Alliance Study Examines Drivers of USPS Cost Growth

A June article in the Alliance of Nonprofit Mailers’ Report dug into the current trend of USPS costs outrunning USPS revenues. The report’s findings revealed that the Postal Service may be doing things that an institution with financial challenges like those facing the USPS shouldn’t do.
The following extracts from the Alliance’s report are provided with their permission.
The Alliance found four areas where costs seem ripe for further examination:

Delivery Points
Transportation Cost
Compensation Cost
We have already discussed Delivery Points and Employees. Today we will review Transportation Cost.

Transportation Cost

According to the USPS Office of Inspector General, transportation costs have been growing quite a bit more than one would expect with declining mail volume. ‘Our [the OIG] analysis found the following:

  • The change in transported volume, including the change in themail mix, likely accounts for 15% ($157 million) of the increase in transportation costs over the last 10 years.
  • The overall increase in transportation-related input costs, including fuel cost and rising trucker wages, likely accounts for another 46% ($490 million) of the cost increase over the last 10 years.
  • This means that 39% of the cost increase over the last 10 years, or $418 million, likely occurred for reasons other than the change in volume and input costs. This does not mean that the 39% increases are necessarily reasonable or unreasonable. It simply means that we cannot tell from this analysis. Additional studies may be warranted.
  • While these numbers represent the overall changes in transportation costs, the results varied widely by the type of transportation. In fact, some components had costs that either declined during the 10-year period or had a cost increase that was less than expected in response to the change in volume and input costs.’

The OIG analysis makes clear that there are huge opportunities to reduce USPS transportation costs. Any successful business would be all over this opportunity before attempting actions that would endanger its future business, such as above-industry price increases.

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