USPS Modernization Effort Is Driving Up Mail Prices and Reducing Service. Here’s What You Can Do About It.

In many ways, the United States Postal Service is a modern marvel. The USPS processes and delivers 44% of the world’s mail volume, averaging 318 million letters, cards, bills, packages,  and other pieces daily, to 167 million addresses six days a week.

But it’s also in a serious struggle to find its place in today’s digital world, now three years into a 10-year turnaround plan to right-size and become consistently profitable. The plan implementation has been extremely rocky, resulting in fast-rising prices, reduced service, and declining on-time deliveries for mail and packages even after the USPS lengthened up to two days some of its target delivery times for first-class.

On top of that, service problems and escalating postal costs are negatively impacting billers, ecommerce companies and other businesses. They’re also hurting the many millions of consumers who depend on receiving prompt billing statements, medications, package deliveries, refunds, and other mail-based communications and payments as well as mailing checks for payments and other correspondence.

With efforts to modernize the USPS still very much a work in progress, companies need to reset their communications, billing, and payments strategies for these new postal service realities without disrupting consumer experience.

In 2021, USPS introduced a strategic plan called Delivering for America, spearheaded by Postmaster General Louis DeJoy. DFA laid out the urgent case for change, saying “business and operating models were unsustainable and out of step with the changing needs of the nation and its customers.” The decade-long turnaround plan was created after USPS lost more than $83 billion between 2007 and 2020 due to declining mail volume, rising labor costs, onerous pension obligations and price caps.

Add in the Covid-19 pandemic and the subsequent economic recovery and the plan was immediately off track. Fiscal years 2022 and 2023 revenues rose above projections due to a wave of online shopping packages and slower drop-off of mail volume. But unexpected operating cost increases for transportation and labor sadly outpaced revenues to an unforeseen point.

The postal service has proceeded with some planned changes including:

As a result, Nordis Technologies and our clients have seen a marked slowdown in delivery times to:

One of the biggest operational changes involves consolidating hundreds of local mail processing centers to 60 new regional hubs and 190 local centers. The processing consolidation is off to a very bumpy start.

The first two regional mega-processing centers in Richmond and Atlanta have experienced major problems, leading to significant delays in mail and package deliveries. Richmond saw rates of on-time first-class mail drop to 65% while on-time first-class mail in Georgia fell below 64% this spring, according to the Inspector General. The national target for on-time first-class deliveries is 93%.

In May, the USPS agreed to temporarily pause the network consolidation until after the U.S. presidential election and voting by mail is completed.

There’s no question the USPS needs a major overhaul to improve operating efficiencies and profitability as its mission evolves and mailed communications and payments continue to decline. Given the ongoing operations upheaval, technology upgrades, planned workforce cuts and other changes, it will likely take years to end service disruptions and reach the sweet spot where revenue and costs align.

Companies that send paper bills, other transactional communications and payments don’t have to simply stay the course. They can take important steps to buffer the impact of rising postal costs, delivery delays and uneven service.

Nordis also offers the premium ACS™ service that corrects undeliverable addresses for mailings already in the mail stream.

Keeping customer addresses up to date minimizes the cost of processing return mail and subsequent delays in delivery to the customer. A key capability to add is Intelligent Mail® Barcode, which is used to sort and track letters and flats. It allows mailers to use a single barcode to simultaneously participate in multiple Postal Service programs, expands their ability to track individual pieces, and provides greater mail stream visibility. 

The USPS provides an indispensable public service and critical infrastructure for the country, and that won’t change.  So many of us welcomed this overhaul concept and had great hope for much needed change. However, it’s proving challenging for the USPS and appears to be taking the wrong path.

The USPS will remain a vital part of our country and a strategic partner to Nordis Technologies and our clients; it just might look different.

We certainly support the goal of the USPS becoming profitable and sustainable in its own right.  However, being profitable on the inevitable lower mail volumes will prove challenging.  A strategic look at a completely new model may be in order.  In particular, frequent price increases could become a worst-case trap for all.  Cost going up, driving volumes and utilization down — abracadabra the plan dissolves into thin air…

We aren’t making the mistake of counting out the USPS, though. The postal service has successfully expanded, evolved, and innovated for more than 250 years. This latest transformation should be no exception if we hold them to account.

As the USPS Office of Inspector General noted in June, “The DFA plan was developed during a time of considerable uncertainty, and conditions have evolved.” It’s time to reevaluate the plan and adjust to strengthen its chances of success and success sooner rather than later.   

We can all agree a strong USPS can help consumers and businesses alike. Let’s advocate for a new path forward but manage today’s risks and realities.