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Postal Innovation and the Bottom Line

Rep. Darrell Issa (R-CA), sponsor of the Postal Reform Act in the House, made a special appearance before a subcommittee hearing on postal innovation today to bang home his belief that five-day delivery and cluster boxes are more important to the future of the postal service than innovation for innovation’s sake.

“One thing I know about business is that the top line and the bottom line are not uniquely different,” Issa said. “You can increase the top line, but if it doesn’t fall to the bottom line, it’s useless.”

Issa chided Postal Inspector General David Williams, who appeared as a witness at the hearing of the subcommittee on Federal Workforce, Postal Service and Census, for focusing too much on innovation instead of inefficiency. “I’m shocked that you would take attention away from investigating waste, fraud, and abuse to promote a specific agenda to be the chief innovation officer,” Issa scolded. “I would hope that in the future you would be more of an advocate for the shippers when Mr. Lynch opposes everything that reduces cost and gets us to break-even.”

Issa was referring to a statement made earlier in the hearing by Rep. Stephen Lynch (D-MA), who derided Issa’s plan to install 15 million cluster boxes over the next 10 years as an expensive “Luddite deal” that would run counter to future innovations such as hybrid mail.

“Mr. Lynch is never going to be my partner in anything that’s going to make the Post Office more efficient, because that will reduce labor,” Issa said.

Testimony was also heard from companies that had engaged, or attempted to engage, with the USPS in public-private partnerships, with varying degrees of success. Newgistics COO Todd Everett shared the success story of bringing its Smartlabel technology to the Postal Service as a way to simplify package returns and watching it evolve into its own class of mail, Parcel Return Service.

But Will Davis, CEO of hybrid mail pioneer Outbox, spun a tale of frustration in attempting to become an innovation partner with the Post Office, which wasn’t ready to introduce hybrid service and denied his company access to mailboxes.“Embracing [innovation] means a totally different thing to the Postal Service,” Davis said, “but it doesn’t mean that the Postal Service has to be worse off or that jobs have to be destroyed.”

Davis made the point that Outbox was better prepared than the Post Office in competing with digital alternatives, because it can collect data on purchase intent that could make delivery of advertising mail and catalogs more selective and efficient. But USPS CIO James Cochrane pointed out that such a capability was not desired by a large segment of mailers. “We have a lot of catalog mailers that are paying to get into the mailbox,” he said. “That’s an extensive revenue stream for us.”

The man shaping up as Issa’s partner in postal reform on the other side of the aisle, Missouri Democrat William Lacy Clay, set the record straight on the issue of third party partnerships. Addressing Davis of Outbox, Clay asked, “Were you aware that advertising mail represented significant volume and that the Postal Service has a right to choose who works with them? I commend Outbox, but I think it’s unfair for Outbox to be here and criticize the Postal Service for not having an innovative mindset.”

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