US Postal Service begins agency overhaul

The U.S. Postal Service (USPS) announced an organizational realignment Friday to refocus its business, setting the stage for a long-anticipated overhaul to save the agency from financial collapse.

“To reach our full potential we need to be even better at everything we do well now, but we also need to recognize our issues and urgently embrace the changes required to unleash the full range of possibilities, and we need to start yesterday,” said Postmaster General and CEO Louis DeJoy, speaking this morning after revealing the agency lost $2.2 billion in its latest fiscal quarter.

The new structure is focused on three business operating units:

  • Retail and Delivery Operations — basic mission: Accept and deliver mail and packages efficiently with a high level of customer satisfaction. To be led by Kristin Seaver. 
  • Logistics and Processing Operations –— basic mission: Process and move mail and packages efficiently to the delivery units, meeting service standards. To be led by David Williams.
  • Commerce and Business Solutions — basic mission: Leverage infrastructure to enable growth. To be led by Jacqueline “Jakki” Krage Strako.

“This organizational change will capture operating efficiencies by providing clarity and economies of scale that will allow us to reduce our cost base and capture new revenue,” commented DeJoy, a former executive at XPO Logistics who replaced former postal chief Megan Brennan in May.

“It is crucial that we do what is within our control to help us successfully complete our mission to serve the American people and, through the universal service obligation, bind our nation together by maintaining and operating our unique, vital and resilient infrastructure.”

The changes follow a newly minted agreement with the U.S. Treasury Department for a $10 billion loan that was included as a provision of the CARES Act relief legislation approved by Congress in March.

Under the terms of the agreement, USPS will provide the government with cost and revenue information, along with “those contracts that generate the most revenue for the Postal Service,” the agency stated, among which industry observers consider to be last-mile delivery companies Amazon (NASDAQ:AMZN), FedEx (NYSE:FDX) and UPS (NYSE:UPS).

However, while the ability to borrow an additional $10 billion addresses the Postal Service’s near-term liquidity crisis, it does not fix the agency’s failed operational structure, according to DeJoy.

“Our financial position is dire, stemming from substantial declines in mail volume, a broken business model and a management strategy that has not adequately addressed these issues,” DeJoy said today at his first open session of the agency’s board of governors.

“As a result, the Postal Service has experienced over a decade of financial losses, with FY 2019 approaching $9 billion and 2020 closing in on $11 billion in losses. Without dramatic change, there is no end in sight.”

As part of the organizational changes, logistics and mail processing operations will report to the new Logistics and Processing Operations organization, which is separate from existing area and district reporting structures, according to USPS. The organization includes all mail processing facilities and local transportation network offices. “Splitting operations into these two organizations is designed to allow for improved focus and clear communication channels.”

USPS noted that while there will be no employee reductions as a result of the reorganization, the agency has begun a management hiring freeze. It will also be seeking voluntary early retirement from employees not represented by a collective bargaining agreement.

DeJoy also addressed recent fears that the Postal Service could potentially undermine the 2020 presidential election through inefficient processing of mail-in ballots.

“Let me be clear, that with regard to election mail, the Postal Service and I are fully committed to fulfilling our role in the electoral process,” DeJoy said. “If public policy makers choose to utilize the mail as a part of their election system, we will do everything we can to deliver election mail in a timely manner consistent with our operational standards.

He added that while there would likely be an “unprecedented increase” in election mail volume due to the pandemic, the Postal Service has enough capacity to deliver all election mail securely and on time.

“However,” he said, “we cannot correct the errors of the election boards if they fail to deploy processes that take our normal processing and delivery standards into account.”

Related articles:

Click for more FreightWaves articles by John Gallagher.