made the USPS a “quasi” agency, they were told to become profitable — or at least make themselves self supporting. How in good faith could that ever possibly happen when they can’t do business without the approval of Congress?

The USPS cannot operate effectively in both the governmental and private sectors simultaneously because whenever it suits them, the federal government can manipulate the business dealings of the USPS through the Postal Rate Commission. For example, the USPS is the only agency, “quasi” or not, that is required to prepay retirement benefits for its employees. Return that money to the bottom line and, voila, the financial picture of the USPS changes for the better. The following is from the August 6, 2009 testimony of David C. Williams, Inspector General, United States Postal Service before Congress: “The first 6 months of this year’s payment to the Postal Service Retiree Health Benefits Fund was $2.7 billion. If not for this payment, the Postal Service would have made $400 million instead of losing $2.3 billion in the first half of 2009”. Legislation is now moving slowly through Congress that would at least give the USPS partial relief from the payment.

We all understand the universal delivery mandate that the Post Office has: If it has an address, the mail piece gets delivered to it – period. But, delivery to some of those addresses is far more costly than it is to others for a host of reasons. Should there be a premium for those deliveries, similar to the UPS’ up charge for residential addresses as opposed to commercial or business addresses? The financial condition of the Post Office has prompted the Postmaster General to ask Congress to eliminate one of the six delivery days. This would be a no-brainer in corporate America, but so far, Congress refused to comply with the request — truly a prime example of the government’s inability to run a business.

Back to the changes I mentioned at the start. They:

1) The new “Flats” Addressing Standards, which impact catalogs, magazines and newsletters larger than lettersize mail (your typical 8.5 x 11 multi-page mailers). To facilitate mail dissemination to individual letter carriers in walk route sequence, the USPS now mandates that “flats” must be intermingled with the rest of the day’s mail in what is known as “Delivery Sequence.” This means that all addressing must now be in the top half of the publication/mailer. Simply put, if you hold the piece with the closed spine to the right, the address must be within the top half. It can be printed horizontally, vertically or parallel (everything except upside down).

2) Self-mailing multi-page booklets that otherwise fall into the “lettersize” postal rates now require THREE 1 ½” non-perforated wafer seals – TWO on the leading edge and ONE on the trailing edge. This change creates one or two production scenarios: Multiple passes through tabbing and addressing equipment or the purchase of newly developed equipment designed especially to accommodate this change at the cost of thousands of dollars. And just to make the changes more onerous, they won’t permit the use of perforated tabs for easy opening. The new configuration and tabs will certainly cause the mail piece to tear… BUT the USPS will be able to run their sorting machines faster.

3) The Intelligent Mail Barcode will replace the now-familiar PostNet barcode. PostNet barcoding was implemented over 10 years ago to allow for the automation of mail sorting down to the carrier route walk sequence level. As we all know, it revolutionized the entire mailing industry. It allowed substantial postage discounting for mailers using barcodes in sorted order because it enabled the Post Office to work less and therefore save expenses. The discounts were based upon the depth of the work done by the mailer before the mail was given to the Post Office. The Intelligent Mail Barcode (IMB) goes even further. In an attempt to reduce paperwork and track productivity, the USPS has created a new technology that allows it to conduct mail sorting and delivery more electronically. The IMB will require extensive additional technology and processing by professional mailers and other postal customers to achieve any of the postage discounts.

These three changes are all geared to meeting USPS needs, but they ignore the needs of mail producers. A case can be made that the USPS is trying to mandate itself into better productivity at the cost of forcing mailers to seek other ways to communicate. In 2009, electronic communication alternatives have already substantially decreased the amount of mail that the Post Office handles. When you couple this volume decline with increased costs, the Postal Rate Commission must raise postage rates. But, each rate increase further erodes mail volume. It’s a never-ending cycle.

So…to answer my lead question: Can the USPS regulate itself into good health? The answer is a clear and resounding NO!