Published September 10, 2020
While COVID-19 can be credited with disrupting many businesses and industries, the truth is that the USPS was struggling long before the pandemic hit. While there are many different views on what went wrong and how to fix it, there are two points we must examine closely to truly determine the best path forward for the USPS.
The first point that must be understood is the mission of the USPS. The formal mission statement can be found under Section 101(a) of Title 39 of the Postal Reorganization Act as follows:
“The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities.”
The USPS is not about making profits but rather about “binding the Nation together.” Certainly, the definition of “prompt, reliable and efficient services” could be argued in these times of VUCA (volatility, uncertainty, complexity and ambiguity), but it is clear that the USPS must serve all communities. It is also clear that the USPS has a monopoly on first-class mail but has many competitors in express mail, parcel and all other forms of delivery. Unfortunately for the USPS, first-class mail has dropped by 50% over the last 20 years while-due to the unbelievable growth of digital commerce-parcel delivery has more than quadrupled over the last 20 years. So where the USPS has a monopoly, volume is way down, but where they have competition, volumes are way up. Thus, the competitive position of the USPS is challenged and the parcel competitors can strip off the highly profitable large city volumes and continue to pass the less profitable rural volumes to the USPS.
The second foundational point occurred just as the fall of first-class mail and rise of parcels began to change the dynamics of the USPS. In 2006, the U.S. Congress put in place the requirement that the USPS prepay retiree and health benefits 75 years in advance. This requirement left an organization that was designed to be nonprofit with competitive headwinds and an annual deficit approximately equal to this highly unusual prepayment of benefits. These realities have been eroding the ability of the USPS to fulfill their mission and then COVID-19 hit the USPS just as hard as it hit all businesses. First-class mail further dropped and parcel volumes accelerated more than ever before. By the spring of 2020, the USPS was in deep trouble and some new thinking was required. It was clear that the definition of prompt, reliable and efficient services needed to be recast and major changes needed to be made.
Major challenges still exist at the USPS today. The current definition of prompt, reliable and efficient services, the requirement to go to every address in the United States six days a week and the requirement to prepay retirement and health benefits 75 years in advance cannot exist without a huge annual contribution by the U.S. government. With the drop in first-class mail and the increased competition in parcel delivery, the USPS must either be subsidized or undergo massive reengineering. I believe an outsider’s view with a strong background in major logistics systems design and execution is required to evaluate the alternatives and create, sell and implement a new USPS that has a clear charter, funding and the ability to be successful. Without this new USPS, the current organization will continue to disappoint its customers on service and/or financial performance. Expecting the USPS to be successful under its current requirements is unrealistic and will result in continued failure.