It seems a simple equation: processing costs should decrease as mail volumes decline. Except that’s not happening. And it’s hurting the U.S. Postal Service’s bottom line.
The Postal Service has not been able to lower mail processing costs at its 285 plants to match decreasing mail volumes, our recent audit report found.
From fiscal years 2014 to 2018, processed mail volume decreased by 9 percent, but mail processing costs decreased only 2 percent when adjusted for inflation. Mail processing productivity over that period had declined in all categories – letters, flats, manual – except for parcels, which saw a huge jump in processing productivity.
Labor costs make up about 80 percent of USPS’s budget, so matching workhours (the number of hours worked by personnel) to the workload is essential to managing costs and improving productivity. This means getting the staffing levels at mail processing facilities right. Despite relying on various tools to do this, the Postal Service is falling short.
We found the Postal Service’s strategic initiatives to reduce costs and optimize the processing network have not achieved planned savings. For example, its tool to schedule staff at processing facilities didn’t always work properly and resulted in staffing levels not matching workload needs. In addition, its network optimization plan fell well short of its projected savings. As in prior audit reports, we recommended USPS develop and implement annual tracking methodologies for any significant projected operational costs or savings. We also recommended sensitivity analysis to account for impacts from changes in mail volume and labor and transportation costs.