Postal Reform: USPS Reactivates Facility Consolidation

July 30, 2014 Charley Howard

USPS mail bins: postal reformSeveral months ago the USPS announced that they were putting their facility consolidation process on hold due to Congressional activity around potential postal reform. Part of the proposed Senate bill required facility levels as of October 1, 2013.

Well, it doesn’t look like there will be postal reform this year, and the USPS still needs to “right-size” the organization to the current level of mail volumes. In other words, they need to get costs in line with their revenue.

Moving Postal Reform Forward

According to a recent announcement by the USPS, the Postal Service consolidated 141 mail processing facilities in 2012 and 2013. This network rationalization appeared to be highly successful for the USPS, resulting in negligible service impact, generating annualized cost savings of $865 million and requiring no employee layoffs.

The Postal Service expects the completion of Phase II of network rationalization will generate an additional $750 million in annual savings: “We believe strongly that this phase of network rationalization will establish the low-cost, technology-centric delivery platform necessary to serve the mailing and shipping industry for decades to come.”

Sounding Alarm?

Much alarm has been expressed recently in regard to the restart of the consolidation effort. These 82 sites were part of the original network rationalization effort and were simply placed on hold to see if the Senate bill gained any real traction in Congress. Even if it had, the USPS would have still pushed for the finalization of the consolidation effort in order to get costs more in line with revenues. So, the surprise seems out of place.

The 82 facilities to be consolidated in 2015 consist of two from Phase I and 80 from Phase II. Generally speaking, for Harte Hanks, the 2012 and 2013 consolidations were a “non-event.” We were able to prepare drop ship entry planning well in advance and manage any issues that arose. There were seven issues, and they did not affect the mail we entered for our clients. We realize that the 82 facilities yet to be consolidated may have a bigger impact, as they will involve the movement of more processing equipment. Still, we know which postal facilities are to be consolidated, and we will be well prepared.

Some mailers were more affected by Phase I than others, and I suppose that is where their concerns stem from. We feel rather confident that the USPS will complete Phase II without undue stress on their delivery performance.

Stay in the Know

For a deeper look into Phase II of the USPS network rationalization effort, as well as additional information on current postal news and issues, please visit our latest Postology Report.

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