An Update on 5-Day Postal Delivery

As indicated in a previous Postology Report the USPS is interested in reducing delivery from six to five days per week and that Congress is seemly more attuned to the idea.

The USPS is very serious about 5-Day delivery!

Even with a reduction in the required pre-funding of retiree healthcare benefits the savings would not be sufficient to stave off the USPS from losing billions a year. The USPS had budgeted to cut costs an additional $5.9 billion over the two year period of 2009 through 2010. With the current economic environment they have opted to cut all $5.9 billion in 2009.

Beyond FSS, the delivery point sequencing of non-ECR flat mail, there are no more automation productivity programs planned. The mail volume of 212 billion is projected to be only 175 billion for the year 2009 and the USPS is projecting that mail volume for 2010 could reach as low as 167 billion pieces. The Postal Service is also projecting a loss of $7.1 billion in FY2009 despite its success in working toward $6.1 billion in cost cutting in one year.

The USPS is aggressively looking at facility consolidation where it looks like it will be viable AND where Congress will let them. So, despite Congresses desire to have the USPS push more aggressively in cost reductions, they interfere actively in not allowing facility closures and in supporting unions in protecting jobs. Therefore there is a practical limit as to how far the USPS can effectively manage costs lower than what they have already achieved and will achieve with FSS.

Therefore, the only real significant annual savings on the shelf is a reduction in one day of delivery AND processing. The USPS estimates that reducing delivery to 5-Days per week will save them $3.5 billion per year. If the Congress allows the USPS to go to 5-Day delivery and all proceeds as planned by the Postal Service the $3.5 billion would not be realized until postal year 2012.

It needs to be stated that the USPS is very aggressively pursuing this course. They are having new market research performed to fully determine the impact on both the industry and the USPS. Once this new research is completed they will move forward with their efforts. In fact, they already are taking steps now to be better prepared. The new report should be ready no later than early September 2009.

The USPS has indicated that it would take them 6 months to implement their plan. If they need to they could make it happen in 60 to 90 days with follow-up stages of implementation. The big items are IT, mail processing, plant maintenance, and route changes. There are over 25,000 carriers that would be directly affected by cutting Saturday delivery, meaning they are no longer required. They are already moving forward with their IT team to be ready.

Jack Potter has indicated that the earliest the USPS would convert to 5-Day delivery would be October 2010, the start of their 2011 year.

PO Boxes and Remittance mail will still be available. In addition the USPS is looking at Saturday deliver of parcels with a surcharge. It may be possible to drop ship enter mail on Saturday to many facilities, but it will not be worked till Monday and that will also be its designated Critical Entry Time. So this will require some interesting solution development on the service provider's part to assist clients meet their needs.

There have been some specific industry questions answered by Sam Pulcrano from the USPS:

Question:		Will FCM still be picked up on USPS on Saturdays from lettershops?
Answer:		Today, Mail Carriers usually pick up mail from lettershops on Saturdays. Under a 5 day environment, carriers will no longer work on Saturday so this mail will not be collected. The carrier will pick up this mail during their Monday rounds.

Question:		I know you said drop ship will remain the same, but I would like to double check on BMC and SCF entered mail on Saturdays.
Answer:		Drop ship mail can be physically dropped at the plants and at most delivery units on Saturday and this would include both DBMC and DSCF. However, this mail will not be processed until Monday and we will start the clock on Monday. Delivery units with either PO Boxes or retail hours are the only delivery units open on Saturday. Many of these sites will run with abbreviated Saturday hours so it may be necessary to drop the mail earlier in the day. Drops to pure carrier annexes or delivery units without PO Box or retail hours cannot be made on Saturday.

Question:		Today origin Standard Mail is picked up 7 days a week, will this be affected?
Answer:		As a practice, standard mail will not be picked up on Saturdays. However, if the volume warrants there may be some places where 7 day pick ups will continue to occur. This will be analyzed on a site specific basis and spelled out in customer supplier agreements (CSAs).