Mailers urge Congress to help save the US Postal Service

Some of the largest mailing companies in America told the US Congress today that they have been “encouraged” by the new direction the US Postal Service has taken this year to respond to declining mail volumes. But, giving testimony today to the House of Representatives’ federal subcommittee, the mailing industry representatives warned that Congress itself is now one of the key barriers to profitability for the Postal Service.

The USPS has seen a 20% decline in mail volumes in the last five years, and this year is predicted to run out of cash without postal reforms from Congress.

Efforts by the Postal Service so far to reduce excess capacity in its network and increase mail volumes and revenues won plaudits from Quad Graphics, one of the nation’s biggest catalogue and magazine printers and transactional mail giant 3i Infotech.

But, the companies said Congress needed to act quickly to correct the overpayment of billions of dollars into USPS pension and healthcare funds, and also to allow the Postal Service more freedom to “right-size” its infrastructure.

Dave Riebe,  president of logistics Services said the USPS network is still set up to process 300bn pieces of mail each year, despite the fact that mail volumes have declined to around 170bn per year.

He said Congressmen pressuring the Postal Service to keep open processing facilities and standalone post offices were holding up the necessary USPS response to today’s lower mail volumes.

“The USPS must be allowed to manage its business and make the decisions needed to rightsize its processing and distribution network and payroll,” said Riebe.

Jerry Cerasale, senior vice president of governmental affairs for the Direct Marketing Association gave evidence that despite the rising importance of electronic communications, direct marketers still see the mail as their primary channel, a situation that will continue if postal rates can be kept down and paperwork minimized.

But he warned the subcommittee: “Congress  must  resolve  the issue of  the overpayment of pension benefits  and postal retiree health benefits, and the Postal Service must right size itself.  Failure will harm the return on investment of mail communications and incent the shift toward electronic communications.”

Mailers’ needs

In their testimony, the mailers raised their concerns about rising postal rates and the preparation burdens that come with attempts by USPS to use more technology to cut processing costs.

Cerasale warned that some actions taken by USPS to shore up its finances could risk further damage to mail volumes.

But keeping the costs down and making it easier to use the mail would slow the shift of mailers towards using electronic communications channels, according to Todd Haycock, director of postal services at 3i Infotech – a billings and statement company that is one of the largest mailers of First Class Mail in the US.

Haydock said in his testimony: “If the US Postal Service focuses on what the mailers in the industry need, the value the mail can provide, and decreasing the  complexity and costs of the mailing process, businesses will divert their capital and resources to more pressing projects  instead of trying to move away from physical mail in an effort to cut costs.”

Jobs

Also giving evidence to the Republican-led subcommittee was Rob Melton, a vice president at papermaking company Domtar Corporation.

Mirroring comments by Quad Graphics about the printing industry, Hendon said the paper industry has had to consolidate and downsize in the face of electronic substitution of print communications, and pointed out that Congress had to allow the Postal Service to follow suit.

With Congress being accused in recent weeks of taking the Postal Service for granted in its attitude towards postal reform legislation, Melton and his colleagues today pointed to the importance of the organisation within an industry that accounts for about 7% of America’s GDP.

While Congressmen press for jobs to be saved within the Postal Service, Melton stressed that jobs are at risk in other industries if USPS operating costs are not cut.

“It isn’t only the mail clerks and letter carriers at risk from an unstable USPS,” he said. “The paper industry, the printing industry, the direct mail industry, the envelope industry and much more need a functioning Postal Service.”

Innovation

While there was a pressing need to reduce operating costs, the mailers did also praise the USPS for recognizing that “it cannot cut its way to prosperity”, with a fresh emphasis on innovation to help grow mail volumes and revenues.

Although there was seen to be some way to go, the mailers said they were “encouraged” by the current approach to increase use of the mail through added-value products and services, and through new partnerships with customers.

“We are very encouraged by the direction we have seen the USPS take in the last six months,” said Riebe.

“Innovation is what we have been looking for from the USPS; it’s what drives our business today. Jobs and the viability of the printing and mailing industries depend on it.”

• The US Senate is due to examine USPS finances next week (May 17), in a hearing of the Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security.