strategic-management

EXHIBIT 2 USPS Operating Expenses (dollars in millions)
CASE 14 • THE UNITED STATES POSTAL SERVICE (USPS) — 2009 141
2008 2007 2006
Compensation and Benefits $ 53,585 $ 54,186 $ 54,665
Retiree Health Benefits 7,407 10,084 1,637
Transportation 6,961 6,502 6,045
Other Expenses 9,785 9,333 9,334
Total Operating Expenses $ 77,738 $ 80,105 $ 71,681
Source: www.usps.com.
employees, substantially all of whom reside in the United States. USPS had 101,850 noncareer
employees. As indicated in Exhibit 2, these employees reaped $53.585 billion in
compensation and benefits in 2008. The USPS labor force is primarily represented by the
American Postal Workers Union (APWU), National Association of Letter Carriers
(NALC), National Postal Mail Handlers Union (NPMHU), and National Rural Letter
Carriers Association (NRLCA). More than 85 percent of USPS career employees are covered
by collective bargaining agreements.
Postal Service unions cover a full range of topics involving wages, benefits, and conditions
of employment. The Postal Service wants to ensure leadership continuity and build
talent from within the organization. The objectives are to develop people for corporate
needs, to identify individuals who can move into executive positions, and to foster diversity
among leadership ranks. Individuals are identified as potential successors based on
their leadership skills, functional and management expertise, and performance results.
After completing the eighth full year of succession planning, less than 1 percent of executive
vacancies are filled by outside hires.
Work hours are a major driver of USPS compensation and benefits expense. As indicated
in Exhibit 3, mail processing, customer service, city delivery, and other work hours
decreased by 50 million in 2008 compared to 2007, offsetting the higher labor rates. The
reduction in work hours was in part an outcome of lower mail volumes, which reduced
workload. As mail volume fell throughout the year, management initiated a number of
efforts to reduce work hours, especially overtime.
Transportation
As indicated in Exhibit 4, USPS’s total transportation expenses in 2008 were $6.961
billion. Highway transportation expenses for 2008 were $3,499 million, an increase of
11.1 percent over 2007. The increases were attributed to higher fuel prices, contract labor
rates, and contract Consumer Price Index (CPI) rates. Also, some mail that was previously
transported via air was moved to surface transportation during the year. In 2008, the
average price of gasoline increased approximately 30.4 percent compared to 2007. Diesel
fuel, which makes up 93 percent of the fuel purchased for highway contracts, was an
EXHIBIT 3 USPS Work Hours by Function (in thousands)
2008 2007 2006
City Delivery 452,288 462,040 468,918
Mail Processing 293,108 315,825 332,269
Customer Services & Retail 217,236 233,791 246,538
Rural Delivery 189,950 189,709 186,164
Other, including Plant, Operational
Support, and Administrative 220,772 221,636 224,840
Total Work Hours 1,373,354 1,423,001 1,458,729
Source: www.usps.com.