The chatter about when the U.S. Postal Service will request its next set of rate increases has already begun.
But of much greater concern is the hubbub over whether the USPS will ask the Postal Rate Commission to raise the rate for lighter weight Standard A mail flats – like catalogs – by an incredible 7% to 8%. Such a hike would be more than double the cumulative rate of inflation since postal rates rose in January. How could it consider this? Here’s how the matter was explained to me.
The postal service, together with its customers, asked for and received discounts for mailer- barcoded Standard A flats. The USPS wanted to boost its volume of mailer-barcoded flats to capitalize on the efficiencies barcode-reading flat sorters can provide. Mailers, naturally, were interested in earning another work-sharing discount to reduce the cost of using mail as a business-development medium – a “win-win” proposition.
Mailers responded to the flats discounts exactly as they had promised. Mail volume grew and so did postal revenue. But unfortunately, according to staffers at postal headquarters, the USPS neglected to do its part. Postal facilities managers around the country often decided not to process mailer-barcoded flats on automation equipment, but used manual means instead. In turn, the cost of this mail grew faster than its earned revenue.
In any private company, such a phenomenon would cause managers to scurry to rectify such a needless waste. The USPS’ solution? Raise rates.
People sometimes question why postal legislative reform is necessary. Many moons ago I offered a James Carville-like answer that had some people aghast: “It’s the incentives, stupid!”
The incentives behind today’s postal service are antithetical to sound business practices. Minimizing costs and maximizing gains mean nothing under the present framework. Unless these wrong-headed incentives are changed, this kind of screwball behavior is likely to continue.
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