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USPS looks at more centralised delivery while waiting for reforms

Monday, January 28th, 2013

USPS is looking at rolling out a more centralized approach to mail delivery across the country, as part of plans to accelerate its cost-cutting efforts, the Postmaster General told fellow employees last week.

Patrick Donahoe said in the “State of the Postal Service” message issued on Friday that USPS was in a “very tenuous position” regarding its cash flow following the failure by Congress to enact postal reforms by the end of 2012.

As a result, he said USPS will continue to default on its multi-billion dollar federal payments this year, until Congress can overhaul the situation, while the consolidation of mail processing plants will accelerate.

Donahoe was providing a little more detail on plans following the approval from the Board of Governors earlier this month for USPS to accelerate its cost-cutting programme.

Regarding the downsizing of the mail processing network, following last summer’s consolidation of 48 plants, USPS has already announced 18 additional mail plants that would have been closed in 2014 are being added to the 2013 consolidation list, which had numbered around 92.

But the Postmaster General also spoke of plans to cut costs in the delivery network, making a start on moving towards a more centralised delivery process.

The Postal Service has already been working to consolidate delivery routes, introducing its flats sequencing systems (FSS) to reduce the amount of mail that carriers have to hand-sort into walk order over the past few years.

Donahoe said last week that work on delivery route structure would continue this year, as per the terms of arbitration deals with the rural and city letter carrier unions.

The USPS Inspector General (IG) issued advice last September suggesting that the Postal Service could close more than 40% of its delivery units and still meet the needs of its customers.

Centralised delivery

The Postal Service is also working on moving to use more centralized delivery points to improve delivery efficiency – cutting the number of homes and businesses offered door-to-door mail delivery.

An IG study issued in July 2011 suggested that “aggressively” moving away from door-to-door delivery to more curbside and community delivery alternatives could save as much as $4.5bn a year in costs.

Donahoe said the expansion of centralized delivery system would take time, but would start this year. The use of community clusterboxes and the end of doorstep delivery in those areas that have it will come side-by-side with the roll out of on-street parcel delivery lockers, which USPS has been trialling under the brand “GoPost”.

“We’ll be looking at some centralized delivery, rolling that out across the country – no major push, but starting to move on that,” said Donahoe.

USPS is expanding more centralised delivery nationwide as it also rolls out its “GoPost” automated parcel delivery lockers

“It’s an opportunity to save some money and also provide better service, especially with parcel lockers that we’ll be installing at the same time.”

USPS told Post&Parcel today that it was at the very early stages of this process.

Initially, it will be geared towards business parks, industrial buildings and shopping malls where mail carriers currently go business-to-business to drop off mail. This will switch to a cluster box, where individual businesses will pick up their mail each day from a central location.

As for residential mail delivery, a Postal Service spokesperson said the move to new community delivery alternatives was “only in new developments”.

“Where the builder used to have a choice on type of delivery, we’re choosing for them – or at least moving in that direction,” said the USPS spokesperson, adding that at present residential property builders were being given the option of cluster boxes or delivery at the roadside.

Payment defaults continue

While changes are stepped up for the USPS to further reduce its annual $67bn operating costs, the Postmaster General said efforts will continue to work with Congress to get postal reform through this year.

But since the entire process of drafting, debating and passing postal legislation is now “starting from scratch”, Donahoe said: “We will not be paying the (retiree healthcare) pre-funding again this year ’til that issue gets resolved.”

The Postmaster General said the major focus of USPS was to have money on hand to pay employees and suppliers to make sure the mail got delivered.

He insisted that the Postal Service wasn’t looking to simply refuse to pay its retiree healthcare benefit obligations, but simply needed the payment schedule restructured to a more manageable yearly amount.

“We need to resolve the retiree health benefit pre-funding requirement – not get rid of it, not refuse to pay it,” Donahoe said. “It’s our benefits, it’s in our best interest to pay it – we’ve just got to pay it on the right schedule.”

Along with the restructuring of the retiree healthcare liabilities – which currently require around $5.5bn a year in payments – USPS will also once again push for its own healthcare plan independent of the federal system in this new Congressional session.

The Postal Service will also demand the return of a multi-billion pension surplus from the Federal Employee Retirement System (FERS). After various revaluations of that surplus, Donahoe said last week he believed the surplus to be currently worth about $6bn.

Aside from pensions and healthcare arrangements, Donahoe said USPS would be once again urging Congress to reduce delivery frequency from six days per week to five days per week, eliminating Saturday deliveries except for packages.

“We’ve got a lot of education to do, just to bring people up to speed on issues regarding the Postal Service,” the Postmaster General said of dealing with the new session of Congress.

Source: Post&Parcel/USPS

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