The U.S. Postal Service (USPS) has been losing money since email became popular. Even though drivers take the most direct route when dropping off mail at homes and businesses, legislators have proposed cutting delivery days to face the agency's mounting debt. As a result, many organizations have discussed ways to further cut operating costs and make the agency solvent once more. A public-private partnership is one of the most common suggestions and has been advocated for years, and a new report from the Information Technology & Innovation Foundation (ITIF) recently expanded upon this idea.
USPS losing money
The USPS is losing money at a rapid pace. The ITIF report revealed the agency has lost nearly $30 billion in just the last three years and already exhausted its $15 billion federal borrowing authority. Reports from USPS show a $1.9 billion loss in second quarter 2013 alone, and the agency has said it needs to save $20 billion annually by 2016, a significant achievement that may be difficult to accomplish. Its combined obligations for retiree benefits and future workers' compensation claims add up to nearly $50 billion, making changes in operational efficiency a necessity.
While the agency has detailed its own plans to cut costs and improve processes, they've been criticized for not going far enough to make the USPS profitable. As a result, several corporations and studies have advocated the idea of a public-private mail delivery partnership, which would completely revise the current system and potentially lead to much greater cost savings for the agency and additional revenue for its private partner. However, it's unclear whether lawmakers would ever support such a move and whether a gridlocked Congress could come to an agreement in regard to the matter.
What the switch would entail
The ITIF's recent report recommends the USPS adopt a system in which the Postal Service itself is only responsible for last mile delivery, specifically delivering letters and parcels to homes and businesses. The report advises the USPS allow private businesses to handle other aspects of the supply chain, such as collection, processing and long-distance transportation. However, the data suggests the USPS keep its monopoly on existing routes and determine a national average for delivery costs that it could charge private carriers.
"As the Internet has transformed how we communicate, from e-cards to electronic bill payment to document transfer, the traditional postal model is outmoded," said Robert Atkinson, president of ITIF and author of the report. "Continued digital migration will mean continued financial challenges for USPS unless Congress drives systemic reforms that allow the Postal Service to focus on what it does best, delivering the mail, with all other services opened up to competition."
If the plan can gather steam, it may offer new opportunities for plenty of private carriers. Companies that manage to edge their way into a public-private partnership could benefit from the additional business and find that by inserting themselves into the mail supply chain, they could enhance revenue streams. Those that get involved would need to optimize processes to ensure the plan would work. Implementing route planning software would ensure they are making long-haul deliveries via the most direct route.