USPS releases 10-year plan, with a focus on restoring its financials and increasing services

The financially beleaguered United States Postal Service (USPS) yesterday rolled out its 10-year plan focused on being financially sustainable and also provide top-level service.

The plan, entitled “Delivering for America,” takes an ambitious approach focused on helping the USPS get on solid financial footing, as the organization has been in the red over the last 14 years and incurred a net loss of $9.2 billion in the last fiscal year.

“The need for the U.S. Postal Service to transform to meet the needs of our customers is long overdue,” said Postmaster General and Chief Executive Officer Louis DeJoy in a statement. “Our Plan calls for growth and investments, as well as targeted cost reductions and other strategies that will enable us to operate in a precise and efficient manner to meet future challenges, as we put the Postal Service on a path for financial sustainability and service excellence.”

The plan calls for the USPS to continue its universal six-day mail delivery, as well as expanding seven-day package delivery, with the latter being a major revenue source for the organization. And a key part of the plan stated that the USPS will generate $24 billion in net revenue, partly from enhanced package delivery services for business customers, including same-day, one-day, and two-day delivery offerings.   

Other key objectives outlined in the plan include:

• improving cash flow for the investment of $40 billion in workforce, new vehicles, improved Post Offices, technology improvements, and infrastructure upgrades;
• a move to an electric vehicle delivery fleet with Congressional support;
• adjusting select delivery standards to improve efficiency and reliability;
• enhancing customer experience through a new suite of consumer and small business tools;
• stabilizing the workforce with a goal of cutting non-career employee turnover in half, and creating more opportunity for growth, including more predictable progression into career workforce;
• align pricing to reflect market dynamics; and
• ask for bipartisan legislation in Congress to repeal retiree health benefit pre-funding mandate and to maximize future retiree participation in Medicare

USPS officials said that this plan represents a combination of technology investments, training, Post Offices and a new vehicle fleet, modernizing the USPS processing network, adopting best-in-class logistics across delivery and transportation operations, creating new revenue-generating offerings in the “rapidly expanding e-commerce marketplace and pricing changes as authorized by the Postal Regulatory Commission (PRC), an independent Federal agency that provides transparency and accountability of all USPS operations.

Last mile focus: As for ways in which the USPS intends to generate $24 billion in new package net revenue growth, a big part of that, according to the USPS, is the introduction of a new line of services, entitled USPS Connect, which will connect businesses of all sizes, across urban and rural communities, with the USPS expanding its core package products—Priority Mail, Priority Mail Express, First-Class Package Service, and Parcel Select—to offer up same-day, next day, and 2-3 day delivery options six-to-seven days a week.  

And the USPS also said it will submit filings with the PRC to modify service standards for First-Class Mail Letters and Flats and its First-Class Package Service, which will move volume from what it called “unreliable air transportation to more reliable ground transportation and enable network improvements allowing it to meet or exceed 95% on-time delivery across mail and shipping product classes.

Analyst take: Gordon Glazer, senior consultant for San Diego-based parcel consultancy Shipware LLC, told LM there is much to like in the USPS’s 10-year plan, with the caveat that the devil is in the details.

“However, I’m concerned this blueprint will be halted in its tracks and put on hold until President Biden’s nominations to fill empty seats to complete the Board of Governors are confirmed,” he said. “It’s even possible that the new Board of Governors votes to elect a new Postmaster General.  Once this process plays itself out, the new leadership can review the 10-year plan and selectively decide which aspects are cut, which are maintained, and what gets added. In my opinion, the USPS is the most trusted government organization ever, routinely beating all others by a wide margin.  We believe in the USPS, we value our Postal system. We recognize and are proud of having the most efficient and respected Post Office in the world.  We love how our Postal system creates an equality of sorts, that Americans can receive Universal Service at fair prices regardless of where we live.  This was the vision of the Post’s founding fathers.” 

Glazer added that while it appears this plan beneficially leaves in place the “universal service standard,” it also detrimentally lowers transit times across the board. 

“There is much left unanswered,” he said. “If FCPS (First-Class Package Service) is lumped in with the reduced service standards for FCM, then how will the gap for low-cost, fast-transit of under a pound be served?  Will Priority Mail be expanded to offer ounce-based pricing?  That might make the change more acceptable, along with defined transit times based upon zip code pairings.”   

And a blog posting from Atlanta-based Spend Management Experts observed that the USPS’s goal is viewed as a tall order for the organization that has struggled for years with mounting debt and service level delays.

“The biggest goal facing the USPS will actually be getting buy into this ambitious plan,” it said. “A big lesson learned throughout COVID-19 has been the need for shippers to diversify their last-mile carriers due to rising shipping costs and capacity constraints and limits set by the two largest carriers, FedEx and UPS, that allowed them to focus more on growing their profits versus increasing volumes. However, USPS's plan is estimated to take ten years to implement, and operating during such an extensive overhaul will likely see the operator experience blips and delays along the way. Will shippers be forgiving during this period, or will they look elsewhere?”

As reported by LM, the USPS has long been hindered by commonly cited reasons related to its ongoing revenue declines in First Class and Marketing Mail, which each continue to see declining volumes, coupled with volumes expected to fall further in the future, due to what the USPS has called the “migration to electronic communication and transactional alternatives resulting from technological changes.” Things like e-mail, texting, and other electronic communications channels continue to hinder First-Class Mail, too.

While the COVID-19 pandemic has had a major impact on all delivery players, it has had a positive impact for the USPS’s Shipping and Packages Group, which saw e-commerce-driven volume gains related to the pandemic, in the fiscal first quarter, rising 25% annually, to $2.173 billion packages, and operating revenue was up 42.1%, to $9.378 billion. For the same period, USPS’s Parcel Services revenue saw a 25.4% annual gain, to $2.741 billion, with volume up 12.6% annually, to 1.022 billion pieces.