Chain of Thought

Postal Closings Postponed—Pony Up Your Pallets!

A month ago the headline coming out of the U.S. Postal Service (USPS) news room was bleak: “Postal Service Ends Fiscal Year 2011 with $5.1 Billion Loss.” Profits bled out of many wounds, big and small. The biggest gusher is only increasing as the volume of first class mail diminishes. Total 2011 mail volume declined by 3 billion pieces, or 1.7 percent, from 2010, the USPS announced. Its largest and most profitable product, First-Class Mail, continued its year-over-year decline, from $34.2 billion in 2010 to $32.2 billion in 2011 (5.8 percent).

Priority, Express and Standard Mail provided the only bits of good news. Priority and Express increased 2011 revenue by $530 million (6.3 percent) over 2010. Standard Mail increased by $495 million (2.9 percent) on a volume increase of 2 billion pieces (2.6 percent).

The Postal Service has been tightening a tourniquet to stem the flow of red ink. Business best practices deserve some of the credit. USPS reduced work hours by 34 million despite an increase of 636,500 delivery points. For this accomplishment it credits effective workforce management, efficient use of materials and transportation, and continued advancements in the use of technology. Since 2001, the Postal Service has reduced work hours by 28 percent, while delivering to almost 14 million additional addresses.

But another profit leak the Postal Service is trying to plug is caused by disappearing material handling assets like pallets and containers. Last month we reported that the USPS was embarking on an amnesty program, encouraging the return of those assets within a two-week period. It promised that no questions would be asked.

The Postal Service spent nearly $50 million this past fiscal year to replace equipment that was never returned. Five years ago this magazine reported that by March of any year most of the pallets used during the holiday shipping season have returned to USPS warehouses. It is then that they can assess their needs for the next heavy mailing season. We reported that the Postal Service's national “comfort level” was around 500,000 to 700,000 pallets. What it actually ended up with that year was around 100,000 pallets, with 60,000 typical on any day. This situation has only gotten worse since then—hence the amnesty strategy. Did it work?

Nobody at the Postal Service seems to have a good answer. I asked Dave Partenheimer, their manager of media relations, for some kind of national number but as of yet the only information he could give me was anecdotal:

• Cresco IA—a pallet recycler reported that she received four USPS plastic pallets and wished to return them;

• Mounds View, MN—a USPS customer called for a pickup of nine USPS plastic pallets;

• New York, NY—a USPS customer called for a pickup of flat tubs;

• Buffalo, NY—a pallet company called to request a pickup of 250 plastic pallets;

• Traverse City, MI—a delivery company requested a pickup of 350 pallets;

• Baltimore, MD—a pallet recycler called to request a pickup of 40 USPS plastic pallets—with a total value of more than $600.

So the Postal Service's “Good Cop” approach is over. Time for the “Bad Cop” to go on duty. Will USPS pallet hoarders be visited by SWAT teams any time soon?

“We will launch aggressive efforts to have this property returned to us,” Partenheimer promises. “We'll announce details soon.”

In the meantime, the Postal Service just announced that its promise to start shutting down mail processing facilities has been postponed until May 15, 2012. Until then it says it will continue all necessary steps to review these facilities and will conduct public input meetings.

It's hoping that during this closings moratorium Congress will pass postal legislation to help it be profitable again. Postmaster General and CEO Patrick Donahoe says the USPS needs a more flexible business model so it can respond better to a changing marketplace. “To return to profitability we must reduce our annual costs by $20 billion by the end of 2015,” he calculates.

That's a lot of pallets. Do him a favor—take another look through your logistics operations. I'm sure he'd look favorably on the return of a few thousand more of those “lost” assets. The Post Office you save may be your own.

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