USPS IMPROVEMENT THROUGH SCANNING By Ericka Bell GM588

INTRODUCTION The United States Postal Service (USPS) is an independent agency of the United States government responsible for providing mail service in the United States. It is one of the few government agencies explicitly authorized by the United States Constitution. Within the United States, it is commonly referred to as the "Post Office", "Postal Service", or "U.S. Mail". Employing 656,000 workers and 260,000 vehicles, it is the second-largest civilian employer in the United States and the operator of the largest civilian vehicle fleet in the world. The USPS is obligated to serve all Americans, regardless of geography, at uniform price and quality. Conversely, it has exclusive access to U.S. mail boxes and non-urgent letters. It receives competition from email and package delivery services. For 36 years, the Postal Services business model, established by the Postal Reorganization Act of 1970 (PRA), worked very well for customers, employees, and the nation. The Postal Service was able to charge affordable prices and use the revenues from those prices to provide mail service to all areas of the country, charging the same prices regardless of cost of delivery. It was able to cut costs, improve service, provide innovative work-share options, and continually improve productivity. The OCI revealed at the USPS could benefit from cultural change of holding back it employees who excel in their area. These plays on power cause others employ not step up and do more. This also discourages the good employee from continuing to do more. There is nothing worse than going above and beyond duty and not being appreciated. Rewarding those who deserve it in this case create future leaders. Safety and attendance rewards encourage people to show up to work and be conscious of their actions. The USPS can also benefit from creating some other competition category within the plants. A competitive workplace can be positive if its fun and engaging. However, it is can be risky if it becomes over competitive. While serving the customer is important, it serves them organization better to adapt measures to prevent service failures as oppose to after. A balance of rewarding employees, setting

realistic goals, motivating and encouraging leadership is an important key to having committed and satisfied employees. PROBLEM STATEMENT While the intent of the Postal Accountability and Enhancement Act of 2006 (Postal Act of 2006) was to give the Postal Service more flexibility to manage its products, it put the bulk of the Postal Services revenue generating products under a stringent price cap and gave the Postal Service no additional ability to control its costs. The Postal Act of 2006 was that mail volume would continue to grow. That assumption was wrong. The combination of the recession and electronic diversion has led to a significant decline in total volume, including a substantial decline in First-Class Mail, the highest-contribution product. The Postal Service has little ability to offset revenue declines; the law restricts it to only providing postal products and limits how it can price and manage these postal products. In addition, the Postal Service has substantial fixed costs, and delivery network expansion continuously drives costs upward. The universal service obligation requires the Postal Service to maintain portions of its transportation and retail networks regardless of mail volume. The Postal Service is a labor-intensive organization; approximately 79 percent of its total costs are the wages and benefits of its employees. While the Postal Service has been aggressively moving toward reducing its workforce, the Postal Services management of the actual cost of labor is limited due to collective bargaining and certain requirements under the law. The Postal Service is also burdened by the requirement to aggressively prefund its retiree health benefit obligation for future retirees. Without this requirement, the Postal Service would have earned an overall profit of approximately $4 billion over the 2007-2009 timeframe. Even in those areas where the Postal Service theoretically has the ability to control its costs, it often faces political resistance when it attempts to close or consolidate facilities. This means that costs cannot decrease as rapidly as volume and revenue decline. Due to this combination of factors, the Postal Service is no longer able to generate enough revenue to cover costs.

The Postal Service cannot continue to provide affordable, universal service to all areas of the country while maintaining mandated inflation-based prices without an increased ability to generate revenue and control costs. Therefore, bold changes to the business model are needed. All options even those that have been dismissed in the past need to be considered as part of the national discussion. In order to choose the best business model for the Postal Service, it is important first to establish the future role of the Postal Service and the mission the nation needs it to fill. Over the years, the Postal Service has played many roles. By statute, the mission of the Postal Service is to bind the nation together. This is typically thought of as providing hard copy delivery. But, historically, the mission of the Postal Service has been broader, including educating and informing the public, enabling commerce, and representing the federal government in local communities. The key to determining the appropriate future business model of the Postal Service is clarifying its role. What future role does the nation, the market, and postal customers need the Postal Service to play? While the mailing needs of the country are changing, there is still a need for affordable, universal postal services and trusted, secure mail delivery. The Postal Service should maintain its responsibility for supplying affordable, universal service. To fulfill this role, it will need additional flexibilities to manage its costs and increase its revenues, and fulfill its mission as the Postal Reorganization Act of 1970 intended. The Postal Service lost over $12 billion in the last three years and expects to lose almost $8 billion in 2010. The Postal Service is becoming financially unstable and urgent action is needed to ensure that mail continues to be delivered. The short-term cause is the recession that began in late 2007 and the Congressional mandate that the USPS prefund its health care liability for future retirees. Hopefully the recession will soon end and Congress is working to see what can be done about the USPSs unfunded liabilities. But even if those two problems turn out to be short term, the USPS faces challenges that are unprecedented and long term; in a nutshell, the Internet has moved the personal and business correspondence of the nation away from paper and mail.

The decline of mail volume due to increased usage of e-mail has forced the postal service to look to other sources of revenue while cutting costs to maintain this financial balance. Competition from e-mail and private operations such as United Parcel Service and FedEx has forced USPS to adjust its business strategy and to modernize its products and services. First Class mail volume (which is protected by legal monopoly) has declined 22% from 1998 to 2007, due to the increasing use of e-mail and the World Wide Web for correspondence and business transactions. In 2008, a general economic slowdown also affected mail volumes, especially advertising. Lower volume means lower revenues to support the fixed commitment to deliver to every address once a day, six days a week. In response, the USPS has increased productivity each year from 2000 to 2007, through increased automation, route re-optimization, and facility consolidation. However the internet with business like ebay and amazon provides an opportunity for the USPS to increase its business in package services. The USPS faces competition from Fedex and UPS. The USPS delivers to more places more often than is competition and provides the same service for a cheaper price. However, it falls short in when it come to scanning the packages to let the customer know where their packages are located. All of the package carrier service provides a barcode label to track your packages. However USPS scanning rates are 40% less than is competition. UPS provides a tracking number for every package shipped with them, and has a feature on their web site that enables you to track your package online (USPS has a delivery confirmation service that accomplishes the same thing for an additional $0.40). However, the employees at USPS and has a hard time making the transition of scanning packages causing the consumer migrates to what is deemed the more reliable service provider. The USPS is must increase its ability to scan and track packages in order to increase revenue The Postal Service cannot continue to provide affordable, universal service to all areas of the country while maintaining mandated inflation-based prices without an increased ability to generate revenue and

control costs. Therefore, bold changes to the business model are needed. All options even those that have been dismissed in the past need to be considered as part of the national discussion. The Postal Service has been using all the tools within its control to reduce delivery costs. It has increased efficiency by automating the sortation of letter mail into the sequence in which carriers deliver. The Flat Sequencing System (FSS) will further this efficiency by sorting flats into the same sequence. Delivery point sequencing reduces the time carriers need to prepare mail for delivery. This leaves carriers with more time for street delivery, enabling them to cover longer routes and more delivery points. Up to a point, this has made it possible for the Postal Service to handle additional delivery points while reducing the total number of carrier routes and carriers. While the Postal Service has been successful at managing the cost of delivery, the tools currently available to the Postal Service are not sufficient to reduce delivery costs to the extent now necessary due to declining mail volumes. One of the limitations to reducing delivery costs is the statutory requirement to visit every delivery address six days a week. The number of delivery days is a fixed cost that does not vary with mail. To continue to bring down delivery costs, the Postal Service is aggressively evaluating delivery routes in order to consolidate them where possible in the past two years; the Postal Service has made substantial cost reductions amounting to over $8 billion while improving service. However, many costs are difficult for the Postal Service to control, especially in the short term. Costs are driven by the requirement to provide affordable universal service to all addresses in the United States. Costs are continuously driven upward by the need to provide six-day a week delivery to a constantly expanding delivery network. Each year, as the number of households grows, the Postal Service adds 1 to 2 million new deliveries to its network. The universal service obligation requires the Postal Service to maintain portions of its transportation, and retail networks, even when volume falls. The strategy that was implemented in 2009 was to capture attrition as it occurred, and to offer early retirements to eligible employees and to incent certain groups of employees. The Postal Service offered voluntary early retirements to all eligible employees. The strategy also required the Postal Service to look at the administrative functions and implement a 15 percent reduction last year. These reduction efforts

took place at all levels of the organization; reducing the number of Areas from nine to eight and the number of Districts from 80 to 74. The Postal Service plans to continue matching resources to workload which will lead to further reductions. Even with these workforce reductions, the Postal Service has increased service and improved customer and employee satisfaction ratings. The Postal Services management of the cost of labor is difficult because of statutory constraints (pension and retiree healthcare) and constraints of collective bargaining. Statutorily the cost of pension and retiree healthcare is set by law and the Postal Service has no control over these costs. The Postal Service has a long collective bargaining history and changes in this collective bargaining process are difficult and not dynamic. Therefore the options for the USPS are no different than they are for any business for whom dramatically raising prices is not an answer cut costs or find new sources of revenue. USPS costs are considerable especially its proportion of fixed costs. The nature and scope of the work and the universal service mandate has meant the creation of an enormous workforce. ANALYSIS One of PMG Pat Donahoes core business strategies is competing for the package business. Package visibility plays a big part in how the Postal Service is going to become more competitive and scanning is one of the keys to making that happen. At the Tampa, Florida, Logistics and Distribution Center (L&DC), employees recognize the importance that scanning and visibility play in the Postal Services ability to win new package business. The USPS have an edge on our competitors with pricing. Where they lack is in our scanning. So we need to improve our scanning throughout the organization to give our customers more service. The customer wants to see a scan. Theyre paying for a piece of mail to go from point A to point B, and what they want to see is Wheres my mail?

Helping increase this visibility is the deployment of a new Intelligent Mail device the ring scanner, which already has proven its worth in Suncoast district. Since receiving the ring scanners at the Orlando, Florida, Processing and Distribution Center (P&DC) several weeks ago, the Suncoast district has raised its originating enroute score from 89 to 91percent. While the district already had a number of effective processes in place, it wasnt able to pass the 90 percent mark until the scanners arrived. Now, the district is on its way to meeting a goal of 100 percent visibility. The hands-free devices have been similarly well received by plant employees at pilot sites in Tampa and Orlando, Florida, as well as in Fort Worth, Texas, and Merrifield, Virginia. As these devices reach other plants, the visibility they and other scanning tools give customers will benefit USPS as well, as it gains a better view of its own operations. Scanning helps track the volume for our business along with the customers business. It helps in planning for staffing and transportation. That service will come under even more scrutiny as customers increasingly use smart phones to track packages and USPSs competitors dedicate themselves to scanning. Orlando, Florida, Processing and Distribution Center (P&DC) several weeks ago, the Suncoast district has raised its originating enroute score from 89 to 91percent. While the district already had a number of effective processes in place, it wasnt able to pass the 90 percent mark until the scanners arrived. Now, the district is on its way to meeting a goal of 100 percent visibility. The hands-free devices have been similarly well received by plant employees at pilot sites in Tampa and Orlando, Florida, as well as in Fort Worth, Texas, and Merrifield, Virginia. (2010, January) REFLECTION The USPS exists right now in its own world. It is not fully public and it is not fully private. It is supposed to compete and innovate but it is stifled by law and saddled with a governance structure that impedes

innovation. It is time to decide its future. It is time the USPS become a business. This company must adapt itself to the new millennium and conduct itself like a private company. However with the politics and unions it will be a long journey to becoming the efficient well run profitable industry I know it can be.

Bibliography
Embracing the Future: Making the Tough. (July 31, 2003). Presidents Commission on the United States Postal Service, (p. 6). Fleishman, J. L. (1983). The Future of the Postal Service. New York, NY: Praeger Publishers , 310. Revenue, Pieces and Weight Reports. (n.d.). Retrieved from www.usps.com/financials/rpw/ Schmid, R. E. (August 4, 2009). Post Office Looks at Changes in Hundreds of Offices. U.S. Postal Service: Transformation Challenges Present. (2010, January). United States General Accounting Office , pp. 6-7.

Yang, J. L. (2009, August 4). Dear USPS: Consider Privatizing. Retrieved from http://money.cnn.com/2009/08/03/news/companies/usps_postal_service_privatize.fortune/index. htm,