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Question:
Can the USPS afford the high-priced Transformation Plan?
By T.L.
Righter, April 29, 2002 |
First, I’d like
to offer a little observation. Many people think that for the U.S.
Postal Service (USPS) to be viable, it must be profitable. I’m not
sure that Benjamin Franklin, the nation’s first postmaster, ever
really thought that the nation’s postal service could truly be
profitable. He viewed the creation of the nation’s postal system
as a government service that was necessary to bind the nation
together. In recent years, America has been fortunate that,
through the hard work of all postal employees (from Casuals to the
Postmaster General), the postal service has been profitable and
self sustaining. It’s been profitable despite the fact that the
postal service delivers to every inner city address and every far
flung rural farm six days a week. Six days – a luxury in my
opinion! The Postal Service is a $67 billion a year enterprise. I
believe, that although the USPS could take steps to become
profitable once again, that a $2 or $3 billion dollar annual
deficit is not such a scandal, especially considering that the
postal service facilitates trillions of dollars of American trade.
(The mailing industry itself is a $900 billion industry, according
to the USPS.) It’s true that the Postal Service has some
shortcomings. However, it’s also true that it does an over-the-top
job of delivering billions of pieces of mail a day to millions of
delivery points.
Over the weekend I finally had the opportunity to fully review the
U.S. Postal Service’s highly touted Transformation Plan. The plan
sounds good, - when you read it. It uses all the latest management
buzzwords I learned in college – particularly words I learned in
my Strategies and Problems in Management class. But look between
the lines and you will see dollar signs oozing from the pages. The
proposals will cost money, just like everything else in the post
office – and there are a lot of proposals in the plan. After
reading between the lines I searched the document for how the
Postal Service planned to pay for the transformation to the
preferred “Commercial Government Enterprise” model. I saw some
projected cost savings, but no real considerations as to the costs
of the projects. I’m just a little curious: How does the USPS
intend to pay for and finance the multitude of proposals outlined
in the plan?
Consignia, the British equivalent to the USPS, recently found
itself in dire straights. Like the USPS, it needs to transform.
Labor issues, declining mail volumes and the like have contributed
to declining revenues. Unfortunately, Consignia failed to act in
time, and now it does not have the financial assets to effect
needed reform. It’s in a death spiral, a term that some have used
to describe the U.S. Postal Service’s plight. The clock is ticking
– can the USPS effect needed changes while it still has the
financial resources to do so? Moreover, are the proposals found in
the Transformation Plan the right ones (proposals) to restore the
Postal Service’s financial viability and to maintain its economic
and societal relevance?
The proposals found in the Transformation Plan are high on ideals
and, in many cases, apparently high in costs. I invite you to take
a look at the Transformation Plan. It’s available at the Postal
Service’s Website –
www.usps.com. What you will find are proposals such as the
following. Consider the many costs when reviewing each item and
remember that for each of the examples below, there are twenty
more such proposals in the Transformation Plan. (Quoted sections
are from the Transformation Plan.) Among the proposals:
- The installation of commercial ATMS in post office lobbies.
(“This proposal would give customers the ability to conduct their
banking business as they would at any other ATM, and also provide
self-service for stamp purchases.”)
- A national database of the approximately 38,000 post offices,
stations, and branches. (“The database will contain all operating
costs, revenue, productivity, market penetration, customer
valuation, logistics, demographics, and technology connectivity.
The baseline review will be the foundation for decision-support
modeling of network optimization and restructuring scenarios.”)
- Enhanced and expanded training programs (“For critical line
supervisor positions, the Associate Supervisor Program will be the
standard for retaining and recruiting the best talent. For other
critical positions in the field and at headquarters, the Postal
Service is introducing new Management Intern (MI) and Professional
Specialist Intern (PSI) programs open to internal and external
applicants to build a strong bench for hard-to-fill positions. The
MI program will provide two years of training and outplacement to
a field manager position.”)
- Expansion of the Postal Service’s Website: (“The site has the
potential to handle most of the transactions that commonly take
place in post offices, especially when combined with carrier
pickup directly from the home or office.”)
- Delivery Point Package System: (“The long-term vision for
delivery operations is a seamless operation that culminates in one
bundle of mixed letters and flats for each delivery point, called
the Delivery Point Package (DPP). This vision is dependent on
having high-speed mail sorting and packaging equipment that will
efficiently sort and merge the letter and flat mailstreams in
delivery sequence for the letter carrier with the addresses on all
of the pieces properly oriented. If the processing equipment can
be designed, the labor-intensive manual preparation of mail in
sequence for street delivery would be reduced using
state-of-the-art packaging technology. The packaged volume would
then be made available at a central carrier point or location,
making the need for delivery unit sortation obsolete.”)
- Segway Human Transporter: (Currently under evaluation – “If
successful, use of the HT would reduce the carrier’s time on the
street and allow the expansion of the number of delivery points
per route. This device is being tested on a variety of routes,
terrain and climates. Tests will continue through 2002, and if
successful, deployment could begin in 2003.”)
- Expand Information and Technology Network: (“To raise the
efficiency of postal operations and develop a performance-based
culture, the Postal Service must make more effective use of
information technology. Using industry-accepted practices and
building on its current, robust technology infrastructure, the
Postal Service will continue to reengineer its infrastructure and
systems to take advantage of new technology and better business
processes. Although the current technology environment is adequate
to run today’s business, the Postal Service has deferred
investment in new technology infrastructure. The Postal Service is
actively working toward development of an “Information Platform”
that will provide high-value, reliable, and accurate information
to improve service and productivity for its internal customers. To
build this Information Platform, the Postal Service is focusing on
standardization and speed to market, eliminating costs wherever
possible. The Information Platform will integrate applications and
data, encapsulating it within a secure environment in order to
deliver value-added capabilities to internal and external
customers.”)
I’ve listed just a few of the many, expensive proposals outlined
in the plan. It’s true that some of the proposals could be funded
and managed by redeploying existing assets and personnel. Some can
be funded by replacing current programs with new programs. And
some can be afforded by future costs savings. However, for
examples, the USPS can barely afford a barebones Associate
Supervisor Program now. How can it afford an expanded program in
the future? The USPS can barely afford to maintain its fleet of
vehicles now. How can it afford a fleet of Segways in 2003? The
USPS can barely afford its information and technology
infrastructures now. How can it afford an expanded version in the
future?
Most troubling however, is that these many proposals do not
adequately and realistically address the core problem facing the
U.S. Postal Service – declining mail volumes and expanding
delivery points. The problem is simple, and the solutions are
simple (see
editorial). Yet, the Transformation Plan is exceedingly
complex and prohibitively costly.
The old cliché “You can’t see the forest for the trees” comes to
mind. Consider the following example about how the Postal Service
is missing the point, and the mark. The USPS is currently
installing a Delivery Operations Information System (DOIS)
nationwide. DOIS is a Web based information platform for use by
frontline letter carrier delivery supervisors to assist them in
operating their units. DOIS calculates, among many other things,
carrier workloads based on mail volume, deliveries, personal work
performance, and other factors. Actually, DOIS is a powerful tool.
It can analyze and give reports on a multitude of factors in a
number of ways. And because the system is Web based, the Area
Manager has access to the information, the District Manager has
access to the information, and the Area Vice President has access
to the information. The Area Vice President, could – if he or she
wanted to, pull up Joe Blow’s office performance data for Route
Twelve in Zone Eight for the first week of Accounting Period Six.
He can see the tree, but he may not be able to see the forest,
because his head is in the computer screen, just like the area
manager’s, and the delivery supervisor’s. The delivery supervisor,
for example, may know from DOIS reports that Joe Blow is using an
extra fifteen minutes a day of unauthorized overtime. But because
the supervisor is beholden to the computer because of DOIS and a
number of other computer-based reports, the supervisor does not
actually have the time to supervise the carrier on the street and
correct the shortcoming. The Area Manager may know that a certain
post office is underperforming in office (mail sorting) time. Yet,
because the manager is beholden to the computer, the manager does
not have time to visit the post office and remedy the situation.
The Postal Service is already drowning in information and reports,
yet it wants more information and reports. How about pulling
someone from Operations Support, the department and people who
manage this myriad of information systems, and put them to work in
a core duty (carrying mail, frontline supervision etc.)? That
would be a start.
The Postal Service needs to transform in many areas. But it needs
to transform in ways that are cost-conscious and cost effective
with a focus on managing core problems. Let’s hope, that among the
many proposals found in the Transformation Plan, that the
proposals that address core problems in cost-effective ways are
the ones that actually come into fruition. It’s all the USPS can
afford. |
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