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EcommerceBytes-NewsFlash, Number 2632 - September 16, 2011 - ISSN 1539-5065    2 of 5

First Class Mail to Get Slower with New Proposed USPS Closures

By Kenneth Corbin
EcommerceBytes.com
September 16, 2011




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The ominous news continues to roll out of the U.S. Postal Service, and the latest announcement could have a serious impact on ecommerce merchants - particularly small sellers.

On Thursday, Postmaster General Patrick Donahoe announced a new wave of planned facilities closings, this time putting nearly 250 processing locations under review in a move that would increase the average delivery time of First-Class Mail.

"We are forced to face a new reality today," Donahoe said in a statement. "First-Class Mail supports the organization and drives network requirements. With the dramatic decline in mail volume and the resulting excess capacity, maintaining a vast national infrastructure is no longer realistic."

The proposed closures come as the latest in a string of proposals from the financially imperiled Postal Service as it looks to dramatically scale back its operating expenses and appeals to Congress for legislative remedies to reduce expenses.

The Postal Service has already been pressing its case to begin closing some 3,650 retail locations that it has placed under review. Earlier this month a USPS representative defended that plan before the Postal Regulatory Commission, an independent oversight body that is preparing an advisory opinion on the proposal.

Collectively, the moves come in response to what Donahoe has described as a "looming liquidity crisis" that could push the Postal Service into default as early as this fall. In the third quarter of the current fiscal year, ending June 30, the USPS posted a net loss of $3.1 billion. For the first three quarters of the fiscal year, the organization lost $5.7 billion, and is projecting losses for the full year as high as $10 billion. Those losses are being driven in part by a sustained decline in mail volume, projected at 2 percent this year, with a disproportionate dip in First-Class Mail.

The Postal Service reports that First-Class Mail volume has plummeted 36 percent over the past five years and nearly 50 percent over the past 10 years, declines that the organization says have left it vastly overextended. The reductions proposed Thursday would increase the USPS service standard for processing and delivering First-Class Mail from one to three days to two days to three days, so customers could no longer expect next-day delivery for items bound for nearby addresses.

The plan could also eliminate as much as half of the Postal Service's mail processing equipment and prune the organization's workforce by 35,000 positions. Donahoe said the reductions could save the Postal Service up to $3 billion annually.

The proposal elicited what has become a familiar reaction from the largest union representing USPS employees, the American Postal Workers Union (APWU).

"The Postal Service should be urging Congress to address the cause of its problems - not slashing service and demolishing its network," APWU President Cliff Guffey said in a statement responding to the announcement.

"The mail processing network is a major asset," he added. "Destroying it is misguided and counterproductive."

About the Author
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here .

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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