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NPTA Alliance Annual Convention By John Nolan, Deputy Postmaster General Good morning. It’s a pleasure to be with you today. I was asked to cover several things in my presentation today:
About four and a half years ago, the Postal Service began the process of developing a plan to transform itself into the kind of organization that would survive and thrive in the 21st century, and, more important, help the mailing industry to thrive. The Transformation Plan issued by the Postal Service is still the roadmap that is guiding our efforts. It consists of two parts:
The efforts were to take place in parallel tracks. However, we did not wait for any legislative action to set about building the solid foundation on which to launch future business model changes. Action took place on several fronts with striking success. Service performance for all classes of mail has reached record levels. Postal productivity has increased more in the past 5 years than in the prior 28 combined. There are about 100,000 fewer full-time employees on the rolls today than at our peak in late 1999, when we reached over 800,000. This was accomplished without layoffs and any disruptions, as our service numbers indicate. We’ve embarked on whatever pricing initiatives are possible under the current law to try to drive new business and generate revenue. We’ve implemented three negotiated service agreements (NSAs) with Capital One, Discover, and Bank One and are working on several others. We’ve also reached settlements following the filing of new product test cases that enabled us to reduce significantly the time to implement a couple of market tests. While still cumbersome, inefficient, and limited compared with the pricing flexibility needed, it shows movement on this critical issue. A commission was named by President Bush to study the long-term viability and structural needs of the Postal Service. They issued their report in June 2003. Both the House and Senate have been working to produce bills that deal with postal reform. Both houses of Congress had bills unanimously clear committees, but floor action has yet to occur. We continue to work with the House and Senate on these bills as we feel strongly that changes are needed prior to any final passage and signing into law. And, while we see some bright spots in revenue as the country climbs into a healthier economy, mail revenues continue to be a challenge as First Class Mail revenue and volume continues to fall at the rate of 1.5% to 2% per year. Postal Service performance over the years (and particularly these past 5) has earned the USPS the right to have a “seat at the table” as legislation is crafted for comprehensive postal reform. The goal for the Postal Service is to achieve what’s best for the country and not to protect what is currently ours. Legislation was enacted in 2003 to deal with the overfunding of the Civil Service Retirement System (CSRS). This reduced postal costs by over $4.5 billion per year. However, the USPS was saddled with a requirement to pay for the military retirement obligations for veterans who subsequently work for and retire from the Postal Service. The impact is $1.6 billion per year (roughly). The other negative to the law passed was the requirement in 2006 for the USPS to pay into an “escrow account” an amount equal to the net savings from the CSRS change. In order to fund this, postage rates will be negatively impacted by roughly 5.4% for this unnecessary obligation on ratepayers. These issues are major industry concerns for the upcoming rates filing next year and need to be dealt with quickly and completely. In addition, a watchful eye is being kept on any new requirements that might be placed on the USPS to prefund retiree health benefits on an accrual basis. While there is no basic disagreement on the prudence of doing this, the issue is the rate at which it is funded. It makes little sense to enact a funding mechanism that would hurt the industry and postal employees at a time when the health of the industry is of concern. A big impact on rates will hurt postal volumes and revenues and cost the industry dearly. A significant number of jobs in the mailing industry would be lost due to this volume drop. So, in the short-term, the CSRS issues need to be resolved. And long-term comprehensive postal reform is still crucial to the long-term health of the mailing industry. There is tremendous opportunity in hard copy communications! Mail works!! But unleashing this potential requires a Postal Service with greater freedoms to both anticipate and react promptly to changes in the mailing industry. So, what is our vision for the Postal Service in the future? While First Class Mail volume will obviously continue to be challenged by technological and corporate structure changes and innovations, there is, as I have said, tremendous power—hard copy communications. As you articulated earlier this morning, print is not old technology, it’s proven technology. But the loss of each piece of FCM requires 2 ½ pieces of Standard Mail to achieve the same contribution to cover institutional costs. Our vision is to create the most efficient, effective, and responsive industry supply chain possible — with the USPS focusing on those significant areas where we can add value. In that regard, worksharing will continue to be important, as will network restructuring and an increasingly motivated and committed workforce; innovative pricing and payment systems will develop to help spur industry growth, and creativity in product design will be seen as the USPS has greater freedom to test market. Areas like Intelligent Mail, greater mail deliverability, greater personalization, and a first and last mile emphasis by the USPS should become evident. This does not mean abandoning the distribution and transportation functions, however. The Postal Service will also continue to work with the industry on issues like privacy and recycling/environment to ensure that the positive story on industry action is known. As we tackle the challenge of volume growth, inroads into small and mid-size businesses are crucial for sustained growth. Many companies still do not take advantage of the mail to build and sustain business relationships. We know that mail can help them succeed. We’ve got our work cut out for us in the mailing industry — but together we can and will succeed as we work together to develop ideas and strategies, and to execute well. |
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