You've got (late) mail: USPS to slash service in pursuit of business cost reductions

on Monday, December 5, 2011

You've got (late) mail: USPS to slash service in pursuit of business cost reductions  The U.S. Postal Service is in financial trouble, and it is hoping that an aggressive business cost reduction program can help it stay afloat.

Let the experiment begin.

The USPS has seen a precipitous drop in circulation over the past decade. The internet increasingly ate into profit margins, while its bloated payroll and inefficient delivery system further hurt earnings. Its poor reputation prompted many private customers – including both businesses and everyday shoppers – to send an email or use delivery companies such as UPS and FedEx in lieu of the government-run organization.

The New York Times reports USPS officials said on Monday they would reduce service to slash business costs. By implementing such a measure, officials warned the USPS would likely no longer offer next-day mail delivery.

The USPS plans to shut roughly 50 percent of its 487 mail processing centers, which are located across the U.S. As a result of the closures, the USPS is reducing its delivery standards for first-class mail for the first time in nearly four decades, according to The Times. Packages and other items will now have to travel substantially farther between post offices and processing centers before arriving at their ultimate destinations.

Analysts asserted the new delivery procedures could have far-reaching consequences, especially on private businesses that rely on the USPS. Instead of delivering first-class mail in the U.S. within three days, the closures are expected to add two to three days to estimated delivery times.

For companies such as Netflix, the newly announced moves could have serious implications. Customers have abandoned the DVD delivery and online streaming service in droves over the past six months, as Netflix raised prices on its core offerings. Some analysts suggested that waiting an additional two to three days for DVDs to arrive in the mail could prompt even more customers to abandon ship.

The closures are part of an overall plan to achieve business cost reductions of $20 billion annually from the USPS operating budget, according to postmaster general Patrick Donahoe. The USPS currently has an annual operating budget of $75 billion. Donahoe is under intense pressure from federal lawmakers to trim the organization's budget, and he has warned that further cuts – including closing up to 3,700 post offices – could be announced in 2012.

 

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