September 15, 2011

US Postal Service Announces 'new reality'

Patrick Rizzo, writing for MSNBC.com:

"The U.S. Postal Service, burdened with huge financial losses, said Thursday that it was facing a "new reality" that would include shutting a slew of processing facilities, changing service standards for first-class mail and cutting up to 35,000 positions.
The moves will mean mail will no longer reach most customers the day after it was mailed."

This was an inevitable result of low postage rates combined with the demand for competitive, quick service.

Consider what the Postal Service does: its current service model is designed to deliver First Class mail in one to three days. The price for that is a 45-cent stamp.

Compare and contrast to what UPS or Fedex would charge for similar service. The least expensive rate for UPS 3-Day Select service is $8.35. And they charge extra for delivery to residential addresses.

The Postal Service is struggling because they don't charge enough for the level of service they provide, while at the same time giving a significant price break to bulk mailers whose product accounts for a majority of the mail stream.

Here's a short list of what the Postal Service should do to recalibrate their service:

  • raise the postage rate for a First Class stamp to $1, and incorporate a service time guarantee of three days.
  • offer and heavily market a revised Second Class rate near $.50, with a "best effort" service time promise.
  • revise the bulk mail discount to no more than ten percent-off the Second Class rate.

In all things, we get what we pay for. UPS and Fedex offer terrific service without a financial struggle, because they charge more than what it costs them to provide it. If we want a Postal Service that can survive on its own, we need to pay for it.

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