Barriers to Retail Network Optimization


Closing a post office can have devastating effects on a community’s economy, culture, and identity.  The Postal Service calls it “network optimization.”

On June 9, 2011, the USPS Office of Inspector General issued a white paper called “Barriers to Retail Network Optimization.”  The report is a survey of what’s keeping the Postal Service from closing post offices as fast as some, like the senior management of the Postal Service and the OIG, think it should.

While the report is meant to help those who want to close post offices, it’s actually very informative for those of us who want to preserve the brick-and-mortar post office.  Here’s a summary of the report in case you don’t want to wade through the whole thing.

The report begins by noting that only 4,000 retail facilities have closed over the past 40 years, about 100 a year, “but a consensus is finally emerging that the retail network needs modernization.”  Previous studies by the OIG have shown “how location economics and retail best practices can devise an optimized network that aligns retail supply to demand and serves current lifestyles better than the legacy network and at lower cost.”  Translation: It’s time to dismantle the “legacy” of brick-and-mortar post offices built during the 19th and 20th centuries.  We need to start closing post offices, and lots of them.

Unfortunately, the report shows, it’s not so easy to close a post office, and the OIG discusses the main “obstacles standing in the way of retail modernization.”  These include the following:

1. Statutory restrictions: Title 39 is the main body of statutes that governs the postal system.  Title 39 (U.S.C. § 101) restricts closing post offices solely for operating at a deficit. The key passage reads as follows:

The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining. No small post office shall be closed solely for operating at a deficit, it being the specific intent of the Congress that effective postal services shall be insured to residents of both urban and rural communities.

Title 39 (U.S.C. § 404(d)) spells out the procedures for a closing or consolidation.  It requires community study, public notice, publication of findings, and appeal to the PRC of any proposed closing.

Also, since 1985, every year when the President and Congress develop an appropriation bill, there’s always been a proviso stipulating that none of the appropriated funds “shall be used to consolidate or close small rural and other small post offices.”

2. Regulatory barrier: These refer to obstacles involving the procedures and interpretations of the law that control how the Postal Service closes post offices.  For example, there’s the time and expense that the Postal Service must bear when a community appeals a closure decision to the Postal Regulatory Commission.  In addition, the PRC has been trying to convince the Postal Service that “consolidating” stations and branches is legally the same thing as “discontinuing” a post office, so that all the Title 39 rules should apply.  The Postal Service disagrees, but the issue has not been resolved.

Perhaps most significant at the present time is the regulation that any nationwide effort to change the retail system of the Postal Service requires a PRC advisory review.  Indeed, the PRC has recently told the Postal Service that it should be asking for such a PRC review right now, given all the post offices it’s started to close.  The Postal Service has not yet requested such a review.

3. Political obstacles: Whenever the Postal Service announces that a post office is closing, citizens are sure to complain to their legislators, who typically contact the Postal Service on the behalf of their constituents.  Then there are the lobbying efforts by big organizations like the National Association of Postmasters, who oppose efforts by the Postal Service to change the rules of the game to make it easier to close post offices.  Plus, the OIG report notes, there are few “stakeholders” on the other side of the issue, who are interested in encouraging “optimization and modernization of the retail network.”

4. Institutional obstacles: Finally, there are barrier within the Postal Service itself.  The report notes  “a lack of sustained focus over time on retail optimization, problems with the availability and quality of data, past dependence on a highly decentralized bottom-up process, and the absence of a well-articulated strategic retail vision.”

Recommendations: The report suggests that since it’s difficult for the Postal Service to do anything about the first three types of obstacle, it should focus its efforts on what it can do within the Postal Service itself.  The report suggests the Postal Service should articulate “a national strategy to enhance customer access to retail postal services,” meaning, more PR telling people about buying stamps on line, at kiosks, and at places like Office Depot.

The report also recommends a  “robust framework for using a top-down approach to optimization to complement its bottom-up efforts,” meaning that decisions about closing a post office should be made at headquarters rather than at a local level, where the management is likely to more sympathetic to the community’s desire to keep the post office open.  And finally, the Postal Service should produce more data and analysis about the cost of keeping post offices open and the financial benefits of closing them.

Overall, the OIG’s “Barriers to Retail Network Optimization” provides an interesting insight into the thinking of those who see post offices primarily in terms of dollars and cents.  Naturally, if you see post offices only as “retail outlets,” it makes sense to “optimize” the network by closing outlets that lose money.  Fortunately for those who seek to preserve brick-and-mortar post offices, there are laws, members of Congress, and organizations like NAPUS that realize that a post office is something more than a retail outlet.  Without these “barriers to retail network optimization,” we will end up with a Postal Service without post offices.

(Image credits: Barriers ahead; 32,000 locations; window sign; Office Depot ad)