The reduction in mail volume has not been accompanied by a comparable decline in expenses, an IG audit has said, saying that “the Postal Service’s strategic initiatives to reduce costs and optimize the processing network have not achieved planned cost savings.”
For example, it said, the Postal Service had planned on savings of $1.9 billion over fiscal 2014-2018 from its “Ready Now/Future” initiative, but achieved savings of only $339.1 million; it reported no savings in 2018 from facilities consolidations carried out earlier; and auditors were able to verify only $90.7 million in savings over 2016-2017 from the Operational Window Change” initiative that lowered first-class mail service standards, which had been projected to save $1.6 billion in that time.
What the OIG Found
Even though infrastructure costs have been increasing and volumes are declining, the Postal Service has not met the majority of its service performance targets over the past five years.
Even so, 80 percent of respondents to the Postal Service’s FY 2018 Delivery Survey were satisfied with their mail and package delivery. This satisfaction rate is significant and may suggest that service performance targets are not always aligned with customer expectations.
Costs, Revenue, and Volume
During the last five years, costs associated with processing, transporting, and delivering mail have increased by about $5 billion dollars, or 13 percent (when adjusted for inflation, costs increased by $2.5 billion, or 6 percent), while mail volume decreased by 8.8 billion pieces, or 5.7 percent. Specifically, mail processing costs increased $301 million, transportation costs increased $1.7 billion, and delivery costs increased by about $3 billion.
During that same time, total revenue increased $3.1 billion, or 5.1 percent, due to Priority Mail and Package Services revenue growth of almost [redacted] percent, respectively. Revenue for the other mail classes decreased between about 5 and 21 percent.
The Postal Service does not know how much it would actually cost to meet its current service performance targets or the financial and customer service impacts of reducing the targets. Yet costs associated with processing, transporting, and delivering mail are already outpacing revenue. When the Postal Service’s processes are not completed as designed or when delays occur, management can, and often does, take actions outside the normal process to keep the mail moving and meet service targets; however, these actions can result in additional costs. Postal Service field managers we surveyed indicated they prioritize service significantly higher than the financial health of the Postal Service. This could explain why costs continue to rise as managers attempt to meet service performance targets.
Service Performance
The Postal Service did not meet national service performance targets for any mail class in FY 2018. Further, over the last five years, the Postal Service met annual service performance targets more than once for only four (or 13 percent) of the 31 mail products.
Survey of Postal Managers
We surveyed about 1,500 plant managers, in-plant support managers, transportation managers, and postmasters. The 744 managers who responded to the survey identified the main causes of service failure as:
- Missent Mail
- Late Trucks to Delivery Units
- Employee Availability
- Untrained Employees/Managers
- Mail Processing Operations Not Completed On-Time
Furthermore, 72 percent of respondents ranked financial health as the lowest of the four corporate priorities when considering their daily duties and management decision making. This is an indication that as field managers make decisions about moving the mail, while they consider several factors, they do not always prioritize the associated costs as the most important factor. Meeting service performance targets is often a higher priority. The priorities for respondents, in order, were: 1) a Safe Workplace and Engaged Workforce followed by 2) High-Quality Service, 3) Excellent Customer Experiences, and 4) Financial Health.
Service Performance Metrics
In evaluating service, we analyzed performance metrics for FY 2018 and found the Postal Service’s processes were routinely not working as designed:
- Of the 11 indicators that measure how much mail completed processing operations on-time, only four had at least 90 percent of the mail processed on time.
- Twenty-nine percent of all surface transportation (Postal Service and contractor) trips were late.
- Almost 9 million mailpieces per day, or 1 percent, were reported as mail processing delays.
- Between 4 and 8 percent of mail transported by air carriers arrived late.
- 3.25 percent and 2.76 percent of single piece and presort mail, respectively, was not delivered the day it was available for delivery.
- Almost 2 percent of mail received at collection points arrived at processing facilities late.
- Over 12,000 Priority and one million First-Class mailpieces per day were delayed due to air transportation.
When these processes are not completed as designed, management interventions can occur to keep the mail moving and meet service targets. Interventions can include using overtime to process and deliver mail, delaying transportation until mail processing is completed, and using extra transportation trips. These interventions can help meet service performance targets but also result in additional costs.
Over the last five years, despite decreasing mail volume:
- Overtime and penalty overtime costs in mail processing increased $327 million, or 43 percent.
- Overtime and penalty overtime costs in delivery increased about $576 million, or 26 percent.
- Mail processing delays increased 43 percent.
- Late trips increased almost 60 percent and extra transportation trips have increased 90 percent. The Postal Service reported these trips cost $140 million in FY 2018.
What the OIG Recommended
We recommended management:
- Conduct a cost-benefit analysis, including a sensitivity analysis, of current service performance targets. This analysis should include an evaluation of additional costs incurred for extra operational services performed to meet service performance targets and opportunities that exist to limit extra services when they are not financially feasible.
Postal management knows it’s not their money they’re wasting… it’s the taxpayers money….as long as that’s the business model you can expect more annual multi-billion dollar deficits…. until Trump shuts it down.
I can not understand how it would be so hard now. When w was the president we rural carriers were paying $4.35 a gallon . I understand that profit is based on overhead . All the workers I once worked with were fired. I am sorry that USPS did the
things that are water under the bridge now. I think to the normal customer cost to
them is a bigger driving force.
Diversity hires, employees that don’t show up for work, and incompetent management are all to blame. Non career equals non care.
Things that USPS and management did wrong.
First and foremost: not listening to the carriers and believing that everything they say is a lie.
The 2006 Congressional requirement for the USPS to prefund employee pension. (This wasn’t management’s fault.)
Implementing flats sorting (FSS) and purchasing more equipment, not to mention the FSS machines and the cost of maintenance and legal fees stemming from the lawsuits of not wanting the remaining FSS machines ordered.
FSS debacle led to impossibly long routes in some cities. Now you have carriers out there after dark and accruing penalty overtime, which totally kills the bottom line and puts us further in the red.
The 5pm window of operations requirement from years ago caused more problems and grievances that it helped solve.
Insincere route checks. Allegedly hiding mail or telling the plant to hold mail during week of route checks to make the route look like there’s less of 8 hours of work. Fine, but when the routes gets added to, the overtime it creates makes the hypothetical savings go away. How about taking the money from the route inspectors and investing that money in training and paying carriers better so they will give a damn and not break down due to wear and tear and injuries.
Changing the delivery standards from 1-2 days to 2-5 days. (Or was it 3-5 days?) Theoretically this should alleviate labor costs and make it easier to get the mail to where it needs to go, but somehow I suspect that management took the hypothetical savings and either possibly paid out bonuses and also tried to save money by understaffing mail sorting facilities which negated the cost savings, while at the same time pissing off our core customers who expected the mail to get there in 1-2 days and, worst of all, not even getting the mail there in 5 days.
That’s just a list of things I can think of on the top of my head. Too many supervisors, too many injured carriers (thanks to bad managerial decisions from the past) and too many routes that are too long and auxiliary routes that shouldn’t exist in the first place that requires someone to case everyday (ODL, OWCP, CCA, etc.). Plus high gas prices and inefficient vehicles don’t help, especially when we’re not allowed to take that into consideration when deciding to raise postage.
You hit the nail on the head.
In CT Valley they let trucks leave only half full.
Why?
Because to get the PFP they have to have the truck leave.
Even if it’s not ready ?
That’s what you get when you put a Buttafuco in charge?
Well if they would stop creating new upper level management positions they might save some money. How many VP’s do they really need. The PO is management top-heavy, too many Chiefs, not enough Indians.
Why is it a postmaster can get away with cutting N/S day overtime
BUT YET THEY GET A BONUS AT THE END OF YEAR FOR REDUCING COST.
HOW ABOUT WE REDUCE COST AND DO AWAY WITH PAY PER PERFORMANCE
OH BY THE WAY LETS DO THIS BEFORE THANKSGIVING AND CHRISTMAS
HAPPY HOLIDAYS
WHAT A MANAGERIAL POS !!!!
I’m surprised they weren’t able to make it up through all the wage theft they engage in.