USPS begins review of 252 mail plant closures

The US Postal Service has launched a 30-day public consultation on its plans to review an additional 252 out of its 487 mail processing facilities for possible closure. The 252 plants are in addition to the 61 that were already being reviewed before today.

Briefing the press this morning as the list of plants within the “radical network realignment” was unveiled, executives said it was “not a foregone conclusion” whether any plant on the list would close, but there was definitely the possibility that all listed plants could close.

“It is expected that the studies will take three months from today to complete,” USPS chief marketing officer Megan Brennan told reporters this morning. “It’s an aggressive plan, but it will put us ahead of the cost curve for the next decade.”

The Postal Service hopes to save $3bn by taking the excess processing capacity out of its network, since mail volumes have shrunk by 22% over the past five years and are expected to continue shrinking as the American public catches on to new ways of communicating electronically.

Standards

The plan is to “right-size” a network designed around overnight First Class Mail, to one based on two-day First Class Mail – getting rid of more than half of the processing equipment in the process, and shrinking to less than 200 plants total.

To do so will impact on service quality levels – obviously of First Class Mail, which USPS will formally change from a one-to-three day service to a two-to-three day service, but also potentially other classes as well.

Brennan told Post&Parcel that the network changes would have no impact on Priority Mail services, but that it was “unclear” exactly how the changes would impact on Standard Mail service standards.

“There may be some impacts,” she said. “But that will be part of the studies that we are looking at.”

Entry

Along with service standards, entry times – and locations – are likely to change for many commercial mailers across the country, and USPS has 20 meetings scheduled with industry groups over the next few weeks to discuss those changes.

With more mail going into fewer plants, the plants’ operating window would be increased to 20 hours a day, with four hours for maintenance.

Time-sensitive mailers such as daily newspapers will be able to input their mail directly into processing facilities before noon to still receive a next-day delivery.

There will also be efforts made to discuss changes with local mailers around each plant as it goes through the review and closure process, which is being considerably accelerated compared to past plant closure procedures.

Brennan said an “extensive customer outreach” process would be key to keeping smaller businesses mailing – particularly since this is seen as a promising growth segment for US mail – the new USPS simplified address initiative Every Door Direct has brought in $65m of extra business already, for example, since launching in April.

Alternatives will be explored as entry points, including uses of local post offices. Brennan suggested there could be “tailored solutions” to cater to certain areas of the mailing industry.

Postmaster General Patrick Donahoe told Post&Parcel: “We will not leave customers high and dry as far as entering business mail. They’ll have the same opportunities – and even better opportunities in some cases if they want to go to a consolidation point, that saves them some transportation costs.”

The notice in today’s Federal Register, which kicked off the current 30-day consultation, warned that “it is possible that Area Distribution Centers would no longer be available for entering mail. Therefore is is possible that the proposal could require a revision to the current service standard for end-to-end Standard Mail… The exact nature of this revision is presently unclear”.

Employees

As well as mailers, executives conceded that the network changes would affect every one of the 151,000 USPS workers involved in mail processing activities, with around 35,000 losing their jobs – though “preferably” by attrition according to Brennan.

“Every employee wil be touched by these changes,” she said. “But we’ve already reduced our complement by 250,000 largely by attrition and we have never laid anybody off.”

Ultimately, however, the 35,000 job losses will be just the next step on the way to cutting the current USPS workforce from 559,000 to 425,000 by 2015.

Next steps

After the current consultation, the proposals to amend service standards will be filed with the Postal Regulatory Commission in November – though the Commission’s opinion on the matter will be non-binding. The review itself of 30 million square feet of real estate will take until December or early January at the earliest, with closures to begin February or March 2012.

The USPS is hoping the process – and all the transfers of equipment into consolidated plants – will be complete within two years.

The USPS network optimization effort also includes separate plans to slim down delivery and retail networks, and comes as part of a three-pronged effort to cut $20bn in operating costs out of the system by 2015.

The other two prongs will need Congress and the postal unions to play ball. Congress will have to pass reform legislation to cut future retiree benefits pre-funding and allow a move to five-day a week delivery. The unions will have to agree to changes in the workforce, such as an increased use of part-time workers who can be sent home when not needed.

Meanwhile, the Postal Service looks likely to be allowed 90 days extra time to pay it’s government bills this fall, which will give it some “breathing space”, as it reaches its $15bn legal limit on government borrowing in the next few weeks, to wait for the required changes to come into being.

Donahoe said this morning: “I think that it will come together – I think we will see a comprehensive bill by the end of the year wih that 90-day extension.”

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