Burrus Update

A Letter Carrier wrote to me recently in response to an Update I posted last month, praising my work on behalf of postal employees and the USPS, and offering some alternate ideas about how the Postal Service could grow. The Letter Carrier suggested that my column (Update 21-2009) downplayed the importance of generating new package-delivery business for the Postal Service. “I believe the post office has another option besides ‘growing’ letter mail, and that is to retrieve the parcel business,” he wrote.

In response, after thanking the gentleman for his kind words and praising his commitment, I pointed out some flaws in the idea that the growth of parcel service could provide enough volume to sustain the USPS:

The first is that a national network consisting of 37,000 facilities cannot be supported by a product that is delivered on an “on-call” basis.

The Postal Service is structured to deliver to every home six days per week. Sufficient revenue simply cannot be generated from the delivery of parcels, which are intermittent. There must be a reason to deliver to every home every day, or there is no justification to staff for universal home delivery.

Parcel delivery alone cannot justify the staffing levels of the Postal Service. While UPS guarantees delivery to every address, it staffs its operation in anticipation of sporadic delivery.

If one compares the United Parcel Service’s network to the USPS’ network, it will reveal that on-call delivery requires a much smaller “footprint.” Following is a comparison:

		United Parcel Service	Postal Service
	FACILITIES	877	37,000
	EMPLOYEES	340,000	600,000
	DELIVERIES PER DAY	12,000,000	565,000,000

As reflected above, there is no comparison between UPS and the USPS network. For UPS, parcels are their primary product; for the USPS packages represent such a small portion of total volume that even a substantial increase would have a negligible impact on total revenue.

The United Parcel Service is a major force in the parcel delivery market, and any attempt to erode its dominance would be met with fierce opposition. As a private corporation unfettered by the regulations that govern the Postal Service, UPS can price its service at a loss in order to preserve its market share.

The Postal Service does not have this freedom, so the likelihood of winning away UPS’ volume is scant at best; even if such an endeavor were successful, the impact on USPS’ total revenue would hardly be worth the effort.

It is not my intent to minimize the importance of increasing the revenue generated by parcels, retail, and other services, but we must begin with an acknowledgement of our primary product: letter mail. A 40 percent increase in parcels would be needed just to replace the decline of 17,000,000,000 letters in 2009. Taking into account the continuing impact of electronic messaging, it is unreasonable to expect comparable increases in parcels year after year.

Letter mail is the foundation of the Postal Service. While other services — including parcel delivery — are necessary to generate sufficient revenue, the foundation of the USPS is built on letters. Without a strong foundation, a structure cannot stand.

The Postal Service, universal rates, and universal service are bound to letter mail. Other services offered by the Postal Service can be provided by the private sector. So, as I concluded in the earlier article, our focus must be to increase letter-mail volume. Without a substantial improvement in that arena, the USPS will perish.

My Letter Carrier friend has been an active participant in the Customer Connect program, which encourages carriers to submit potential business leads they discover on their routes to USPS marketing departments. He was severely disappointed by what he believes is management’s abandonment of the program, which is aimed primarily at small businesses, in favor of focusing exclusively on big customers.

In that regard, I wholeheartedly agree: I believe the USPS should market its parcel services to small businesses much more aggressively; but letter mail is the key to our survival.