As Congress considers legislation to reform the business model of the Postal Service, it must confront a basic choice: to permit the Postal Service to function more as a business does or constrain it from doing so.
With greater business model flexibility, the Postal Service can return to profitability and financial stability. A flexible business model would speed product and pricing decisions, enable a five-day-per-week delivery schedule, and permit the realignment of mail processing, delivery and retail networks to meet lower mail volumes. It would also allow the Postal Service to more effectively manage its health care and retirement systems and better leverage its work force.
For an organization that generates all of its revenue from the sale of its postage, products and services — and is contending with declining use of First Class Mail for bill payment — having the flexibility to quickly adapt and react to the marketplace is vital. Our immediate goal is to reduce our annual costs by $20 billion by 2015, which would put the Postal Service in the black and ahead of the long-term cost curve.
The alternative is a business model that prohibits or delays cost reduction, perpetuates an inflexible structure and constrains the Postal Service from being more responsive to the marketplace. Under this scenario, and in the absence of meaningful and immediate business model reform, the Postal Service could soon incur long-term deficits in the range of $10 billion to $15 billion annually.
Within the limits of our current legal framework, we have responded aggressively to a changing marketplace — reducing the size of our work force by 128,000 career employees and reducing annual operating costs by $12.5 billion in just the past four years. However, to return to profitability we must move at an even faster pace. And to do so requires changes in the law.
If provided with the flexibility and speed to act, the Postal Service can avoid being a financial burden to the taxpayer. More importantly, a financially stable Postal Service that can operate more like a business can more readily adapt to America’s changing mailing and shipping needs.
For example, we are expanding our network of 70,000 retail partner locations and online offerings so that our customers will be able to purchase stamps and conduct other mailing and shipping transactions outside of the traditional Post Office. Customers will increasingly be able to visit gas stations, grocery stores and pharmacies — which are part of regular shopping patterns, open longer hours and weekends, and more conveniently located — to conduct their postal business. The traditional Post Office will always exist, but a changing world demands rethinking the status quo and adapting to the needs of our customers.
In a digital world, businesses and individuals have choices in the way they communicate. Although the Postal Service facilitates trillions of dollars in commerce annually and supports a $900 billion mailing industry that employs almost 8 million people, it must have the tools and the motivations to effectively compete for customers.
In the current debate about its future, some have argued the Postal Service should not operate like a business and be allowed to regress back into a unchanging, taxpayer-subsidized agency, and some have urged that it be privatized and completely separated from the government. The former is undesirable and the latter is unrealistic.
The answer resides in the middle — an organization that performs a vital national function and operates with the discipline and motivations of a business that competes for customers. If it is to endure as a great American institution, provide the nation with a secure, reliable and affordable delivery platform, and serve as an engine of commerce, Congress should provide it with the speed and flexibility it needs to compete in an evolving marketplace.
The Postal Service is far too integral to the economic health of the nation to be handcuffed to the past and to an inflexible business model. To best serve taxpayers and postal customers, it’s time to remove the constraints.
Eric D. Chavez is district manager, North Florida, for the U.S. Postal Service.