John Haber, founder and chief executive officer of Spend Management Experts, dissects the U.S. Postal Service’s 10-year plan for reviving operations and reaching profitability.
The U.S. Postal Service recently announced a 10-year plan to achieve “financial sustainability and service excellence.” It plans to invest $40 billion over that period, while reaching the break-even point by fiscal 2023. Central to that plan is a boost in the scale and service quality of package deliveries to business, representing $24 billion in net revenue.
Can USPS meet those targets and compete with the private parcel deliverers, in particular Amazon.com? And is the money that’s earmarked for the initiative enough to get the job done? “The jury’s still out on whether or not it can, and whether that’s too little too late,” says Haber. He noted the “huge pile of debt” that’s burdening the organization, including pension obligations extending out for decades.
“Whether or not they can execute and reach profitability goals as quickly as outlined, I’m skeptical,” says Haber, noting that USPS is saddled with expensive infrastructure and a loss of revenue due to the steep reduction in First Class mail. “As volume shifts toward parcels, we’ll see how well they’re able to manage profitability,” he adds.
When it comes to customer service expectations, Amazon has set the bar. USPS must scramble to match the private competitor’s prowess in same-day, one-day and two-day delivery. United Parcel Service and FedEx provide additional competition, although both are also vying with Amazon for business.
On the positive side, Haber believes USPS could benefit from shippers diversifying their last-mile carriers, a lesson learned from the COVID-19 pandemic. But Amazon already is flying parcels for the Postal Service, and is UPS’s largest customer. “There’s a very complicated weave of small-parcel noise going on,” says Haber.
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