Transcript

On today’s podcast, I recap the recent Postcom Study Day including remarks from PMG Louis DeJoy, the GAO has a new primer on the USPS, and an early update on service performance as we head into peak mailing season.

Welcome to the podcast everyone!

Finally, after nearly over a year and a half, I was able to attend an in-person Postcom Study Day in Washington, DC on October 19. It was so wonderful to see industry and USPS friends as we gathered to listen to presentations from Fisher Analytics, the Government Accountability Office, the USPS Office of Inspector General, and the Postmaster General Louis DeJoy. This was the first time I had a chance to see Mr. DeJoy in person and he was candid, passionate, and clearly driven to course correct the USPS to a path of financial stability and growth.

The first speaker was Bob Fisher from Fisher Analytics. Bob presented a detailed reflection on how the USPS performed during COVID-19 in 2020 and the first half of 2021. Based on the detailed analytics presented, Bob predicts that FY2021 will end as follows.

For financials Postal Service financial performance is significantly better than the FY21 Integrated Financial Plan and the performance of the past 2 years, FY21 Controllable Loss is projected at $2.5 billion dollars, which is $1.3 billion below SPLY, FY21 Net Loss is projected at $5.9 billion dollars, which is $3.3 billion below SPLY.

For mail volumes as we move into 2022, Bob noted that mail volumes have generally stabilized when compared to the pre-covid base year. We are seeing that as well with BCC data processing noting that the cadence of data services is starting to normalize to pre-covid levels. Package volume, of course, continues to remain strong by over 20% ahead of pre-covid levels.

Bob noted some things to watch in the next year include:

• The FY 2021 results –due for release mid-November
• The FY22 Integrated Financial Plan (IFP). This should set a new baseline relative to the DFA Plan and provide a basis for evaluating subsequent longer-term projections
• A possible update to the Delivering for America Plan given the positive cash position of the USPS
• Legislative reform passing Congress this term
• The impact of the Market Dominant rate increase and service standard changes on volumes and revenue
• Shipping volume going through peak season, then the trend after peak –the “new normal”
• Complement changes –hiring, conversion to career, overtime and leave rate impacts
• Capital investment plans –more than just vehicles
• And the impact and effectiveness of new management structure in driving results

Next, we heard from the USPS Office of Inspector General regarding a recent audit on USPS nationwide service performance that was published on September 20. The OIG observed 7 processing facilities and 14 delivery units to determine where the most common service failures occurred in the mail flow process. They specifically analyzed service performance for Priority, First-Class, Periodicals, Marketing, and Bound Printed Matter mail classes from October 2019 through March 2021.

What they found was that the COVID-19 pandemic greatly impacted the Postal Service during this time. The amount of mail and parcels delivered on time decreased for all mail classes, primarily during the FY 2021 peak mailing season, which was from November 2020 – January 2021. In February and March 2021, the amount of mail delivered on time started to improve and are now at their highest levels since October 2020.

Some causes for the decreases in service included:

• A larger than expected parcel volume for a longer period due to the pandemic, which resulted in a shortage of floor space that led to a gridlock in many locations. This parcel volume exceeded the available capacity of air and surface transportation.
• Loss of over 50 percent of its commercial air capacity during the pandemic, which resulted in over 736 million mailpieces being delayed due to air capacity. This resulted in 26% of all surface transportation trips arriving late to processing facilities, which in turn resulted in 14% of all surface transportation leaving facilities late.
• Employee availability was also a challenge with only an average of 75% of all employees being available to work during this period.

The most common failure points included:

• Transit – 56%
• Last Mile – 19%
• Unable-to-Assign – 12%
• First Mile – 8%
• Origin Processing – 3%
• Destinating Processing – 2%

The recommendations from the OIG report included:

• Reemphasizing the need for discussions among local processing, transportation, and delivery management components.
• Investigating causes “Unable to Assign” failed mailpieces and decrease to under 10 percent of total failures.
• Reemphasizing and implementing best practices.
• Directing local processing management to retain only the quantity of mail transport equipment the facility and customers need.

The OIG noted that Postal Management disagreed with the recommendations and proceeded with their Delivering for America Plan, which included prolonged delivery standards for First-Class Mail from 2 to 3 days to 2 to 5 days for delivery, which was implemented on October 1.

Next up, we heard from the Government Accountability Office who recently published an updated primer on the USPS. This primer is actually more of a consolidation of their previous works and is designed to explain how the USPS works, why it needs reform, and discusses some options to help Congress consider legislation for the future of USPS.

If you have a moment, I strongly encourage you to download, read, and share this primer within your organization and perhaps customers as well. I personally found it to be an excellent introduction to not only postal governance, but also a clear understanding of the challenges facing the USPS and by extension the entire mailing industry. It includes such essential topics as:

1. The USPS’s mission
2. The USPS’s expenses and revenues
3. The USPS’s financial challenges
4. Challenges related to USPS’s retiree benefits
5. Constraints limiting USPS’s ability to improve its financial viability
6. Options for USPS to improve its financial viability
7. Actions Congress can take to improve USPS’s business model

The bottom line of the primer is pretty much what I’ve said before on prior podcasts. The USPS alone cannot fully address its financial situation given the constraints of PAEA. Continued inaction will only result in deepening the USPS financial problems, which is why Congress must move forward with their Postal Service Reform Act of 2021. Congress needs to reassess and determine the level of postal services the nation requires, the extent to which the USPS should be financially self-sustaining, and the appropriate institutional structure for the USPS if we are going to have a viable USPS that is foundational to an entire ecosystem of mail.

Finally, and perhaps most importantly, we heard directly from the PMG himself. As noted earlier, this is the first time I’ve seen Mr. DeJoy face-to-face and I have to say I am very impressed with his passion and his candid comments regarding the dire situation of the USPS. He spoke for a full 75 minutes straight addressing many of the concerns expressed by the industry regarding the ten-year plan, challenges during the pandemic, and changes to the mail processing network. The PMG started out stating that he did indeed listen to the industry and took our views into consideration when formulating the ten-year plan. He did so by the numerous meetings previously held with senior USPS officers, whom he relied upon for the formulation of the plan and its execution. Moreover, he also considered published OIG reports as well that in his opinion were spot for the ongoing issues facing the USPS.

PMG DeJoy is clearly a man of action, decisive, and as noted earlier passionate about the USPS. I have to personally say that I was very impressed with him and walked away with a greater level of respect. I sincerely wish he had engaged the industry earlier, but and to be clear these are my words not his, “If your kitchen is on fire and the basement is flooded, don’t come to me with drapery designs for the living room!”.

I also must share to share with our listeners a quote from PMG DeJoy that had many laughing including myself. He said, “If Mother Theresa and Ben Franklin were designing a postal service to altruistically serve the nation, they wouldn’t have built this!” And you know, in many ways he is correct. Our country has changed considerably in just the last ten years and will continue to change in the years to come. How we communicate, how we conduct multichannel marketing, how we act as a society is very fluid and will likely to remain so in the years to come. Thus, I agree with PMG DeJoy that we need a nimbler USPS and one that continues to be the foundation for an entire ecosystem that supports a trillion-dollar industry.

Moving on, we are now in peak mailing season and the USPS recently reported record service improvements, though those are now being measured to a much lower standard. During a recent Delivery Technology Advocacy Council call, mailers expressed concerns with a shortage of pallets especially in the Midwest. Some had even noted that their orders for MTE had been canceled due to availability. Again, this is Midwest only, so hopefully a root cause analysis can be done quickly to get those pallets to mailers as quickly as possible.

Also noted during the call was the recent USPS Business Intelligence Capacity Model, or BCIM, which offers round-the-clock operational insights that show potential gridlock in the postal processing and delivery network before problems occur. BICM helps the Postal Service predict risk by hour at the facility level, providing local managers with answers to questions like, “Are we properly staffed by tour?” and “Is all processing equipment operational?”

BICM uses analytics along with webcam footage of physical staging areas and dock traffic to provide real-time snapshots of current plant conditions. The information gleaned through historical trends, current processing activities and instantaneous video observation is displayed in a convenient online dashboard, providing USPS with a peak season playbook.

Hopefully, this new BICM will help the USPS and by extension the mailing industry, through an essential peak mailing season. Having a successful and stable peak season isn’t important just to mailers, it will help to stabilize the network in preparation for what will likely be a huge vote by mail initiative for the 2022 mid-term elections.

Finally, I have to do a quick shout out to Garrett Hoyt who was recently named USPS acting Technology Applications vice president. Garrett was a key person for the development of seamless acceptance and eInduction. With this acting promotion, he moves into a role formerly held by Marc McCrery who is now the USPS Customer Experience vice president, which was the role formerly held by Kelly Sigmon who is retiring at the end of this year after a 32-year career with the USPS. So, I wish a happy retirement to Kelly, extend congratulation to Marc, and also congratulation to Garrett! Very glad to see good friends getting recognized and proven talent taking on new responsibilities.

Thank you for listening to today’s podcast, and if you’d like to learn more about mail tracking, or how to better automate your mailing workflows, please visit us at BCC Software.com or give us a call. As always, we’d like to know “How can we help?” Thank you for listening to the podcast, and have a great day!