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USPS plan to eliminate Saturday delivery comes to a halt

By Jeff Berman, Group News Editor
April 11, 2013

The United States Postal Services’ (USPS) desire to eliminate Saturday delivery—as part of an effort to become financially solvent—is not likely to come to fruition.

Citing the recently passed Continuing Resolution by Congress to fund government operations through the end of the fiscal year, the USPS Board of Governors said this week that “restrictive language” in the Continuing Resolution has effectively prohibited the USPS to implement the new national delivery schedule for mail and packages—including package delivery Monday through Saturday and mail delivery Monday through Friday—that was scheduled to go into effect the week of August 5.

When it first unveiled its plan to nix Saturday delivery in February, the USPS said this effort would result in roughly $2 billion in annual savings. This plan also factored in employee reassignment and attrition, said the USPS.

Even though the USPS formally rolled out its plan well in advance, making this switch was by no means a done deal, as it requires Congressional approval. This is because it is an independent agency which receives no tax dollars for its day-to-day operations and is subject to Congressional approval, according to an Associated Press report.

Eliminating Saturday delivery has been proposed by the USPS several times in recent years.

The USPS has said repeatedly that due to falling mail volumes and revenues it has considered eliminating Saturday mail collection and delivery except for Express Mail and existing post office box service.

As removing the majority of Saturday-based operations has been discussed on and off in recent years, as the USPS has seen its fair share of financial challenges, due in large part to economic pressures and a migration to electronic media having a significant adverse impact on mail volumes and operating revenues.

“Although disappointed with this Congressional action, the Board will follow the law and has directed the Postal Service to delay implementation of its new delivery schedule until legislation is passed that provides the Postal Service with the authority to implement a financially appropriate and responsible delivery schedule,” the USPS said in a statement.

“The Board believes that Congress has left it with no choice but to delay this implementation at this time. The Board also wants to ensure that customers of the Postal Service are not unduly burdened by ongoing uncertainties and are able to adjust their business plans accordingly.”

The USPS added that in order for it to return to long-term financial stability the USPS needs the flexibility to reduce costs and generate new revenue to address its myriad financial losses. In February, the USPS said in the first quarter of fiscal year 2013 it incurred a net loss of $1.3 billion, coming off of a fiscal year 2012 loss of $15.9 billion. And for fiscal year 2012 it incurred a record net loss of $15.9 billion, compared to a $5.1 billion loss in fiscal year 2011.

Roughly 70 percent of its losses are due to mandated prefunding health retiree benefits which are part of a Congressionally-mandated 10-year payment schedule at an average of about $5.5 billion per year to create a fund to pay future retiree health benefit premium, among others.  Last summer, the USPS announced it could not make $5.5 billion in mandated prefunding health retiree benefits to the Treasury, which was due August 1, as well as a $5.6 billion payment that was due on September 30.

The USPS has been unable to fund this obligation from operations and has used all of its retained earnings and drawn down from its $15 billion borrowing authority from the U.S. Treasury. And even with the requested increase, the USPS would not be able to meet this annual obligation at the present time or in subsequent years, according to the Postal Regulatory Commission.

The USPS pointed out that it is currently not possible to reduce costs unless it changes its current delivery schedule, adding that not making the needed changes increases the chances that the USPS may ultimately become a burden to American taxpayers.

And due to its current predicament the USPS Board of Governors said it has directed its management to reopen negotiations with the postal unions and consultations with management associations to lower total workforce costs and take the necessary administrative actions to reduce costs. These actions could include an exigent rate increase to raise revenues across current USPS product categories that are not covering their costs.

“The problem with the Postal Service is not really their mandate to deliver on Saturday, but the problem is the Congressional requirement to prepay retiree healthcare benefits for the next 75 years in a compressed 10-year schedule,” said Jerry Hempstead, president of Hempstead Consulting, in a previous interview. “No other branch of our government has such funding requirement and no private business budgets this way.”

The USPS, he said, has 330,000 workers represented by the American Postal Workers Union, which he said can be seen as 330,000 votes in an election.

“Eliminating Saturday delivery, one sixth of the work week, quid pro allows the USPS to obviate one sixth of the employees in the union,” he noted. “That’s 55,000 folks sent to the unemployment office in these most difficult times. I just can’t see the White House (the USPS comes under the executive branch) eliminating that many well paid jobs. What we may be observing is a shot across the bow of the Congress to create a public outcry, in order to get what the USPS really needs and that’s budgetary relief from the prefunding mandate and the workman’s comp payments it’s forced to make.”

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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