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USPS deal with APWU could result in $3 billion in savings

By Jeff Berman, Group News Editor
April 06, 2011

In mid-March, the United States Postal Service (USPS) said it reached an agreement with the American Postal Workers Union AFL-CIO (APWU) on a tentative four-and-a-half year contract.

This contract, said Postmaster General Patrick R. Donahoe in testimony this week before the House Committee on Oversight and Government Reform, is a reasonable pact and the “best possible outcome we could have achieved” under current law.

Upon ratification by union membership in the next two months, this deal will run through May 20, 2015 and impact roughly 205,000 employees, according to USPS officials.  They added that this contract will “set the stage for a more flexible and cost-effective workforce to accommodate America’s changing mailing trends,” citing how this deal will include:
-economic provisions that address critical Postal Service needs to control labor costs; and
-enhanced workforce flexibility to match workforce with workload.

The USPS added that this agreement provides immediate cost relief for the organization by freezing wages for the first two years of the deal. And it also establishes a two-tier pay schedule for new employees which is 10.2 percent lower than the existing schedule and allows the increased use of non-career employees from today’s 5.9 percent, with restrictions, to roughly 20 percent unrestricted and represents $3.8 billion in savings for the USPS.

The USPS initially kicked off negotiations with the APWU in September 2010. The APWU is the largest of the Postal Service’s four unions and represents 205,000 employees, including clerks, mechanics, vehicle drivers, custodians and some administrative positions.

This announcement follows negotiations between the USPS and the National Rural Letter Carriers’ Association, which stalled on its November 20, 2010 expiration date and now is following its current agreement until a third-party weighs in on a new contract, according to the USPS. The NRLCA is comprised of 67,000 career employees and 48,000 non-career employees; these employees deliver mail in rural and suburban areas.

Jerry Hempstead, president of parcel consultancy Hempstead Consulting, said in a September 2010 interview USPS has many challenges when it comes to getting relief from its rank and file union members.

“USPS has more employees than it has work at the moment, and management has a contract…but you really don’t hear about layoffs at the USPS,” he said. “You hear more about voluntary and early retirement. There is not much the USPS can do short of making sure overtime is in check and not replacing anybody who resigns or retires to right-size the business. But considering their numbers they have done a yeoman’s job of bringing down man-hours to coincide with the decline in business.”

Hempstead added that if the USPS can get some relief from the unions in terms of the way business is managed to better align staff hours to the amount of work coming through, it would be a great win for USPS management.

Following an $8.5 billion loss in fiscal year 2010, the United States Postal Service (USPS) began the new fiscal year with a $329 million loss in the first quarter.

This is a deeper loss than the $297 loss incurred a year ago, but USPS officials said that excluding the cost of prefunding future retiree healthcare benefits and noncash adjustments to the workers’ compensation liability, the Postal Service would have had a net income of $226 million for the first quarter.

During the height of the recession, the USPS cited things like economic pressures and migration to electronic media having a significant adverse impact on mail volumes and operating revenues. To counter this, the USPS implemented various measures to eliminate work hours and drive productivity improvement, but still was unable to get into the black.

Donahoe noted in his testimony that USPS’s volume has dropped 21 percent since 2008, which led to a series of process improvements and personnel reductions through the reduction of 110,000 employees and $11 billion in costs.

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About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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