The Postal Service's Bid for Deliverance

When letter carrier Gene Kahl noticed mail piled up at the home of an elderly couple along his Pensacola (Fla.) delivery route, he made chalk marks on their car tires, and after determining that it hadn't moved days later, called police, who discovered a husband, dehydrated and paralyzed with grief, sitting with his dead wife. Deeds like Kahl's are not unusual among letter carrier: Each year, dozens of U.S. Postal Service employees receive commendations for similar acts.

These days, the Postal Service itself is also in distress, expected to wrap up its fiscal year with a $7.1 billion deficit caused by a recession-led drop in mail volume and the burden of funding future retirees' health benefits. The fiscal crisis has some in the Postal Service and its unions suggesting that the agency is uniquely positioned to capitalize on some long-underleveraged assets: No other firm has the Postal Service's regular access to every U.S. residence, business, and post office box—some 150 million daily stops, except Sundays. UPS (UPS), for example, has 71,600 delivery vehicles in the U.S., while the Postal Service has more than 200,000, some of which travel to remote areas private transport companies won't. The service also employs a force of 268,000 carriers that could be deployed in new functions. Letter carriers' familiarity with customers and presence in every nook of the nation present entrepreneurial opportunities.

"We should experiment with utilizing our 'last mile' advantage in areas beyond traditional mail, whether that means conducting the Census or national polling, delivering medications, or helping law enforcement in any number of ways," Fred Rolando, the new president of the National Association of Letter Carriers, the union that represents 300,000 active and retired letter carriers, told a Senate panel on Aug. 6.

He believes Postal Service carriers could perform such services as helping with Neighborhood Watch efforts and checking on older people who might need assistance. The extra revenue would come from businesses and governmental and community organizations who would pay the Postal Service for performing services at their behest. And who better than to rely upon than the folks who deliver their mail? "A lot of letter carriers have the same routes for years and get to know the neighborhoods and the customers and see their families grow up," Rolando says. "It would be a wonderful thing for customers to have people they've come to trust perform these services." Rolando says he is eager to engage officials at the Postal Service in talks about how to harness the organization's resources to stir up new revenue. It's not clear how far such work could extend, or how much revenue potential there is. Carriers would not seek pay increases as part of any expansion into new revenue-generating services, Rolando says. "We need to look at ideas from workers and the community," he says. "They're the ones who know what could be done on a daily basis."

"Why shouldn't we do the Census?"The Postal Service is already deriving extra revenue from the "last-mile" partnerships, whereby FedEx (FDX) and UPS (UPS) transport their own packages on the larger part of their journeys, then drop them at post offices that serve out-of-the-way areas for delivery to final destinations. FedEx's own revenue from SmartPost, its last-mile partnership with the Postal Service, increased 21% in the last quarter.

"We've always thought the Postal Service should leverage the way it goes to every home and business," says Bette Phelan, a spokeswoman for Senator Tom Carper (D-Del.), who is co-sponsor of the Postal Service Retiree Health Benefits Funding Reform Act of 2009, which if passed would relieve the Postal Service of some of its onerous multibillion-dollar payments to the fund. Dale Goff agrees. "There are places in this country where post offices are the nearest outpost to the outside world for 200 miles," says Goff, president of the National Association of Postmasters of the U.S. (NAPUS), based in Arlington, Va., which represents the 30,000 postmasters and retirees. "Why shouldn't we do the Census? Why shouldn't we be going to different government agencies and seeing what we can do for them?" Additionally, the carriers' union and Postmaster General both strongly favor utilizing post offices to sell products and financial services.

A prohibition in the Postal Accountability & Enhancement Act of 2006 forbids the post office to offer new services other than those related to delivering hard-copy mail. Representative Jason Chaffetz (R-Utah) recently introduced a bill to allow the Postal Service to team up with the U.S. Census Bureau. Passing it in time for the next U.S. Census in 2010 will be a challenge. Rolando believes that paying the Postal Service to conduct the Census would be more economical for the Census Bureau, which is planning to hire 1.2 million temporary employees in 2010 to canvass an estimated 60 million households that do not respond to Census documents. Census spokesman Stephen Buckner says that because of most Americans' day-time work schedules, Census privacy concerns, and language differences in many areas, the Postal Service isn't a staffing solution for this work.

Katrina deliveriesAs for the idea of helping law enforcement keep an eye on neighborhoods, mail deliverers also enjoy something of a head start, since they notice when something is amiss in their regular territories. "We've all heard of letter carriers stopping burglaries because they've reported suspicious signs to the police," Rolando says. He thinks that in some areas of the country, local law enforcement agencies would pay postal workers to spend extra time patrolling neighborhoods, looking for strange parked vehicles, doors ajar, and other signs of crime. Likewise, social service agencies or home-health care businesses might be interested in compensating letter carriers for looking in on customers along their routes who are weakened, chronically ill, injured, or otherwise need modest assistance at home.

The proposal with perhaps the best odds of materializing in the near term is that of the Postal Service's making special, express deliveries of vaccines and other pharmaceuticals to hospitals or doctors' offices. "Medication via the mail is a very viable prospect," says Pat Donahoe, Deputy Postmaster General and COO of the U.S. Postal Service. For one thing, current law allows it. Postal workers successfully delivered medication to disaster victims in 2005 after Hurricane Katrina hit New Orleans, and the Postal Service is already testing drug deliveries in parts of Minneapolis and Philadelphia. In the future, the Postal Service could reach deals with pharmaceutical companies to transport drugs quickly.

"Anything the Postal Service can do to increase its efficiency on overnight delivery would be good," says Steve Goodrich, a board member for the Association of Management Consulting Firms. "Right now [the Postal Service's] Express Mail costs more than alternative delivery services' overnight service. Maybe delivering drugs and other similar products could add to the post office's speed and efficiency and make it more competitive." Donahoe also sees extra dollars in making deals with companies who want to promote new products like cookies, shampoo, or pantyhose. "We think that there's a big market in putting free samples in people's mailboxes, the kinds of things they give out in supermarkets and Sam's Club," Donahoe says. "There are places in the country where consumers don't have access to stores that give samples out."

Some of the proposals cause Postal Service leaders serious concerns, especially those that involve forays into aiding law enforcement. "We've always been able to go into neighborhoods safely, but if it was in the newspaper that letter carriers were going to be part of Neighborhood Watch, they could be targeted" by criminals, Donahoe says. Other industry watchers worry that new endeavors will damage dependability. "The Postal Service already has the last-mile stuff with FedEx and UPS that fits into its schedule today, but the next potential source of delivery volume and the time windows won't necessarily match," says Brian Clancy, managing director of MergeGlobal, a financial advisory firm that specializes in transportation and logistics.

The other point of contention concerns whether such entrepreneurial activity would generate enough money to avoid what appears to be an inevitable reduction of mail service from six days a week to five. Postal Service COO Donahoe says it would not. "Right now it costs us $3.5 billion to collect, deliver, and process mail on Saturday." The Postal Service needs to cut that cost immediately, he says, while also finding new funds. The union and postmasters' association bristle at the notion of cutting Saturday delivery, calling it an assault on the agency's strength and an inexorable slide to service cuts other days. Says Rolando, of the letter carriers' union: "Instead of dismantling the postal network, we need to find ways to better utilize it."

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