Volume VI, No. 2 March-April 1999 Newsletter

New Omnibus Rate Case Brewing?

When will lower productivity, revenue shortfalls, and higher wage rates equal a new rate case? Probably in the not too distant future, perhaps next fall. The Postal Service has suffered a decline in Total Factory Productivity during four out of the last five years, including a 1.1 percent drop in 1998. Despite this negative productivity, the recently negotiated agreement with clerks and mailhandlers called for a wage increase on top of cost-of-living adjustments. The Postal Service's contracts with the National Association of Letter Carriers ("NALC") expired at the end of last November. Since that time NALC has been negotiating with the Postal Service, but the two parties have not been able to reach an agreement. An attempt at mediation failed. The matter has been submitted to binding arbitration, and there could be retroactive wage increases.

The Postal Service is struggling to keep current rates in effect for two full years, or until January 2001. Cuts are being implemented in consulting and other current expenditures that do not have an immediate impact on service, but these items represent a comparatively small amount of money. In terms of postal costs, labor is the big enchilada. Historically, whenever the Postal Service has tightened up on its labor costs, service has suffered.

Capital Investment Spending Lags -- Again

According to the 1998 Comprehensive Statement on Postal Operations, the Postal Service planned to invest $5,592 million in 1998, but it actually committed only $3,948 million or 29.4 percent less than planned. This failure to achieve planned investment is in keeping with the pattern of prior years. In 1997, for example, the Postal Service planned to invest $6,024 million, and actually spent only $3,202 million, or 46.8 percent less than planned.

The $3,948 million spent in 1998 was gross investment. Depreciation and amortization amounted to $1,579 million, so net investment was only $2,369 million. The failure to invest according to plan helps explain the decrease in Total Factor Productivity (see previous article).

Postal Service Career Employment up 3.7 Percent

The Postal Service reported that at the end of accounting period 5 the number of career employees exceeded 800,000, up from 771,715 in the same period last year. That represents a year-to-year increase of 3.7 percent, about the same as the increase in mail volume. This reflects the decline in Total Factor Productivity and the comparatively paltry amount of net investment by the Postal Service for automating and upgrading its facilities.

Delivery Confirmation Goes National

Priority Mail Delivery Confirmation service was finally launched nationwide on March 14, 1999. For those customers who can send and receive Delivery Confirmation information electronically, the price is right -- FREE. Retail Priority Mail Delivery Confirmation costs $0.35. The first two weeks witnessed significant demand for this new product offering.

The 300,000 handheld laser scanners deployed nationwide automatically record the time and date. Delivery Confirmation information also includes attempted deliveries, and whether the shipment was forwarded or returned. Upon a carrier's return to the office, the information is transmitted to a central database, where it is updated each evening, and becomes available to customers. For pieces delivered in the morning, as much as 12 hours may elapse before the fact of delivery can be confirmed. No data are yet available on how many pieces bearing a delivery confirmation barcode actually had the barcode scanned and entered into the computer. Unless carriers scan a very high percentage, the Postal Service could face a public relations problem.

Major mailers can download electronic files with their delivery information. APMU members who want to send and receive Delivery Confirmation information electronically can obtain a technical guide on the requirements by calling 1-800-279-2651 (or by contacting their account representative).

Later this year the Postal Service plans to launch a Signature Confirmation service.

Priority Mail Performance Measurement - APMU Calls for Volunteers

As noted in the preceding article, bulk users of Delivery Confirmation will be able to download Priority Mail delivery information to their own computers. The Postal Service has steadfastly refused to release any performance data on Priority Mail. Consequently, APMU is interested in compiling its own data bank on Priority Mail performance. To do so, we need to receive summary data prepared in a common format that will facilitate combining the data of all participants into a common and anonymous database. Any mailer who like to consider participating should contact Craig Thoburn of APMU at 703-356-6913.

Hearings on Postal Reform Bill, H.R. 22

The House Subcommittee on the Postal Service, chaired by Rep. John McHugh (R-NY), held two days of hearings on H.R. 22. Testimony covered the legislation in its present form, plus a large number of Postal Service proposed amendments, many quite substantive. The first hearing, on February 11, featured PMG William Henderson, PRC Chairman Ed Gleiman, and heads of various USPS labor-related organizations. It was less than a lovefest. Chairman Gleiman gave H.R. 22 a general endorsement, but took strong exception to several of the Postal Service's proposed amendments, while Moe Biller, head of the American Postal Workers Union, said his organization could not support any bill with effective rate caps.

The second day of hearings, March 4, heard testimony from the Administration (Justice and Treasury), as well as competitors and users of the Postal Service. In brief, the Postal Service's proposed amendments encountered strong opposition while drawing little support. Many of those who testified gave H.R. 22 qualified support; but each seemingly wants to see changes made in the current bill. How much support they would give the final bill if it does not include their desired changes is, of course, unknown.

Another big unknown is whether the Postal Service would support any bill that does not include most of its proposed amendments. It remains to be seen whether the Subcommittee can draft a bill that will defuse opposition and attract enough critical support to move it successfully through the House and to the Senate (which continues to evidence little interest). The next step will be for the Subcommittee to mark up the bill, which it expects to do some time this spring, and send it to the full Government Reform committee. The odds against a major reform bill clearing this Congress increase with each passing day. Interested observers have begun speculating whether any pieces of H.R. 22 may survive as riders to an appropriations bill.

Update on Appeal of Omnibus Rate Case

As reported in prior issues of APMU News, the decision of the Governors in the recently concluded rate case has been appealed by three parties -- including UPS, which wants steep increases in Priority Mail rates. APMU filed a brief opposing UPS. The parties presented oral argument on April 14, and the court is expected to render its decision this summer.

Management Team Assembled for Expedited/Package Services

John Kelly, VP for Expedited/Package Services, including Priority Mail, has chosen a team of eight experienced postal people to keep the operation running smoothly. They are Bill Good, General Manager; Pat Brennan, Manager, Business Alliances; Deborah Cullen, Manager, Finance; Gerald McKiernan, Manager, Communications; Julie Rios, Manager, Information Systems; Jerry Selman, Manager, Resources & Development; Larry Wood, Manager, Operations Planning & Performance; and Kim Parks, Manager, Marketing & Strategy.

Expedited/Package Service Headquarters is in a suburb of Atlanta, at 200 East Mansell Court, Suite 300, Roswell, GA 30076 (not far from UPS headquarters). Julie Rios and Gerald McKiernan are both familiar to APMU members, having attended several of our meetings. APMU News will offer brief introductions to John Kelly's team in this and future issues.

Larry Wood Becomes Manager, Operations Planning & Performance

Larry Wood is the new Manager, Operations Planning & Performance, Expedited/Package Service group. Larry's primary responsibility is to develop and implement the 5-year plan for the network which handles Express Mail, Priority Mail and parcel post. Plans for the network will depend on the specific features that each product has or might have -- for example, what improvements would the Priority Mail network need if the Postal Service were to offer a money-back guarantee? Should Priority Mail be processed in totally dedicated facilities, or should Express Mail or parcel post be processed in the same facility? In addition to his planning responsibilities, Larry also undertakes trouble shooting challenges that cannot be solved by operations people in the field. Larry, who has been with the Postal Service since 1971, grew up in East St. Louis, graduated from East St. Louis High School, and attended Belleville Area College. He has done management work at Duke University and the University of Virginia, and earned an MBA Degree from Washington University.

Postal Service and DHL in Deal for Global Priority Mail

In early March the Postal Service announced an alliance with DHL Worldwide Express to offer a two-day Priority Mail Global Guaranteed service to 19 countries in Western Europe, beginning April 12. Initially, the service will be limited to documents weighing up to 70 pounds.

John Kelly, Postal Service vice president for Expedited/Package Services, said he sees the alliance with DHL appealing to small and home-based businesses that require reliable service overseas with Delivery Confirmation, day-certain delivery and on-line track and trace capability. "By coupling with a world-class provider, the Postal Service gains immediate access to an infrastructure it needs to meet customer demand," said Kelly. The link with DHL, according to Kelly, gives the Postal Service the flexibility it needs to keep pace with the demands and rapidly changing requirements of the international market.

This is the first international service offered by the Postal Service that bypasses foreign postal administrations. Customers are said to be avoiding the Postal Service's International Express Mail because of the USPS' inability to track parcels, as well as poor and inconsistent service by European post offices.

The new service will only be available from the following 11 metropolitan areas: Boston, Charlotte, N.C., Chicago, Houston, Miami, Minneapolis, New York, Philadelphia, Phoenix, San Francisco/San Jose and Washington, D.C.

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