The United States Postal Service and its International Business in Today’s Economy

Deputy Postmaster General Patrick R. Donahoe, Mail & Express Review February 2009 In a recent edition, Mail and  Express Review interviewed U.S. Postmaster General John E. Potter on the future of the U.S. Postal Service. In this issue, we conduct a follow up interview with Deputy Postmaster General Patrick R. Donahoe, with a special focus on international shipping. In his role as Chief Operating Officer, Donahoe oversees all operational areas of the Postal Service, with nineteen vice presidents and business groups reporting to him, including the agency’s Global Business unit.

How is the current economic situation affecting the Postal Service, and in particular your international business?

Donahoe: The worldwide economy is making headlines every day. A global downturn significantly affected almost every economic sector worldwide last year, and none more so than the postal industry.

As your readers are well aware, economic declines always lead to drops in mail and shipping volumes. In the United States, we are experiencing the biggest volume decline in decades and reported a US$2.8bn operating loss in fiscal year 2008. However, the Postal Service has acted quickly, changing our operations, staffing and facilities to match the drop in volume. It is all about continuing to streamline operations, becoming more efficient and adapting our products and services to address dramatically changing conditions. At the same time, we have refocused our growth initiatives to better address the same changing conditions.

One of the top areas for growth is international shipping and mailing. Even with overall mail volume shifts, USPS saw international revenue grow last year. Since we established a new, focused Global Business unit in 2006, our international revenues have grown by more than US$600m.

The Postal Service recently appointed a new Global Business unit leader. Will that change your direction in international business development?

Donahoe: Our previous Global Business managing director and senior vice president, Paul Vogel, is familiar to many of your readers. A driving force in international growth, Paul retired from the Postal Service 1 February after a long and successful career of nearly forty years. Well known throughout the international postal community and in logistics and shipping circles, Paul was instrumental in growing international USPS revenue from US$1.7bn in 2006 to more than US$2.3bn in 2008.

I am pleased to introduce as Paul’s successor an individual who worked closely with him and who will continue to develop the Postal Service’s international business in much the same vein, former Global Business Strategy and Technology Executive Director, Pranab Shah. In his new position as Global Business managing director and vice president, Pranab is responsible for managing the Postal Service’s worldwide trade with a focus on international business management, financial and commercial analysis, network strategy and technology, and international relations. He also manages international operations, including the Postal Service’s five International Service Centers, which have all earned Certificates of Excellence in mail processing from the International Post Corporation.

Pranab joined the Global Business team in 2006 and led new business development initiatives with key foreign postal administrations and private integrators in Europe and Asia. Before joining USPS network operations in 2001, he was a senior executive with ten years’ experience in private sector international management consulting. He specialized in business strategy, supply chain management and emerging technologies across a range of industries, so is well prepared to lead the Postal Service on its continued path of international growth.

Can you be more specific about some the of the Postal Service’s international growth strategies?

Donahoe: One of our major international growth strategies is to continue to build partnerships with other postal agencies, consolidators and integrators. These types of partnerships benefit customers in both the United States and other countries. They establish pricing flexibility, innovative customer solutions and transparency from origin to destination, regardless of domestic or international borders. It is a strategy that aims to increase the overall international market, bringing larger business opportunities for all partners rather than small, incremental market share gains.

Another key growth strategy is to continue to provide competitive affordable pricing. This is reflected in the Postal Service’s recent move to annual January price changes for all shipping services. In our suite of international expedited products and services, Global Express Guaranteed, Express Mail International, Priority Mail International and International Direct Sacks (airmail M-Bags) are included.

This move was another step in the Postal Service’s continued implementation of the Postal Accountability and Enhancement Act of 2006. As you reported in a previous edition, the reform act opened the door for USPS to adopt more competitive, flexible shipping pricing and generate profit rather than breaking even over time as previously mandated by U.S. law.

The change to annual January price changes and the more competitive, flexible pricing model overall are both consistent with industry wide practice, and reinforce the value that Postal Service pricing offers to its customers. International commercial customers have a number of options to save on shipping, including published incentives ranging from 5% to 12% for online shipping, depending on the product and the customer’s annual volume, postage amount and payment method. Additional savings are available through customized agreements, making the Postal Service extremely competitive and poised for growth in the international shipping sector.

Sustainability is a topic garnering much attention today across all industries, including the postal sector and the express and courier market. What is the Postal Service doing on sustainability?

Donahoe: The Postal Service has long been recognized for its strong sustainability and environmental track record. In a new development, an office of Sustainability was created in 2008. The Sustainability office coordinates multiple programs that will ensure the agency remains a leader. The office works with all Postal Service business units, combining initiatives from energy management, to green purchasing, to recycling, to alternative fuels and more, all in a comprehensive corporate strategic sustainability plan.

The Postal Service’s sustainability effort is focused on two main areas: accelerating conservation, especially in energy and fuel use, and expanding environmentally responsible business practices, both internally and through partnerships. Among the top goals this year are completion of our greenhouse gas emissions inventory and an action plan to reduce emissions. The finalized inventory and plan are expected in early spring.

Sustainability is one more way that USPS strives to better deliver long term value to its customers, employees and the communities it serves.

Any final comments?

Donahoe: Experience has proven that when the economy stabilizes there will be renewed demand for shipping and mailing services. Even in today’s wired world, mail continues to be one of the most effective communications channels available,  a clear competitive advantage for the Postal Service and national posts around the world.

That is why the Postal Service’s commitment to the customer will not waiver. Fiscal 2008 was one of the most challenging years on record,  yet our employees provided the American public with the most outstanding service performance ever. The Postal Service was also  named the most trusted government agency in the internationally renowned Ponemon Institute’s annual survey of the American public, for the fourth consecutive year.

We will continue to deliver superior levels of service, domestically and globally, and to put the customer at the center of all of our efforts. The Postal Service remains optimistic about the future. When the economy rebounds, USPS will be ready.

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