First Class Mail has traditionally formed the "backbone" of operations at the U.S. Postal Service, says Nicoski. With the advent of the internet, that state of affairs began rapidly to change. The plunge in highly profitable First Class volumes has eaten away at the agency's fixed-cost base. As a result, he says, "it's incumbent on us to find other business to replace that."
For USPS, the solution lies in a new focus on packages. Nicoski says the agency can be competitive in that area as well, given a delivery network that already touches every address in the U.S. six days a week.
At the same time, USPS must retool some of its operations to accommodate the requirements of packages. For one thing, they take up more space than letters. Nicoski says there’s a need to upgrade the agency’s delivery fleet, which is approximately 15 years old and already past its originally expected lifespan by five years. All of that will require a “significant capital investment.”
In line with the changes, USPS is exploring the concept of “the mailbox of the future.” And it has done some limited testing of lockers, which are gaining in popularity as an alternative to home delivery of orders placed by consumers over the internet.
Despite extensive efforts in recent years to improve service quality and reliability, the agency still has something of a public image problem, Nicoski acknowledges. It’s addressing the issue in part through new service guarantees and a tracking system that matches the capability of private-sector rivals such as UPS and FedEx.
“Guarantees are definitely something we’re looking at and evaluating,” Nicoski says. “We recognize that it’s becoming something like table stakes.”
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