USPS Looks to the Future
Post office awaits Harvard University study, creates CEO task force to look at business Copyright 2001, Traffic World Magazine The U.S. Postal Service is supposed to perform a public service but act like a business, said John Nolan, USPS deputy postmaster general and chief marketing officer. As part of its efforts to strike this balance it has established a task force that includes 12 CEOs to look at the mail business and soon will publish a study by Harvard University about its future, he said.
“We need legislative reform,” stressed Nolan, who was speaking at the Bear Stearns Global Transport & Logistics Conference, New York. The organization’s labor relations model needs to be changed to make it more responsive to the market. USPS already has approached the White House and Congress with proposals, Nolan confirmed. The organization is looking for changes in its operating principles, not political change, he said. USPS will lose an estimated $2 billion to $3 billion this year, which Nolan blamed on its inability to adjust rates quickly enough in response to changing market conditions. A rate change takes about 18 months to implement.
Inflexible labor agreements make it tough to control costs, and more than half of the country’s post offices are losing money “but we can’t close them,” said Nolan. The organization has put a freeze on facility construction projects and other investments as well as mail handler hiring programs in an effort to stem its losses. Five-day, as opposed to six-day, delivery is being studied, he said.
More automation and partnerships with private-sector players are part of the organization’s strategy for fostering growth, Nolan explained. It also has introduced new services such as electronic tracking and bill paying. Even so, “there is still tremendous value in hard-copy mail,” he maintained. That is one reason it has created a task force of 12 CEOs, including executives from large-volume users such as advertising firms, to examine the potential of mail as the Internet erodes its customer base. The Harvard study will be available soon, said Nolan, and will map out what the Postal Service should look like in the future.
In Europe creeping privatization is slowly opening the mail market to companies like TNT Post Group, said CFO Peter Bakker. That is why his company is expanding its services internationally. Made up of three businesses – mail, express delivery and logistics – TNT Post Group achieved a record year in 2000 and anticipates a growth rate of 20 to 25 percent in 2001.
On the mail side it is the main postal operator in the Netherlands, where it has dominated the market since it was privatized in 1989, and has established a presence in other countries including Belgium, Italy and the United Kingdom.
Its strategy, explained Bakker, is to establish a foothold in the unaddressed mail market (otherwise known as junk mail) in other countries and then use this as a platform to expand as the national services are liberalized. “We can then add addressed mail ahead of liberalization in Europe,” he said.
Bakker said the French stymied recent attempts to liberalize European Union national postal services. France’s socialist government fears the job cuts that would ensue if private-sector firms were able to compete for a slice of its mail market. But a more pro-market approach now is driving policy in the European Union. “So our expectation is that in December of this year the EC will decide to gradually liberalize the market,” he said. “That’s why we are building the network.” The company is now looking at Spain and France for further network expansions.
