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Cary H. BaerThere’s a saying in business that’s long been a truism: If you don’t measure, you can’t manage. Recent postal reform legislation had requirements for the US Postal Service to develop delivery service standards, and then to report on actual delivery service.

The mailing community has consistently called for the USPS to develop delivery service standards for all classes of mail and to report on adherence to those standards.

The USPS has been consistent in ignoring its customers’ calls for delivery service reportage. With reform legislation mandating delivery service reporting, the jig is up. So, the USPS — along with a broad-based mailers organization, Mailers Technical Advisory Committee — has been developing delivery service standards. These groups, with the Postal Regulatory Commission, will agree on delivery service standards. The industry eagerly awaits reports that will show actual delivery service performance.

There are two other measurement issues. First, is a measurement system called total factor productivity (TFP). The Postal Service regularly reports its productivity using TFP. Recently, a well respected member of the mailing community stated that, although he had long heard TFP statistics, he really didn’t understand them. It made me realize that I, too, could not explain TFP, so I went to the USPS Web site to get an understanding of it. The definition was, “TFP measures the growth in the ratio of outputs and the inputs, or resources, expended in producing those outputs.” The definition then says, “the Postal Service’s main outputs are mail volumes and servicing an expanding delivery network.”

The definition then gets complicated as it explains the various factors (i.e., adjustments) that must be made to compensate for mail type, size, weight, mailer preparation (barcoding, presorting), mode of transportation, capital usage, etc. The reality is that with so many adjustments, the TFP productivity statistic, while it may be accurate, is too complicated for laymen — or knowledgeable postal watchers — to understand.

With 80 percent of its expenses tied to labor, the key productivity statistic — indeed, perhaps the only one that matters — must simply relate mail volume to labor hours. Does mail mix or mailer preparation, size and weight matter? Sure. But in the end, mail volume and labor hours used to handle it, are all that matters. The USPS should use that as its key productivity statistic, and it’s what management should focus on.

The U.S. Postal Service expects a loss of about USD 600 million next year despite increased income and reduced spending.

The agency’s governing board on Tuesday approved a fiscal 2008 financial plan that anticipates income of USD 78.2 billion and expenses of USD 78.8 billion.

The plan for the budget year beginning Oct. 1 does not assume any increase in rates, though the Board of Governors has not taken a formal position on any price changes.

Rates were increased in May, and the expected USD 3.2 billion income increase from 2007 is based on having those prices in effect for the full year, plus an anticipated increase in mail volume.

Meanwhile the agency plans to cut spending from the USD 80.4 billion total expected when final 2007 figures are in.

The net loss of USD 5.4 billion expected for 2007 includes operating income of USD 1.5 billion and a USD 6.9 billion in costs from the 2006 changes in the law governing postal operations, including a USD 3.0 billion one-time escrow expense, a USD 5.4 billion payment into the Retiree Health Benefit Fund for 2007 and USD 1.5 billion in savings.

Postal managers remain concerned about potential threats, however, including changes in the economy, the possibility of reduced mail volume because of higher prices and proposals for a “do not mail” list which could reduce mail volume.