USPS Postmaster General Louis DeJoy released the Postal Service’s promised 10-year strategy with a press conference on Tuesday, March 22. While he touts it as a plan to cut costs, increase revenue and modernize the national institution, the reality is likely to be the opposite.
We’re extremely disappointed with the details and the lack of transparency leading up to the release of the plan earlier this week. Like most in the industry, we see clearly that his strategy is to lower service standards so he can meet them, raise the price of postage to levels that will result in lower mail volumes by driving away his biggest mailers, and increase USPS costs unnecessarily.
This isn’t reform — this is redefining what success looks like so the Postal Service doesn’t have to fix anything or improve in any area.
What’s at stake
PMG DeJoy and his colleagues outlined the challenges that its biggest customers are too familiar with. Less mail generates less revenue. The infrastructure isn’t built for the influx of packages they’ve seen this past year. And a one-size-fits-all processing plan creates inefficiency and unnecessarily high costs in operations.
Quad’s Chairman, President & CEO, Joel Quadracci testified before the House Oversight Committee last month on these topics. He offered clear solutions that will help mailers and the USPS. Unfortunately, the 10-year strategy overlooks Joel’s warnings for what will hurt the Postal Service and mailers.
Three major areas of concern rise out of the press conference and strategy document. Quad is working with Congress, industry associations and other decisionmakers to take action in addressing what we all view as potentially harmful.
Joel told Congress that if Quad had fewer print customers, the last thing he would do is raise prices on print. Yet, USPS leadership sees it as a way to increase revenue. The reality is that higher prices will drive away loyal Postal Service customers, making a bad problem much worse. Retaining Letter and Flat mail volume is not the focus of their strategic plan as they predict mail volume to decline by 36% over the next decade. PMG DeJoy framed his intention as exercising the broader pricing authority that the Postal Regulatory Commission granted. But that authority — which is above and beyond the fair annual price increases tied to CPI for the past 14 years — was granted in bad faith. We continue to explore legal and legislative options for preventing this part of the strategy.
The 10-year strategy paves the way for replacing operational equipment for market dominant products with machines for sorting packages. This is a flawed approach for several reasons. Packages could be a blip due to the pandemic. If it’s not a blip, the USPS faces stiff competition for that lucrative business from UPS, FedEx, Amazon, Walmart and others. And competitors would focus on delivering to population centers, leaving the Postal Service to serve only more inefficient and costly rural addresses. Meanwhile, instead of improving service to the standards we expected prior to the pandemic, the USPS is apparently satisfied to let delivery performance deteriorate for Flats and Letters — abandoning the mailers that generate 45% of its revenue.
Overly optimistic costs savings
The new strategic plan notes that it leveraged studies and papers from the OIG. The USPS would be wise to re-read the OIG’s “Savings Not Delivered” report. The network rationalization effort from 2011 to 2015, which repurposed facilities and reduced service standards, failed to achieve even a small percentage of the lofty savings that the USPS projected. This strategic plan counts on the USPS achieving $34B in cost improvements. Shuttering locations and cutting hours of service get the most attention, as it mainly affects the general public. Preventing return trips for carriers and later pick-ups delays mail in the last mile further. If it’s not out for delivery first thing in the morning, mail has to sit for an in-home date of the following day, which hurts business mailers.
While the 10-year strategy calls for legislation to eliminate pre-funding for employee retirement benefits, nothing will happen until Congress takes action. This was their wrongheaded mandate in the first place. The obvious solution that already has wide bipartisan support is for USPS retirees to go on Medicare like other federal employees. This will save the Postal Service billions every year.
Like so many others, Quad is extremely frustrated at 15 years of inaction to right this poor legislation. The strategy’s call for change is meaningless without Congressional action.
We all recognize that this past year compounded USPS challenges that have built up over time. Major improvements must happen immediately, no question. We all have new opportunities coming out of 2020 to rethink how we conduct business.
But too much of the 10-year strategy is short-sighted. Most of its sweeping changes are focused on being in the black this year. It ignores potential long-term harm in driving away major customers and eroding trust with substandard service.
Instead of seizing a unique opportunity to revitalize and engage its biggest customers, the USPS is taking steps to hurt mailers and double-down on the uncertain boom of package volume.
This strategy isn’t binding — it’s a roadmap for the future. A video featuring USPS leadership touts the hundreds of employees who helped shape this vision. But what about its customers? We strongly urge the USPS to have conversations outside its walls.
This situation isn’t us vs. them, though. As Joel detailed in his testimony, there are plenty of win-win scenarios for everyone. Quad wants the Postal Service to be as strong and profitable as possible. We candidly see ways that leadership could focus its resources to become more efficient while growing revenue.
There’s much more to consider in how this strategy will have lasting, potentially damaging impact to businesses and the American people. If you want to know exactly what the USPS 10-year strategy means for you, contact Quad today.
When the USPS announces in late-May that it will raise prices on mailers midyear, Quad will host a webinar with details for how the numbers will impact our clients. We’ll also help you craft messages to your legislators if Congress finally chooses to act and introduce bills for meaningful postal reform.