It’s not news that the US Postal Service is in a rough spot. USPS has been saddled with insurmountable levels of debt as mail volumes keep falling while package volumes rise. As a result, service quality has plummeted and shaken confidence in America’s most beloved government agency. During the 2020 presidential election, millions of Americans worried whether or not USPS would deliver their mail-in ballots on time for their votes to count (spoiler alert: they did). Several months later, as the Postal Service continues to financially languish and its mail and parcel network continues facing unprecedented delays, USPS has released the long-awaited 10 year plan that outlines how the organization plans to get back on solid financial footing.
COVID-19 Has Exacerbated the Postal Service’s Biggest Problems
The US Postal Service is known above all for one thing: delivering the mail. First-Class Mail and Marketing Mail services are, in fact, how USPS makes the majority of its money. After all, letter carriers can transport much more mail than packages, due to how much space packages take up on their trucks. The problem is, mail volumes have fallen consistently since 2007…and throughout the Coronavirus pandemic, they plummeted even further than initially forecasted at the start of 2020.
Package volume, on the hand, has kept rising as eCommerce continues growing in popularity. This has been especially apparent during COVID-19, when nationwide shutdowns resulted in an online shopping boom beyond expectations. However, the gains from higher package revenue haven’t been enough to offset the Postal Service’s losses from dwindling mail volumes. Moreover, complications from the pandemic have strained the USPS network resources beyond repair, leading to unacceptable delivery delays and the largest backlog the organization has ever faced.
The Main Highlights in the USPS 10 Year Plan
According to the report, if USPS continues to operate on its current course, it will lose $160 billion by 2030. However, the 10 year plan ensures that USPS will not only avoid these losses, but achieve break-even status as early as 2023.
In a press briefing, Postmaster General Louis DeJoy told reporters the following:
“[The plan] takes a holistic view of the organization and is meant to elevate our business, competitiveness, and our ability to meet the needs of the nation.”
In order to attain profitability, the 10 year plan stipulates that USPS needs to generate more cash flow in order to invest in:
- Its workforce of 640,000+ employees
- New vehicles
- Improved Post Office locations
- Technology improvements, including new eCommerce solutions
- Infrastructure upgrades
In summary, the main focus points are as follows:
Preserve Affordable, Six-Day Mail and Expand Seven-Day Package Delivery
Preserving affordable mailing rates is one of the plan’s biggest goals, as well as the commitment to universal service. Current mail services will keep the same schedules, with letter carriers delivering mail to every residential address in the nation six days a week. Package services, on the other hand, will get a significant boost, adding in Sunday as another working day. Expanding package delivery to seven days a week will open up an extra day for USPS to earn additional revenue and capitalize on the fastest growing aspect of its business: competitive package products.
Invest in Enhanced Package Delivery Services
On that same note, the plan highlights a desire to “double-down” on package delivery services by introducing enhanced delivery options for business customers. Some examples of new package services USPS plans to implement will be same-day, one-day and two-day delivery offerings. In this regard, USPS will design its competitive product model more in line with its main competitors, UPS and FedEx. In turn, USPS will be able to offer customers a wider variety of delivery options at different price points.
Accelerate Transitions to Electric Delivery Vehicles
USPS recently announced a partnership with Oshkosh Defense to produce the next generation of delivery trucks. In contrast to other carriers’ moves to electric vehicles, only 10% of the new USPS fleet will be electric. However, the new plan expresses a commitment to sustainability, which will require additional funding from Congress. Meanwhile, Democrats have introduced a $6 billion bill dedicated to providing USPS with enough capital to invest in electric delivery vehicles.
Adjust Delivery Standards to Improve Efficiency and Reliability
Currently, USPS simply can’t meet the service standards advertised with Priority Mail and First-Class Mail. In fact, USPS notes that “over the past eight years,” it hasn’t been able to meet current delivery standards. Therefore, the solution isn’t necessarily to improve the quality of the service, but to adjust expectations.
The main change would be extending the timeframe for First-Class letters and flats from three days to a five-day standard. Under these altered delivery standards, USPS expect it can deliver roughly 70% of First-Class Mail within three days.
Introduce a New Suite of Consumer and Small Business Tools
USPS plans to drastically enhance customer experience with USPS, and plans to focus on small businesses. As part of this strategy, the Postal Service will launch USPS Connect, a new platform that will connect businesses to urban and rural communities across the nation. USPS also plans to offer digital storefront creation software to individuals and businesses looking to sell goods online. This new foray into digital storefront creation will be similar to other popular eCommerce platforms such as Shopify, WooCommerce, and BigCommerce.
Stabilize Workforce by Creating More Opportunity for Growth
Postmaster General Louis DeJoy openly acknowledges that the Postal Service’s biggest strength is in its people. Knowing it can’t succeed without keeping the well-being of its employees in mind, going forward, USPS plans to put its employees first. As a result, USPS will work towards a goal of cutting non-career employee turnover in half by creating more growth opportunities. For example, this strategy will include a more predictable progression for non-career employees to transition into the career workforce.
Align Pricing to Accurately Reflect Market Conditions
The Postal Regulatory Commission sets all of the prices for USPS competitive products. Under the new plan, USPS will have more autonomy to set rates more in line with market conditions. Without a third party imposing pricing constraints, USPS will be able to set incrementally higher rates for competitive package products (albeit in a reasonable fashion). As a result, the organization will capture a larger portion of revenue from its growing package services.
Repeal the Pre-Funding Mandate with Bipartisan Legislation
This is another big one. Currently, USPS is forced to pre-fund future employees’ retirement and health benefits up to 75 years in the future. In order to do so, it must pay billions of dollars to the Treasury each quarter. These payments, in turn, have put a huge hole in the Postal Service’s finances. Simply put, the pre-funding mandate is the main culprit behind the Postal Service’s financial troubles. In fact, after Congress enacted this law in 2006, USPS went from being profitable to operating at a loss the very next year. The Postal Service has never recovered since. Once Congress repeals this legislation, USPS will gain access to billions of dollars of operating capital previously allocated to paying into the pre-funding mandate.
USPS Forecasts Profitability if the 10 Year Plan is Implemented in its Totality
Postmaster General DeJoy stresses that the profitability outlined in the 10 year plan is, in fact, attainable. However, he also maintains that the organization will not meet its goals unless it follows the plan in its totality. Not one piece can go awry, or else the whole metaphorical house will fail to stand.
“The Postal Service’s problems are serious but, working together, they can be solved,” DeJoy said. “Our 10-year plan capitalizes on our natural strengths and addresses our serious weaknesses. It can and must be done.”
Assuming these new outlined changes take effect immediately, we’ll see over the next three years if USPS might just pull off the impossible.
If you would like to view the full 58-page plan, visit the USPS website.