2010 Comprehensive Statement on Postal Operations - USPS.com

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Appendix: Strategic Initiatives Strategic goals supported by Expanded Access: ■■ Service is improved by making postal products and services available where customers already are doing business, whether online or in person. These locations often have longer hours, better parking, and/or higher foot-traffic. ■■ Financial Performance is impacted on both the revenue and expense sides. Expanded access drives revenue growth by making postal products more accessible and easier to use. Alternative forms of retail access are also less expensive than the postal retail counter. Optimize Network. Adapt physical networks to changes in mail volume, mail mix, and customer behavior. This allows the Postal Service to take advantage of technology and improved processes to reduce excess capacity in plants, Post Offices, and delivery units. The 2011 target is to reduce total interior facility space by 2.8 million square feet. Strategic goals supported by an Optimized Network: ■■ Service is improved by gaining economies of scale and scope when operations are consolidated. Fewer trays, trips, and handlings are required, which expedites processing and delivery, and minimizes errors. ■■ Financial Performance improves by reducing the number of owned and leased buildings. Savings include fixed costs such as maintenance and administrative overhead. This also supports the Reduce Energy Use strategic initiative. There is also a revenue benefit when buildings are sold. Flexible Workforce. Labor remains the largest cost component. In addition to reducing work hours, the strategy is to take full advantage of contractual flexibility to reduce the cost of work hours used. The indicator for this initiative is the average hourly rate for bargaining and casual employees, including existing contractual wage increases. It excludes payments for retiree health benefits (current and pre-funding amounts) which are not within management’s control. The 2011 target is to beat the $41.69 average cost per work hour contained in the Fiscal Year 2011 Integrated Financial Plan. Strategic goals supported by a more Flexible Workforce: ■■ Service is improved by having the right employee, at the right place, at the right time for all operations. ■■ Employee Engagement. Employees realize that workforce changes are necessary for future viability. Flexibility must increase as career attrition continues without compromising service. ■■ Financial Performance is improved by reducing the wage and benefit costs per work hour used. 52 | <strong>2010</strong> <strong>Comprehensive</strong> <strong>Statement</strong> on Postal Operations Reduce Energy Use. Energy is a major component of cost, primarily transportation fuel and utilities. The target for 2011 is continued progress toward 2015 energy reduction goals as laid out in the Strategic Sustainability Performance Plan at usps.com/green. Strategic goal supported by Reduced Energy Use: ■■ Financial Performance is improved by reducing expenses in energy sources that often have volatile prices. Customers and employees are often influenced in their purchases by the sustainable actions of an organization, which also improves revenue and employee engagement. Reduce Delivery Fixed Costs. Delivery is the largest cost center and carries the greatest share of fixed costs. For example, a carrier must go down the street regardless of the number of customers who receive mail on a given day. There is also a fixed cost of going to the mailbox whether an address receives one piece of mail or 10. Reducing fixed delivery costs is critical given declining volume and revenue per delivery point. The indicator of success is the increase in the average number of deliveries per route for city and rural routes combined. The 2011 target is 589 by the end of the year. Strategic goal supported by Reduce Delivery Fixed Costs: ■■ Financial Performance is improved by reducing the number of routes and vehicles used to meet service objectives. While Congressional approval to change to five-day delivery would obviously have a large impact, the focus here is on actions within management’s control. Expand Products, Services, and Features. Profitable revenue is key to the future of the Postal Service. The best approach is to provide customers with new mailing and shipping products, services, and features consistent with their changing needs. The indicator is to create 15 new products, services, and features this year. Strategic goals supported by Expanded Products, Services, and Features: ■■ Service is improved by enhancing and expanding product offerings based on customer input. Many features will improve ease of use for customers, from households to large businesses. ■■ Employee Engagement. Adding features and services allows employees to respond more fully to the needs of their customers. By virtue of their daily interaction with customers, employees are often the source of ideas and insights that lead to product improvement and innovation. ■■ Financial Performance will be improved by being responsive to changing market needs. In most cases this is about increasing revenue, while in some cases it will reduce expenses for customers and the Postal Service.
Appendix: Strategic Initiatives Address Overfunded Legacy Costs. As mentioned in the Action Plan for the Future, the Postal Service believes that the Civil Service Retirement System (CSRS) and Federal Employee Retirement System (FERS) have been overpaid for postal employees. Outside review has confirmed this assessment. Ideally, the overfunded amounts would be applied to future Retiree Health Benefits obligations and the Postal Service would return to “pay-as-you-go.” It is not certain whether the Postal Service will be financially able to pay the RHB obligation come September 2011 given it will likely meet the statutory $15 billion debt limit. Strategic goals supported by Address Overfunded Legacy Costs: ■■ Employee Engagement would improve by resolving uncertainties created by this issue. Employees are concerned about the long-term viability of the organization and their inability to mitigate large, recurring losses caused largely by the legislated prefunding requirement. ■■ Financial Performance obviously would improve greatly. This would not solve the problems of the current postal business model. However, it would provide more flexibility and opportunity to invest in meeting the country’s future needs. The table below illustrates the relationships between each of the strategic initiatives and the three strategic goals. Strategic Initiative Corporate Goals Supported Intelligent Mail Service Employee Engagement Financial Performance Flats Sequencing System Service Financial Performance Expand Access Service Financial Performance Optimize Network Flexible Workforce Reduce Energy Use Reduce Delivery Fixed Costs Expand Products, Services, and Features Address Overfunded Legacy Costs Service Financial Performance Service Employee Engagement Financial Performance Results Indicator 2011 Target Increase the percentage of workshared mail containing an IM barcode. (Full-Service and Basic, excluding Periodicals in-county volumes) Increase the percentage of flat mail in delivery point sequence for delivery zones on FSS that have been in operation at least six months. Expand share of retail revenue generated by means other than at a postal retail counter. 90% by end of year 72% 35% Reduce total interior facility space. Reduce 2.8 mil sq/ft Come in below the Integrated Financial Plan average work hour rate. (Bargaining and casual employees, including wages, benefits and existing contractual wage increases. Excludes current and prefunding payments for retiree health benefits.) $41.69/hour Financial Performance Continue progress toward 2015 energy reduction goals. On target Financial Performance Increase average number of deliveries per route. (combination of city and rural delivery routes) Service Employee Engagement Financial Performance Employee Engagement Financial Performance 589 by end of year Create new products, services, and features. 15 new Address legacy cost funding issues. All three addressed <strong>2010</strong> <strong>Comprehensive</strong> <strong>Statement</strong> on Postal Operations | 53
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