The Postal Service continues to push to implement five-day delivery during FY 2011. By eliminating Saturday delivery, the Postal Service estimates annual savings of $3.1 billion. For this to happen, Congress must not enact an FY 2011 appropriations bill requiring six-day delivery. As part of this process the Postal Service presented their proposal to the Postal Regulatory Commission for an Advisory Opinion.
Jill Kaufman, our VP/Account Services expressed her thoughts about this issue a year ago in our LEAD:Performance Marketing Insight newsletter. Those insights still hold.
Interestingly, the PRC Advisory Opinion issued March 24, 2011 includes several keys findings that may not make the USPS very happy:
• The Postal Service’s annual gross cost savings estimate of $3.3 billion is overstated by 1.0 billion. Additionally, full savings may not be achieved until year three after implementation.
• The Postal Service’s annual net savings estimate of $3.1 billion ($3.3 billion gross savings less $0.2 billion lost revenue) is overstated by $1.4 billion.
• The Postal Service estimates that it might lose $0.2 billion net revenue as a result of volume declines caused by these service cuts. Net revenue losses are more likely to approach $0.6 billion.
• The planned changes would cause 25 percent of all First-Class and Priority mail to be delayed.
• The Postal Service did not evaluate the impact of the proposal on customers who reside or conduct business in rural, remote or non-contiguous areas.
While the PRC findings do not prevent the Postal Service from continuing to move forward and lobby the U.S. Congress to implement 5-day delivery, it does weaken the proposal. If members of Congress agree with the Postal Regulatory Commission’s findings that potential savings are not as great as proposed and that 25 percent of First Class and Priority mail will be delayed they may find it difficult to vote for the elimination of USPS Saturday in home mail delivery.