USPS must reform its measures to manage the rate reform

There’s A saying in business that’s long been a truism: If you don’t measure, you can’t manage. Recent postal reform legislation had requirements for the US Postal Service to develop delivery service standards, and then to report on actual delivery service.

The mailing community has consistently called for the USPS to develop delivery service standards for all classes of mail and to report on adherence to those standards.

The USPS has been consistent in ignoring its customers’ calls for delivery service reportage. With reform legislation mandating delivery service reporting, the jig is up. So, the USPS – along with a broad-based mailers organization, Mailers Technical Advisory Committee – has been developing delivery service standards. These groups, with the Postal Regulatory Commission, will agree on delivery service standards. The industry eagerly awaits reports that will show actual delivery service performance.

There are two other measurement issues. First, is a measurement system called total factor productivity (TFP). The Postal Service regularly reports its productivity using TFP. Recently, a well respected member of the mailing community stated that, although he had long heard TFP statistics, he really didn’t understand them. It made me realize that I, too, could not explain TFP, so I went to the USPS Web site to get an understanding of it. The definition was, “TFP measures the growth in the ratio of outputs and the inputs, or resources, expended in producing those outputs.” The definition then says, “the Postal Service’s main outputs are mail volumes and servicing an expanding delivery network.”

The definition then gets complicated as it explains the various factors (i.e., adjustments) that must be made to compensate for mail type, size, weight, mailer preparation (barcoding, presorting), mode of transportation, capital usage, etc. The reality is that with so many adjustments, the TFP productivity statistic, while it may be accurate, is too complicated for laymen – or knowledgeable postal watchers – to understand.

With 80 percent of its expenses tied to labor, the key productivity statistic – indeed, perhaps the only one that matters – must simply relate mail volume to labor hours. Does mail mix or mailer preparation, size and weight matter? Sure. But in the end, mail volume and labor hours used to handle it, are all that matters. The USPS should use that as its key productivity statistic, and it’s what management should focus on.

At his keynote during the Spring 2005 National Postal Forum, Postmaster General John E. Potter set as a goal to cut undeliverable-as-addressed (UAA) mail in half by 2010. The USPS included this objective in its Transformation Plan update. The USPS amplified this objective by saying that its goal was to cut UAA costs in half. In fiscal year 2004, the last year statistics are available, the USPS handled 9.7 billion UAA pieces at a cost of $2 billion. So, the PMG’s target would save $1 billion annually, without considering the impact of inflation. It’s one of the most significant cost-saving programs the USPS has.

Given its importance, and the fact that we’re halfway to the 2010 target date, it’s appropriate to get a status update. So where are we? Sadly, we don’t know. There are no reports indicating current status.

It’s inconceivable that a regular reporting system has not been established to measure progress on one of the USPS’s key goals. Note my earlier adage: if you don’t measure, you can’t manage.

The USPS is mandating significant changes to mailer addressing criteria in order to qualify for automation discounts. Are mailers not entitled to know if these additional costs are achieving USPS benefits? Senior postal managers report to the Board of Governors on various key operating statistics, including this one. But there are no statistics.

Postal reform legislation provides for significant financial bonuses for management to be based, in part, on achieving certain operational and financial goals. How will the Board of Governors evaluate the address portion of their goals?

Related Posts