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POST OFFICE INEFFICIENCIES

Posted by Tim Bryce on March 13, 2013

BRYCE ON POLITICS & MANAGEMENT

– How far behind is the USPS operating behind its competitors?

(Click for AUDIO VERSION)
To use this segment in a Radio broadcast or Podcast, send TIM a request.

The United States Postal Service (USPS) recently announced it is going to suspend Saturday deliveries of mail. Actually, we shouldn’t be too surprised as paper based mail has been diminishing over the years, thanks to e-mail, electronic banking, and rising postal costs. I know many businesses who avoid the USPS as much as possible and prefer the service of other carriers instead. All of this adds up to a decline in revenues and an increase in expenses for the USPS who is now scrambling to reorganize themselves in order to survive.

One of the key lessons I preach when working with young people is, “Everything begins with a sale.” Business functions such as administration, engineering, research and development, and customer service are nice, but all employees should be cognizant of the fact that everything begins with a sale. Consequently, employees should be mindful that everything should be geared towards producing income and minimizing costs. In the case of the USPS, either the product isn’t priced properly, or they’re running an unproductive operation.

One clear indicator is the amount of profit associated with each employee. To illustrate, let’s consider a commercial enterprise, such as the Ford Motor Company, who in 2012 had 164,000 employees. The company had $136.26B in revenues and $128.632B in expenses, leaving an operating profit of $7.628B. If we divide the profit by the total number of employees we find each employee is responsible for incurring $46,512 of the profit. Think of this as a performance measure. It is an important figure which every employee should be cognizant of, yet few companies publicize.

Let’s next compare the USPS and its shipping rivals in the same light:

  EMPLOYEES REVENUES EXPENSES PROFIT PROFIT/EMPLOYEE
USPS 546,000 (2012) $ 65.223 billion (2012) $80.964 billion (2012) $-15.741B $-28,830/employee
DHL 423,348 (2011) $ 71.169 billion (2011) $70.693 billion (2011) $ .476B $ 1,124/employee
UPS 398,000 (2012) $ 54.127 billion (2012) $52.784 billion (2012) $ 1.343B $ 3,374/employee
FedEx 300,000 (2012) $ 42.7 billion (2012) $39.494 billion (2012) $ 3.206B $ 10,686/employee

NOTE: Latest available data, courtesy of the corporate web sites and Wikipedia.

Thanks to a considerable operating loss in 2012, USPS employees are operating in the hole. Also notice in the comparison, even though the USPS has the most employees, it has the worst profit performance. Not all of its shipping competitors topped the revenues of the USPS, but all were considerably less in terms of expenses. This may be indicative of the difference between running a commercial enterprise and one operated by the government.

There are actually many variables affecting a company’s performance, such as economic issues, changing government regulations, and business decisions, but making each employee mindful of their individual contribution raises their consciousness as to what should be best for the company overall.

Suspension of Saturday deliveries may be a good idea to reduce costs, but I suspect it is another example of a bloated government bureaucracy running amok and needs more serious cuts as opposed to minimizing service. I am reminded of the Bryce’s Law, “Do not try to apply a band-aid when a tourniquet is required to stop the bleeding.”

Perhaps it’s time for a little Enterprise Engineering to flatten this government behemoth. Otherwise, the taxpayers will be asked to once again bail out this model of inefficiency. If it was a commercial enterprise, it would have likely perished by now and its shipping competitors would have taken over (and we wouldn’t be discussing the suspension of Saturday service).

If the government is having this much trouble running a monopoly like the post office, imagine what they’ll do with Obamacare.

Keep the Faith!

Note: All trademarks both marked and unmarked belong to their respective companies.

Tim Bryce is a writer and the Managing Director of M&JB Investment Company (M&JB) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com

For Tim’s columns, see:
timbryce.com

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Copyright © 2013 by Tim Bryce. All rights reserved.

NEXT UP:  MY “CROWNING” ACHIEVEMENT – Why my visit to the dentist was like digging the English Chunnel.

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13 Responses to “POST OFFICE INEFFICIENCIES”

  1. Tim Bryce said

    HAVING TROUBLE READING THE TABLE? Try my backup site – http://timbryce.blogspot.com/2013/03/post-office-inefficiencies.html

    Like

  2. Tim Bryce said

    An M.M. of Ohio wrote…

    “I couldn’t agree more. I thought this was a ridiculous move on the govs part.”

    Like

  3. Tim Bryce said

    An R.W. of Tarpon Springs, Florida wrote…

    “Super!”

    Like

  4. Tim Bryce said

    An S.S. of Clearwater, Florida wrote…

    “Every business owner should read this article and every employee for that matter and every student in college taking any kind of business class – heck why stop there?”

    Like

  5. Tim Bryce said

    An L.M. of Chicago, Illinois wrote…

    “Enterprise Engineering.” Haw. With a President whose does not have any intention”balancing the budget.”

    Like

  6. Tim Bryce said

    A B.H. of Boulder, Colorado wrote…

    “While it is indeed instructive and informative to compare the USPS to UPS, FEDEX, DHL, etc., we also have to realize that none of the others are required to provide first class letter mail, bulk mail, or any of the other kinds of services for individual mail that the USPS is required – by law – to provide. Up until a few years ago, the USPS was a federal government agency. In fact, they are still kind of schizoid about that relationship – when it’s convenient for the government to treat them that way or for them to act that way, they do; when it’s more convenient to treat them or act as a private corporation, they do that too. Part of the reason they’re so far in the hole is most likely due to the fact that for so many years, the rates were determined by congress, and they also provided subsidies to offset any losses the service might have had in providing mail service at the rates congress allowed. When Congress cut them loose (because they didn’t want to keep paying higher and higher subsidies out of the budget), that’s when we (the public) started looking at profit/loss statements for the USPS. I remember the penny postcard and 3 cent first class mail rate of the 50’s. The problem is, if WE truly wanted to “fix” this problem, we’d raise the rates of postage for just about every class of mail to roughly what other countries currently use – and it would cause such a hue and cry for blood as we’ve never before seen. In fact, I’m thinking that we’re the only country in the world offering “forever” rates on stamps…maybe to disguise the fact that rates go up so often. Certainly, if we more than doubled the current first class postage rates (not to mention any of the other classes), there would definitely be an incentive to move quickly to electronic payments of bills, electronic communications for routine “letters” and so on. Right now, there’s only a gentle incentive to do so.

    And, while we can all bitch and moan about the cost of postage for a letter, we should also realize that the US has probably one of the cheapest mail rates for first class mail in the world. Of course, that argument is about as popular as reminding motorists that our gasoline prices are significantly lower than our contemporary allies’ costs (although some of our “suppliers” and “adversaries” out there have much cheaper gas … subsidized by the prices WE pay here … so it becomes a hollow argument pretty quickly. Heck, gas in Colorado was running $3.50 or so a gallon when I left a week ago to come to Great Falls. Thru Wyoming, it was $3.07/gal and in Montana it is $3.27/gal. Now, Colorado and Wyoming both have extensive refining capabilities, so transporting the final product to the pump is pretty comparable. Taxes in Montana are higher than most states because they don’t have a sales tax…so it begs the casual observer to wonder WHY the rather large disparities in pricing for the same product in places that have similar conditions….so compare the costs of, say, mailing a PACKAGE via USPS, FEDEX, and UPS or DHL…and remember that they’ll have differing criteria as to size/weight/content limitations.

    I don’t defend the USPS…they are indeed inefficient, sloppy, and bloated. In fact, I will use UPS and FEDEX as appropriate for some things. Until and/or unless society finally gets to the point where EVERYONE has a computer, is connected to the internet, pays bills and communicates electronically, there WILL be a valid need for “snail mail” service. Like a lot of things, SOCIETY drives the decisions – for example, women on submarines – until we get to the point where having men and women share bathroom and shower facilities together, sleep in the same bunk (different times – called hot-racking), and dismiss obvious physiological differences when getting dressed/undressed, we’re probably not going to change much in the way of attitudes…just like, until the last of the letter-writers dies, you’ll probably not get rid of letter mail. Although, getting rid of the junk mail catalogs we seem to get in abundance would (in my humble estimation) put a LOT of advertising money back into the pockets of the companies – allowing them to either lower prices or to improve selection and quality of product.

    Oh yeah, schools now moving away from teaching kids cursive handwriting is probably the first step to eliminating letter-writing altogether.”

    Like

  7. Tim Bryce said

    A C.N. of Boston, Massachusetts wrote…

    “I can see your desire to compare but please compare apples to apples.

    I don’t recall DHL, UPS, or FedEX delivering letters as USPS does but mostly delivering primarily packages. Oh, sure, I’ve received the overnighted FedEx letter but I don’t think that compares to the “thank you for the bike, Grandma” letter or the beach postcard. If we all had to pay $13 to mail a postcard from the beach or a Christmas thankyou letter, well, I’m sure we’d think twice. And, while email is great and certainly a nice way to save, it’s just not the same in sending a Christmas card for the mantel during the holidays.

    I am sure that the use of sales per employee is a great comparison to prove the USPS’s inefficiency but please temper it by also showing other factors such as volume and type of mail. And consider the everyday person use of the Post Office.

    A regular reader”

    Like

  8. I agree with B.H. – I’m not going to totally rag on the Postal Service. There is no business yet who is going to give Aunt Tilly her daily mail way, way out in the vast wilderness. Aunt Tilly can still have her mail delivered to her doorstep. And overall, they get us our mail quite efficiently. However, as B.H. and you noted Tim, it is a sloppy, inefficient mess. The first clue was when the Post Office started handling totally unrelated retail items. What business does the Post Office have in buying and stocking their shelves with Beanie Babies?? To name just of the totally USELESS items the Post Office started selling for years.

    Then the fancy colorful posters telling us what could easily be printed out on one sheet of paper. Imagine every post office in every town and city and the cost of making, printing and distributing poster about BUYING STAMPS.

    As an Army wife, for years I’ve been shocked by the excess and waste just inside the walls of various post offices around the U.S. I’ve lived in every corner, middle and many places in-between of the U.S. and every single post office could have been trimmed down to the tune of thousands and thousands of dollars had I gotten a hold of them for just one week. Why do we have (as we do in Lansing) a HUGE and I mean massive fairly newly built building – where you can’t get stamps, you can’t mail a package, can’t buy any boxes or do anything AT ALL except pick up a package? Then in the same township we have ANOTHER post office where you CAN do all of that but CAN’T pick up a box that was delivered—required a signature—you weren’t home so you needed to go to the Post Office to get it. Seriously??? Why not COMBINE these two huge buildings?

    As you noted Tim they would have gone under a long, long time ago had it not been for the taxpayers and now they are so deep under water it probably can never be fixed at this point. Too bad, because faithfully the USPS has overall served us for many years in a positive way.

    Like

  9. Tim Bryce said

    A U.V. of Largo, Florida wrote…

    “I shudder at your last sentence.”

    Like

  10. Tim Bryce said

    A D.C. of Pennsylvania wrote…

    “Let’s remember the accounting components that are “paper” additions to that deficit … the retirement contributions being a big part. None of the other shipping companies you list is under Congressionally mandated budget constraints. Sadly, other companies in the US are declaring bankruptcy to divest their retirement obligations (and I do not commend this to the USPS even it could do so legally), but we must understand that we cannot totally judge its current state by mismanagement in the past.

    We should also look at the services the USPS offers we do not get elsewhere (including, being the last mile delivery of packages shipped by DHL, UPS, and FedEx in areas they do not service).

    The USPS, and its costs, need help. But if we are going to judge them, lets do it on a level playing field, and in recognition of all of their functions.”

    Like

  11. Tim Bryce said

    It really doesn’t matter who you compare them to; I used UPS et al simply because they were close to them. The fact remains they run a losing proposition .
    All the Best,
    Tim

    Like

  12. Tim Bryce said

    An S.P. of Pittsburgh, Pennsylvania wrote…

    I often joked that the USPS should switch to using owls like they do in Harry Potter. It would probably be an improvement. B-)

    Like

  13. Tim Bryce said

    A W.A. of the Dominican Republic wrote…

    “Tim, is there really anyone that believes the government has ever run anything and made a profit? If we ever meet, just ask my wife, who is an unbelievably hard worker, what she saw going on while she worked for TSA in Tampa before retiring so we could move to the DR. Horror stories of waste, laziness, fake illnesses etc. etc. She figured TSA could get rid of 30% of the employees that didn’t want to work and TSA would run 100% more efficiently. “

    Like

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