Transforming the Postal Service

Transforming the Postal Service

By George S. Kikuchi

Transforming the Postal Service

By George S. Kikuchi

The Postal Service recently delivered its Transformation Plan to Congress. The plan offers solutions to the current financial situation the Postal Service now faces and in the long term calls for a new business model to replace our 30-year-old operating structure. Changing to a new business model will require legislative changes, essentially rewriting the 1970 Postal Reorganization Act that formed the current Postal Service.

The Postal Service gets most of its revenue from First-Class Mail—the kind of mail used to pay bills and write letters. Any decline in this type of mail has huge consequences since two-thirds of our costs are covered by the revenue it brings in. Add to that equation the 18,000 new addresses created every year in the Northern Illinois district, and you can see the crisis we face. Trends like that threaten our ability to deliver the mail.

But we have solutions. In the long term, the Postal Service will ask Congress to adopt a new business model, called a Commercial Government Enterprise (CGE). Changing to a CGE would be a large step toward placing the Postal Service on more business-like footing. We would be expected to provide traditional and non-traditional products and services and implement market-based pricing. Universal mail delivery would be maintained by giving the Postal Service the flexibility to survive in a new economy.

We will also cut costs. The Northern Illinois District cut more than $20 million in operating expenses since the end of 1999. The Postmaster General has asked us to cut $5 billion more nationally (on an annualized basis) over the next five years, and the Northern Illinois District will do its part to meet that goal.

The old legislation served the country well. In the Northern Illinois District alone (which encompasses Zip codes 601, 603, 600, 602, 610, 611), we deliver 51 million pieces of mail every week; that equals 2.7 billion pieces every year to over 1.4 million businesses and homes. The Postal Service delivers in one week as much as UPS delivers in a year; we deliver in two days what FedEx delivers in their typical year. No postal system does what this U.S. Postal Service does today. But what organization can keep the same business model for 30 years and hope to survive?

No organization could. Organizations must be able to change in order to survive. No one 30 years ago could have predicted the rise of the Internet, electronic bill payment and competition from global mail providers. Mail volume nationally and in the Northern Illinois District has always had steady increases, and our old business model counted on volume always going up. But that has changed, too. Nationwide, the Postal Service lost $1.68 billion in fiscal year 2001 and could lose close to $2 billion this fiscal year.

The plan also allows us to better meet changing customer needs, such as increasing access for consumers. The Northern Illinois District has 217 post offices and other retail outlets, but there are quicker, more cost-effective ways to get basic services like stamps. People already purchase stamps by phone and over the Internet, but we will also explore other non-traditional outlets. We plan to offer simplified, pre-paid package shipping so customers can pay by the size of the box, not the weight. And we recently introduced a product called Confirm, part of the new generation of “intelligent” mail services that allows large businesses to track their mail in near real-time throughout the postal system.

As the District Manager for Northern Illinois, I’m excited to be a part of this Transformation Plan. Delivering the mail is a public trust, and the Postal Service is committed to guaranteeing mail delivery well into the future. This plan is the first step in that process and sparks the public policy dialogue with the American people.

George S. Kikuchi is the Northern Illinois District manager for the U.S. Postal Service.

Editor’s note: What are your reactions to the new postal plan? Send your views to The Rock River Times via mail or e-mail.

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