USPS reviews closing 252 processing plants, cutting workforce

Monday - 12/5/2011, 2:37pm EST

By Jolie Lee
Web Editor
Federal News Radio

The Postal Service's financial challenges have reached an "historic proportion," and the agency must make changes across its operations, according to the latest semiannual report to Congress from the USPS Inspector General.

In fiscal year 2011, USPS had a net loss of $5.1 billion, bringing five-year losses to $25 billion.

The report said, "As it struggles with record losses and burdensome federal benefits payments, it must adapt its business model for a new era of communications."

The IG's report outlined recommendations, some of which the Postal Service have already started implementing.

IG recommendation Current implementation
Stop Prefunding
Previous USPS IG reports found "excessive prefunding levels" for the Postal Service's pension and retiree health plans. The IG said if the overcharges were applied to the benefits funds, USPS would already be more than 100 percent funded. The Postal Service should stop making these prepayments and have expenses "come out of the fund as intended." The IG also recommended taking the Postal Service's real estate holdings into consideration for prefunding. Aside from the $82 billion in overfunding, USPS has set aside about $312 billion for its pension and health care liabilities, the report said. Congress extended the deadline to make its $5.5 billion payment to the retiree health benefits fund, but the Postal Service will still have to pay in 2012.
Streamline retail offices
Reduce physical infrastructure holdings to match reduction in workforce size. The Postal Service will study 3,700 retail facilities, as well as 252 of 461 processing plants, for possible closure, supporting the IG's recommendations.
Rethink delivery
As the Postal Service cuts staff and facilities, it will also have to reroute trucks and the way it handles mail. USPS is considering cutting delivery down to five days a week. Also, a shift from air to ground transportation and the closing of the plants will slow down delivery of first-class mail.
Expand USPS offerings
With the transition to digital communications, "the trusted provider of delivery services in the paper world should be melded with a new role in the digital global world." The IG suggested an eMailbox for registered citizens and businesses to send and receive message. In response to a white paper first proposing the idea, Postal executives said didn't think the market was "mature enough," said Bruce Marsh, Postal Service Risk Analysis Research Center, in an interview with Federal News Radio.

The IG report also recommended that the Postal Service innovate in all areas. It gave one example of using Global Positioning System or GPS to better manage its fleet. USPS must also simplify the products it offers, the IG said. The Postal Service currently has 7,600 domestic prices for three product lines — letters, flat mail and packages.

"The effort will require innovative thinking about the entire organization, from the 'big picture' issues, such as a digital strategy, to the more mundane aspects of daily operations," the report said.

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