Plant consolidations

Sometime over the next few days, the Postal Service is expected to publish the final rule implementing the service standard changes that are the foundation for the Network Rationalization plan to consolidate over 220 mail processing plants.  First-Class Mail that is currently delivered overnight will be delivered in two days, and much of the mail delivered in two days will take three.  Periodical mail will slow down as well.

When it published the proposed changes in service standards in the Federal Register in December, the announcement stated, “The Postal Service is not proposing any revisions to the service standards for Standard Mail and Package Services pieces mailed within the contiguous forty-eight states.”

That’s only partly true.  The service standards for Standard Mail will remain 3 to 10 days for the continguous US, but the plant consolidations will lead to some significant changes in delivery times for most Standard Mail. 

The changes are probably not what you’d expect.  The Postal Service is actually planning to speed up Standard Mail. 

The Postal Service hasn’t said much about this, but the big customers who send a lot of Standard Mail are probably well aware of what’s going on.  The changes, after all, are being made for their benefit.

The reconfiguration of the processing network is not simply about eliminating “excess capacity” — like sorting machines that run eight hours instead of twenty — or about adapting the system to declining volumes of First-Class Mail.  It is also about reconfiguring the network to better serve the big mailers.

The Postal Service’s biggest customers — its National and Premier accounts — have been among the staunchest advocates of downsizing because they see it as key to keeping postal rates low.  At the same time, these customers are concerned about relaxing service standards for First-Class Mail and Periodicals, as we saw in their responses to the marketing survey that showed slowing down the mail would cost the Postal Serive $5 billion worth of business. 

It turns out that the reconfiguration of the processing system may have an effect no one has been talking about: faster delivery for Standard Mail.

Changes in Service Standards for Standard Mail

You can see the changes in the service standards for Standard Mail on the USPS website.  There’s a page on the site called the “National Customer Support Center,” which provides information primarily useful for big mailers and members of the MTAC — the Mailers' Technical Advisory Committee, a group of important industry stakeholders.  The Support Center has a page called “Modern Service Standards,” with links to database tables for the current and future service standards.  You can also see a visualization of the data on a map page.

Looking at the maps for a particular three-digit ZIP code, it’s easy to see how First-Class mail will be affected.  The website provides a map of current standards and a second map for the future standards.  in comparing them, you can see the area for one-day delivery disappears, and the area for two-day gets smaller; the area for three-day takes over most of the map.

Mid-Island, NY (005)

If you look at a pair of maps for Standard Mail, however, something much different happens.  Here, for example, are the maps for Mid-Island, New York.  The first map shows the service standards for Standard Mail under the current system, and the second map shows how things would change with the Network Rationalization plan.

As the first map shows, in the current processing system, there’s a checkerboard pattern with the area nearest the Mid-Island facility getting the mail in five days (light blue); regions in the northeast get delivery in six days (dark blue) or seven (yellow); the Midwest and most of the West, seven or eight days (brownish-red); and the Northwest, eight or nine (dark green). 

Under the new system, as seen in the second map, the checkerboard disappears, and there are basically three homogenous zones, with delivery ranging from six to eight days (for the continental US).  The three-day area close to the facility gets a little bigger as well.

On Monday, December 5, the Postal Service submitted to the Postal Regulatory Commission (PRC) a request for an Advisory Opinion on the proposed changes in service standards associated with the consolidation of the mail-processing network.  The plan would close 252 facilities, put around 35,000 employees out of work, and save the Postal Service an estimated $2.1 billion a year.  It would also slow down the mail, particularly First-Class, which would be delivered in two or three days instead of one-to-three.  Delivery of periodicals would slow down as well.

Because it would have a “nation-wide” impact on the mail system, the Postal Service is required by law to submit its plan to the PRC for an Advisory Opinion.  But the PRC’s opinion is just that, an opinion, and the Postal Service is not required to take it.  The PRC, in other words, does not rule on whether or not the plan can be implemented.  According to comments made by PRC Chairman Ruth Goldway at a meeting of the PRC earlier in the week, the Postal Service has already indicated “it intends to move forward with service-standard changes regardless of what our [the commissioners’] views are” (podcast, at 42:30).

The Request itself is just over 15 pages long, but it is accompanied by testimony from thirteen witnesses (most of them employees at postal headquarters), as well as 36 “library references” — documents like Excel tables with data related to the testimonies.  The entire presentation is several hundred pages, and it will take a lot of work for participants in the case to analyze it, pose interrogatories to the witnesses, and construct critiques. 

This is a much more thorough and detailed presentation than that which the Postal Service presented for the Retail Access Optimization Initiative to close 3,650 post offices.  That one started with just one USPS witness presenting testimony, and most of the library references were filed later in the case, in response to information requests and interrogatories.  The fact that the Postal Service gave the service standards much more attention is just one indication of the magnitude and significance of the network “rationalization.”

Following is a summary of the Request and the witness testimonies.  The complete docket, N-2012-1, is here.

The Request [pdf]

The Request briefly outlines the nature of the service changes, the statutes that give the Postal Service the authority to make them, and a rationale for making them in the first place.  The Postal Service does not contest the fact that an Advisory Opinion is required.  The changes it is proposing will clearly have nation-wide impacts (one of the criteria that set the process in motion).  In fact, the Request states explicitly, “The service changes described in this request potentially affect every sender and recipient of mail served directly by the United States Postal Service, and are likely to affect most of them.”

As reported in the media already, “The most significant revisions would eliminate the expectation of overnight service for significant portions of First-Class Mail and Periodicals. In addition, the two-day delivery range would be modified to include 3-digit ZIP Code origin-destination pairs that are currently overnight, and the three-day delivery range also would be expanded.”

The Request does not elaborate, but the description of the plan published in the Federal Register in September explains that 40% of First-Class mail is currently delivered overnight, about 25% is delivered in two days, and the rest in three.  According to the new service standards, about half the mail would arrive in two days and the other half in three days.  In other words, instead of a 1-to-3 day window, it would become 2-to-3 days.  Delivery of periodicals would also slow down: Instead of a 1-to-9 day window, the new standard would be 2-to-9 days.  

Back in the day (circa 1755), it could take six weeks for a letter to go from Philadelphia to Boston if the weather was bad.  “It having been found very inconvenient to persons concerned in trade” for the mail to take so long, Postmaster General Ben Franklin gave orders to pick up the pace, and the delivery time was cut in half.  Thanks to innovation — from the Pony Express to auto-trucks and airmail — the speed with which the mail is delivered has improved year after year for the past two and a half centuries.  But if the current Postmaster General has his way, that’s going to change, and the mail is going to slow down.

Postcom reported yesterday that “the Postal Service will be filing its service changes with the PRC on 12/5.  Among the changes -- an adherence to the principle of servicing mail in strict accord with delivery standards, and the abandonment of the targeted ‘in-home day of delivery’ practice within Standard Mail.” 

The somewhat cryptic note presumably means that next week the Postal Service will submit a request to the Postal Regulatory Commission (PRC) for another Advisory Opinion.  Given the reference to "service changes," this one will apparently be about the Postal Service’s proposal to consolidate the mail-processing network and about the effects this will have on how fast the mail is delivered.  

The announcement came at a meeting of the Mailers' Technical Advisory Committee (MTAC), a group of representatives of the direct-mail business, who protect the interests of the industry by making recommendations to the Postal Service.  These meetings, we learn today, will apparently henceforth be restricted to industry insiders.  (More on that to come.)

Expect a press release from the Postal Service early next week and maybe an interview with the Postmaster General about how relaxing delivery standards is regrettable but inevitable because mail volumes and revenues are dropping through the floor.  There will probably also be a response from the unions about what a disaster the whole plan is.

One Advisory Opinion almost done, so it’s time for another

Since consolidations on the scale the Postal Service is envisioning will inevitably result in slower delivery of First-Class mail and periodicals, with impacts on standard mail as well, the Postal Service is required by law to go to the PRC for an opinion about whether the changes comply with laws like Title 39 (e.g., section 3691) and the Postal Accountability and Enhancement Act (PAEA, e.g., Title III).  (The PRC’s role in setting “service standards” is discussed in this George Mason study on the “Universal Service Obligation,” pp. 240ff.)

This new request for an Advisory Opinion follows the March 2010 “Advisory Opinion Concerning the Process for Evaluating Closing Stations and Branches” (the SBOC initiative); the March 2011 “Advisory Opinion on Elimination of Saturday Delivery,” and the Advisory Opinion on the Retail Access Optimization Initiative to close 3,650 post offices, due out in a couple of weeks or so. 

It’s been clear for a while now that the Postal Service had already begun consolidating the processing network, so it was only a matter of time before it would go to the PRC for yet another Advisory Opinion.  It probably should have done so months ago, but it may have been waiting for the RAOI opinion to be completed.

The brief note in Postcom doesn’t say how the Postal Service will articulate its Request (and it's possible the "service changes" referenced in the Postcom note aren't directly related to the plant consolidations), but in September of this year, the Postal Service gave a pretty good indication of where things are headed.  In a press release and in a notice published in the Federal Register under the title “Proposal To Revise Service Standards for First-Class Mail, Periodicals, and Standard Mail,” the Postal Service explained what it wanted to do.

The Postal Service proposes cutting its network of processing facilities by more than half, from 500 to around 200.  It estimates that this would save up to $3 billion a year.  Some of that cost saving would come from not needing to pay rent, maintenance, and utilities for the 300 facilities it closes, but most of the savings would come from cuts to the workforce — the changes would eliminate “as many as 35,000 positions.”  In its notice in the Federal Register, the Postal Service concludes by saying that should it "decide to move forward with the Proposal . . . it would request an advisory opinion from the Postal Regulatory Commission," so it looks like that time has come.

Impacts on Service Standards: Slow and Slower

The consolidation plan will have a direct, observable impact on how fast the mail is delivered, and First-Class mail would be the most affected.  Currently, 40% of First-Class mail is delivered overnight — it gets where it’s going the next day.  About a fourth of First-Class mail is delivered in two days, the rest in three days.  According to the new service standards, no First-Class mail would be delivered next day.  Instead, half the mail would arrive in two days and the other half in three days.  In other words, instead of a 1-to-3 day window, the new standard would become 2-to-3 days.

Delivery of periodicals would also slow down: Instead of a 1-to-9 day window, the new standard would be 2-to-9 days.  That probably won’t please publishers, since those periodicals are time-sensitive.  But many may prefer slower delivery to an increase in rates — although they may get both.

The Postcom note mentions that the Advisory Opinion will encompass “the abandonment of the targeted ‘in-home day of delivery’ practice within Standard Mail.”  That refers to the fact that the Postal Service currently offers bulk mailers an opportunity to designate the date they want their mail delivered to your house. 

The Postal Service wants to abandon this practice, and it now looks like it won’t be waiting for the Advisory Opinion to implement the change.  In a letter dated Nov. 29, the Postal Service advises mailers that “we will no longer be able to stage and deliver mail using In-Home-Date windows.”