Last week, President Trump nominated 3 people for the 9 open seats on the United States Postal Service (USPS) Board of Governors (Board). Because the Senate hasn’t confirmed any nominees since 2009, there are no presidentially-appointed members of the Board. The terms were designed to be staggered, so there are several open seats with terms expiring in the near future.
The new nominees represent a mix of political and management qualifications.
My bank gave me a choice – receive my monthly statement online, or pay a fee for a paper copy. For my car loan, the interest rate would be a point lower if I accepted automatic withdrawal and online notices. My utility company prints a request on every bill – and envelope – to pay electronically. As a consultant, I’ve seen several clients in these industries replace physical mail with digital documents.
One industry that has trailed on the move to digital has been healthcare – both providers and payers. Challenges include systems integration, member and patient preferences, and of course, federal and state regulations. Due to interpretations of the Affordable Care Act, many healthcare companies saw an increase in their volumes of physical mail beginning in 2013.
Until recently.
On Friday, October 6, 2017, the U.S. Postal Service (USPS) filed the rate case for Market Dominant products with the Postal Regulatory Commission (PRC). Set to go into effect on January 21, 2018, the new rates represent about a 1.9% increase over the current prices for mailing, or “Market Dominant” products and 3.9% increases for shipping, or “competitive” products.
Interestingly, this price increase comes in the absence of both a Board of Governors (Board) and the anticipated PRC review of the ratemaking process.
Continuous improvement leads to continued success. Small, incremental steps can have significant and long-lasting impact on your operation.
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For mailers across the United States, the next best educational opportunity is National Postal Customer Council (“PCC”) Week, which takes place September 25 – 29, 2017 at multiple locations throughout the country.
PCCs have a variety of events scheduled – from luncheons, to half-day seminars to full-day conferences. At almost every event, a senior representative from the United States Postal Service (“USPS”) will be present to discuss upcoming postal initiatives and field questions from the audience. Their presentation will be supplemented with training on subjects like networking, quality control and professional management.
Sometime in the next month, the Postal Regulatory Commission (PRC) will complete their review of how the United States Postal Service (USPS) sets postage rates. There have been strong protests from several mailer associations against allowing the USPS to increase rates for Market Dominant products beyond the rate of inflation. On the other hand, the USPS has argued that the existing rules prevent them from establishing the rates necessary to cover their expenses.
As the prospects for legislative postal reform remain dim, the USPS needs more flexibility in setting rates. The CPI is a poor standard to use for postage rates, as most of the USPS expenses are for transportation and personnel. The price index for gas has consistently risen higher than CPI, as have health insurance rates. Ending the CPI cap will put the USPS on a stronger financial footing.
The PRC hasn’t indicated what their decision might be. They could leave the cap in place, they could modify the cap, or they could remove the cap altogether. Whatever they do, the USPS will then develop the proposed rates for 2018, probably releasing the pricing in October.
For most companies, October is too late in the planning cycle. Many of our clients are already submitting their preliminary 2018 budgets. For the past decade, managers could look up the CPI, add a few points as a buffer, and calculate their future postage costs. With no PRC decision, there are no guideposts to follow.
Predicting the future is a fool’s errand. Especially when it comes to political bodies like the PRC. However, not planning for the future is the hallmark of a fool. What’s a manager to do?
It’s probable that the PRC will lift the price cap on Market Dominant prices, with some type of controls. Postmaster General Brennan has repeatedly stated that the USPS want to grow the business of mail. A drastic rate increase won’t help them reach that goal.
A reasonable rate increase would be 5%. This would bring rates close to where they would be if the Exigent Rate Increase wasn’t rolled back in 2016. Also, it’s consistent with the annual rate increases of both FedEx and UPS – not including the holiday surcharge both companies recently announced.
Most managers are asked to reduce spending, and a significant rate increase will be unwelcome news. Savvy leaders will need to look for other methods of limiting the impact. That starts with taking advantage of the heavier weights allowed for machinable letter mail. Mailings should be combined and householded to a single envelope. Wherever possible, flats that weigh less than 3.5 ounces should be redesigned for 6 x 9 letter envelopes.
Mailers need to take a second look at the Promotions & Incentive Programs for First-Class & USPS Marketing Mail. Savings that seemed small before will be key to offset additional expenses. Mail service providers can add value to relationships by finding ways to easily enroll customers in these programs.
While no one knows the amount, postage rates will increase in 2018. Managers should budget and plan accordingly.
The United States Postal Service (USPS) released their 3rd Quarter 2017 Financials last week, and as expected, the news wasn’t good. While the USPS continues to reduce expenses – down 2.4% – they weren’t able to generate enough income due to slumping mail volumes, resulting in a “controllable loss” of $587 million.
“Want of care does us more damage than want of knowledge.” – Ben Franklin
Recent incidents involving suspicious mail highlight the need for an effective mail center security plan, paired with ongoing training. In Kansas City, MO, a suspicious package that smelled like ammonia sickened several people at an IRS building. In Queensbury, NY a suspicious package delivered to the courthouse was sent through an X-ray machine, and officers observed an object that appeared to be a hand grenade.
Security in your mail center is always important, 365 days a year. Increased volumes in packages due to internet shopping can lead to a lax attitude. Managers must take a proactive approach towards security and awareness by reinforcing the basics, reexamining current plans, and increasing the amount of training.
For most of my career, I’ve been involved with requests for proposals (RFP). First, as a customer looking to purchase equipment and services. Next as a consultant, guiding my clients through the RFP process. Also as a vendor, responding to companies looking for a consultant.
Two things I’ve learned – first, there’s usually only one vendor who wins the business. Second, not every proposal submitted will be successful.
While many people were celebrating Independence Day with an extra-long weekend, the U.S. Postal Service (USPS) filed a price adjustment request with the Postal Regulatory Commission (PRC) on July 3, 2017. Under Docket No. R2017-7, the USPS seeks approval for changing how it verifies compliance with Move Update and to increase the assessment charges for pieces that don’t meet the standard.
Move Update, the process for updating names and addresses, is required by USPS if mailers want to receive discounted postage rates. Mailers who use the exceptional address format (e.g., Jane Doe or Current Resident) do not have to meet this requirement.
The Postal Service offers mailers four approved and two alternative Move Update methods:
