The U.S. Postal Service has been the trending story in the news cycle for the last few weeks, raising questions about a variety of Postal Service issues including mail delivery, operational changes, removal of equipment, and USPS finances. As a result, marketers are asking questions about what to expect in the coming weeks and months, and how to plan for their fall marketing campaigns.
Much of the controversy has focused on the ability of the Postal Service to support expanded Vote-by-Mail activity during this fall’s election. Louis DeJoy, who instituted several operational changes after becoming the 75th Postmaster General (PMG) on June 15, was called to testify before both the Senate Homeland Security and Governmental Affairs Committee and the House Oversight and Government Reform Committee. Both hearings provided more insight into political talking points than into the actual state of the agency.
It should be noted many of the operational changes being implemented by the new PMG simply expand efforts already underway that focus on Postal Service issues such as improving efficiency, aligning processing and delivery operations with current mail volumes, and reducing costs, but anecdotal reports of mail delays remain concerning. For a better understanding of recent changes that have brought the Postal Service to its current role in the spotlight, check out this background article by ABC News. Let’s look at where the Postal Service is today:
Current Status of Mail Delivery
Despite the media hype, the vast majority of Marketing Mail volume continues to be delivered on time. IWCO Direct’s mail tracking reports show drop-shipped Marketing Mail automation letters are arriving in one to three USPS delivery days after the pallet arrives at a Destination SCF facility. In other words, the USPS service standard for delivery is being met.
There have been some delivery delays in isolated pockets around the country due to COVID-19. In these hotspots, employee availability issues and peak season package volumes have created the isolated service stories reported in the media in various geographic regions. The Postal Service is keeping their employees safe and accelerating hiring to ensure they have staff on hand to maintain service standards for all classes of mail. These delays of one to two days are not widespread and remain isolated to specific ZIP codes. Our logistics tracking team considers these to be delivery anomalies.
Impact of Operational Changes Implemented in July
Service standards have not changed. What is new is the focus to change the USPS culture to start and finish operations on time and operate as a single team. The Postal Service had compensated for this lack of discipline in the past with extra trips, late dispatches of transportation, or dispatches of half empty vehicles due to processing delays. The late arrivals of sorted product at Post Offices resulted in letter carriers hitting the streets later and incurring more overtime.
Achieving consistent and predictable service at affordable rates are critical Postal Service issues, and the USPS has made substantial improvements in aligning in-plant operations with scheduled transportation. Their internal on-time transportation dispatch schedule reached a score of 97.3% (up considerably from 89.8%). Extra unscheduled transportation trips were reduced by 71% during the same time period. However, due to concerns about the impact of these changes on mail delivery and potential impact on Vote-by-Mail, the Postal Service has stated it will delay these changes until after the election.
Removal of Sorting Equipment
The initiative to right-size automation equipment to mail volume is nothing new. It has been in place since 2015 when a realignment of facilities, transportation, and available operational hours took place. This initiative has resulted in better equipment utilization with less staff and lower maintenance costs while running remaining equipment for more hours each day.
Based on the PMG’s announcement last week, we don’t expect the USPS to reinstall any mail processing equipment already removed, as they don’t need it. Equipment that was already scheduled for de-installation will simply stay in place and remain unused until after the election.
Postal Service Finances
The Postal Service has proven to be much more financially resilient than was feared at the beginning of the pandemic. Increased parcel revenue has helped to offset the dramatic loss of revenue, due to COVID-driven declines in mail volume. USPS revenue in the third quarter (April – June) increased by more than $500 million compared to the previous year. In fact, the Postal Service has reported some of its best financial results in the past five years.
The Postal Service has asked for a temporary rate increase on commercial parcels to offset some of the additional COVID-19 related costs it is incurring by processing peak-level parcel volumes. This commercial parcel rate increase will begin on October 18. Marketing Mail is not affected.
PMG DeJoy has agreed to loan terms to access up to a $10 billion line of credit from the Treasury Department (authorized in the CARES Act) should the Postal Service need access to cash.
Current forecasts do not show the USPS running out of cash until May 2021 (worst case) or September 2021 (best case). These forecasts assume no additional operational or legislative changes and were made before the parcel price increase was announced and did not include access to the new line of credit.
In in a recent article written for the New York Times, former Postal Regulatory Commission Chair Ruth Goldway states, “I urge everyone to be calm. Don’t fall prey to the alarmists on both sides of this debate. The Postal Service is not incapacitated. It is still fully capable of delivering the mail.”
We agree with that statement. There’s a lot of political theater happening around Postal Service issues right now, but it remains a strong, resilient provider of essential services for the American public, including the marketing industry. Come back on Friday when we’ll discuss how marketers can best prepare for the fall mailing season.
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