Postal Affairs Update, May 14, 2021

May 14, 2021

The Postal Service released better than expected financial numbers for its most recent quarter. The House of Representatives advanced a Bill to enact USPS reform measures. And the global supply chain continues to contend with unusual events that challenge business as usual.

Quad’s Postal Affairs team remains committed to keeping you up to date and informed. As a significant mailing industry partner, we are in a unique position to provide clear and accurate information regarding the state of the USPS and suggest best practices during this time. Please notify the Quad Postal Affairs team if you become aware of any changes, questions or something new related to how the USPS is conducting business. We will investigate and update all. Please send inquiries to the Quad Postal Affairs Distribution list (Postal Affairs – Team) or ask your Quad representative.

Here are key developments since our last update:

USPS Q2 financial news

The USPS released its second quarter financial numbers (Jan-Mar 2021), which far exceeded projections. While it lost $82M, Postal Service revenue was up 6% compared to the same period last year, when it lost $4.5B.

Even with that relatively good news, USPS leadership continues to plow ahead with a mid-year price increase even though their current financial situation has improved. With six months of numbers left in its fiscal year, the Postal Service is on track to beat its projections.

But the PMG states that they’re projected to lose $9.7B for the year. If that were the case, the USPS would have to lose $1.6B per month for the rest of the year. While anything is possible, this seems unlikely to happen.

We’ve heard that they’re looking at the $160B gap over the next 10 years, and don’t want to focus on this year. If that’s the case, they should heed our industry’s plea to wait until January for further price increases so USPS customers can build it into their business plans.

Cost-cutting measures have played a role in this, though those have come at the expense of historically poor service. The U.S. House Oversight and Reform Committee will take up a Bill to help take huge and unnecessary financial obligations off of the Postal Service’s books. We expect the legislation to pass out of the House committee and then head to a vote by the full House of Representatives.

Now is the time to contact your Member of Congress and encourage the passage of the Postal Service Reform Act. C21 makes this easy with pre-written text and a short form that will automatically send to your Representatives. Or you can text MAIL to 52886. Congress needs to hear from as many people as possible on the importance of the Postal Service as the backbone of the U.S. economy and a core part of the American experience. C21 has also created this infographic so you can clearly understand how the Postal Service Reform Act will help resolve the USPS financial crisis without excessive rate increases.

There are several mutually beneficial ways that the USPS can get out of the red without hurting its business partners. Quad continues to work alongside others in the industry and in Congress to prevent Postal Service leadership and the Board of Governors from doing irreparable harm to their institution.

Following the release of proposed mid-year price increases, Quad clients can plan to join our Executive Director of Postal Solutions Jeff Henke and Director of Postal Affairs Bob Schimek for a webinar on how new rates will affect postal customers.

Delivery performance

The USPS continues to move Letter mail better than it did in early 2020. Flat mail is still showing some delays, specifically in the Philadelphia and Baltimore areas. The USPS has informed the industry that they have identified and are correcting problems in the Philadelphia facilities and that we should see improvement soon. They are struggling with a lack of labor, though.

In the Baltimore area, a new facility has been brought online and the USPS seems to be having some glitches during this transitional period. We are hopeful that things will improve in both locations, and Quad continues to provide the USPS with data to assist them. Mail volume is traditionally lower in May and June, so we do expect to see faster USPS processing times in the coming weeks.

First Class mail is also moving fairly well hitting 80-85% in-home by the third day after the drop. However, the current Service Standard is for 90%+ to be in-home at that point. So while performance has improved on what we saw earlier this year and late 2020, it’s still far below where it should be.

Materials and fuel shortages

The February 2021 Texas weather issues severely impacted availability and cost for both transportation and chemical intermediates coming out of the Gulf Coast region. The already stressed raw materials supply chain has become extremely tight, with several suppliers exercising force majeure.

The main base feedstocks of ethylene and propylene are foundational chemicals for adhesives, UV coatings, lithographic fountain solutions and silicones. Below-freezing temperatures severely impacted the chemical plants producing these building-block intermediates. This affected their ability to replenish the supply chain even after weather returned to normal.

Quad’s main concern has been monitoring the supply chain and doing everything we can to procure additional resources for these raw materials. We have recently hit a crossroads with our UV Coatings supply — therefore, sales team members will be reaching out to clients individually to communicate the situation.

The industry is also experiencing challenges due to last week’s Colonial Pipeline cyberattack. At this point, our customers will see an increase in their fuel surcharge costs. But capacity is not limited right now due to this hack.

However, supply chains have been severely impacted by other factors. And this cyberattack comes on the heels of the CVSA’s annual Truck Inspection Week which disrupted truck capacity across North America. As such any diesel shortages will have a wide-ranging capacity issues.

Postal volume

Mail Volume for the week ending May 1, compared to this time last year

  • Total Mail: Up 18.2%
  • Packages: Down 13.1%
  • Single Piece: Down 5.5%
  • Presort First Class: Up 5.5%
  • Marketing Mail: Up 57.2%
  • Periodicals: Up 16.8%

Total Mail compared to 2019: Down 8.5%