Subscribe to our free, weekly email newsletter!


USPS delays decision to shutter or consolidate facilities until May

By Jeff Berman, Group News Editor
December 14, 2011

The United States Postal Service said yesterday that it has agreed to delay the closing or consolidation of any Post Office or mail processing facility until May 15, 2012.

The USPS has repeatedly stated that it wants to reduce operating costs by $20 billion by 2015 to get back to turning a profit.  In Fiscal Year 2011, it had a net loss of $5.1 billion. USPS officials said this loss would have been more than doubled—at $10.6 billion—were it not for passed legislation that postponed a congressionally-mandated payment of $5.5 billion to pre-fund retiree health benefits.

Among the things it has proposed to get back into the black are consolidating its network in the form of facilities, processing equipment, vehicles, and staff, which it said would result in a savings of $2.1 billion and serve as a big chunk of its network optimization initiative that it projects to save up to $3 billion by 2015. And as part of this rationalization, the USPS said in September it would consider closing down 252 of its 487 mail processing facilities.

USPS officials said yesterday’s announcement to delay the closing or consolidation of any Post Office or mail processing facility until May 15, 2012 was in response to a request made by multiple U.S. senators.

“The Postal Service will continue all necessary steps required for the review of these facilities during the interim period, including public input meetings,” the USPS said in a statement. “The Postal Service hopes this period will help facilitate the enactment of comprehensive postal legislation. Given the Postal Service’s financial situation and the loss of mail volume, the Postal Service must continue to take all steps necessary to reduce costs and increase revenue.”

A parcel industry expert told LM that it is entirely likely Congress will further delay this again in May until after the November 2012 Presidential election.

For the entire Fiscal Year, USPS mail volume was down by 3 billion pieces—or 1.7 percent—annually, with First Class Mail down 5.8 percent from $34.2 billion to $32.2 billion. First Class volume declines have been due in large part to ongoing diversion to electronic alternatives, including e-mailing business documents and online purchasing orders, as well as other electronic mailing processes.

On November 9, the Senate Homeland Security and Governmental Affairs Committee voted by a 9-1 margin to move forward the 21st Century Postal Service Act, S.1789, which HSGAC said would provide USPS with the flexibility it needs to restructure itself in an effort to save billions of dollars and return to financial viability. Among the key components of this legislation are: buyouts and retirement incentives; health care savings; workers’ compensation reforms; arbitration standards; limitations on five-day delivery; streamlining delivery; retail service standards; processing facilities; and new products and services.

The recommendations made by the USPS will be sent to the Postal Regulatory Commission. A Reuters report noted that the PRC will study the proposed changes and issue a nonbinding advisory opinion. Williams said the service standards would not change before April 2012.

In early December, the USPS said it is proposing—through a rulemaking process—to move First Class Mail to a 2-3 day standard for contiguous U.S. destinations. But that would be expedited for mailers that properly prepare and enter mail at the destinating processing facility prior to the day’s critical entry time to have their mail delivered the following delivery day.

“The USPS is losing billions of dollars, but the bulk of these losses stem from an unusual pre-funding of retiree benefits for workers who have not yet even been hired by the USPS,” said David Ross, Stifel Nicolaus analyst, in a recent interview. “Also, the organization’s inability to appropriately size its business is causing the remainder of the financial strain.  The U.S. government will not let the USPS become insolvent, so while a first glance at its bottom line leads to an ‘on the ropes’ characterization, it should also lead to some governmental action (even if not near-term) to allow the USPS to remain a viable part of the parcel industry.”

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).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Intermodal units, at 278,767 containers and trailers were up 6.7 percent compared to the same week last year and marks the third best week for intermodal ever recorded based on AAR’s data.

LM Group News Editor Jeff Berman recently conducted a wide-ranging interview with Bobby Harris, President and CEO of non asset-based 3PL BlueGrace Logistics about various aspects of the freight transportation market.

It’s small, but senior brass at YRC Worldwide will take it. After nearly seven years of continuing losses in excess of $2.6 billion, the parent of the nation’s second-largest LTL carrier posted a narrow net profit in the third quarter ended Sept. 30.

As was the case for the second quarter, third quarter earnings results for publicly-traded less-than-truckload (LTL) carriers are again strong. Signs of solid earnings results from carriers that have posted earnings to date include tonnage increases, gains in weight per shipment and average daily shipments, higher yield, and revenue per hundredweight.

While the holiday season is known to bring good tidings and cheer to all, it may also come with another thing that is not so pleasant: higher rate freights. That was the thesis of a commentary written by Mark Montague, industry pricing analyst and chief market-watcher for DAT, a Portland, Ore.-based subsidiary of TransCore.

Article Topics

News · USPS · Parcel · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA