Sustainable Solutions Paper
The Post Office Department known as the United States Postal Services (USPS) (Annual Report, 2009) today, is a dominate player in the mail delivery arena and has been existence since 1776. The Post Office was originally a governmental agency, but due to mismanagement by Congress, was reorganized in 1971 and no longer a part of the presidential cabinet; but became an independent establishment of the executive branch of the Government. To date, the USPS maintains a monopoly on the day-to-day delivery of mail but competitors do share the market on some of the other types of deliveries; shares the market on some of the other types of deliveries (i.e. express delivery, priority mail and overnight delivery).
The Post Office Department is known as the United States Postal Services (USPS) an independent establishment of the executive branch of the Government of the United States (USPS, 2009). During the late 1960s the Post Office Department was suffering from mismanagement and the employees were forced to take a stand. After the mutiny, it was recognized that Congress was not able to provide the direction of such a large entity. In 1971 the United Stated Postal Services began operations with a focus on reorganization. The researcher will examine USPS’ primary and support activities in relation to sustainability in light of the decrease in production. An analysis of the internal and external forces will highlight its strengths and weaknesses that have sustained the organization for many years. The threat of new technology including the internet and very strong competitors are a reality that the USPS cannot disregard.
Their core revenue stream has been the day-to-day delivery system that has not been duplicated but is threatened by new technology thus reaching an obsolete level. A genuine value is the day-to-day delivery system that has not been duplicated but is reaching an obsolete level. The value that the USPS operates with is found in many aspects of the organization, including the vast equipment, brand, facilities and vehicle fleet in enormous. The USPS has initiated a green initiative (Anonymous, 2009). With 614 processing facilities and 1,000 other facilities, and a major issue with operating costs, The USPS is looking to cut operational costs. They also are encumbered with the fact that the mail they deliver has an adverse effect on the environment and are working on this issue as well (Syracuse, 2008). As a result, the USPS has considered cutting operational costs. Currently the USPS is facing a major operational issue that can be detrimental to the organization. Representative John M. McHugh, of New York, introduced the USPS Financial Relief Act of 2009, House Bill 22 (Opencongress, 2009). The USPS is seeking relief at a forced payment of $5.4 billion due September 30, 2009 and seeking to make payments and have submitted the strategy plan for sustainability and for payment into the employees benefit system. Stakeholder Identification and Value Analysis (Part I)
The USPS employs 785,929 people and 614 processing facilities that process more than 200 billion pieces of mail (USPS, 2009). This organization ranks third in the number of employees in the United States. USPS has a network of 37,000 owned post offices, stations, branches, contract postal units, 36,723 are retail and deliver facilities (USPS, 2009). The company also has one of the largest vehicle fleets in the United States consisting of 221,047 units, and 197,898 are delivery and collection vehicles, including some using alternative fuel sources vehicles. These vast employees interact with the stakeholders on a daily basis and as Wheeler explains in his article, it is valuable to integrate and sustain these relationships (2003).
The company is a governmental agency, but was given the authority to: Be vested in a Board of Governors and Postal Service executive management, rather than in Congress Authority to issue public bonds to finance postal buildings and mechanization. Direct collective bargaining between representatives of management and the unions. A new rate-setting procedure, built around an independent Postal Rate Commission. This accounts for the bureaucratic management of the USPS as represented by standardized procedures that guide the execution of most if not all processes with the organization. This being a strong culture, and according to Harvard Business Essentials, a strong culture is difficult to change without much effort, time, and substantial disruption (2005). The current Postmaster General (PMG) has been in place for the past nine years and has, according to Nocea of the New York Times, the PMG, Potter has had a very successful run (2009). He survived the anthrax crisis, overseen productivity gains and an increase in customer satisfaction (Nocea, 2009). During this time, he also eliminated a $11.3 billion debt. General Force Analysis (External – Remote Environment)
General Force Matrix Analysis
The postal services are facing a steady decline in the volume of mail being delivered, due to external influences such as the internet, UPS, FedEx, and DHL. The internet’s email system, ability to receive and pay bills online, has drastically reduced the hand delivered mail volume (Kamarck, 2009). In an article in the Washington Post, the Post Master General Potter reported to the Senate oversight committee that “the average number of pieces of mail the U.S. Postal Service delivers per stop declined from 5.9 in 2000 to 4.8 in 2008 (Norcea, 2009).” The USPS has recorded this trend in their Annual Report as shown in chart below: Mail Volume By Type
(Pieces in millions)
Other Mailing Services*
Total Mailing Services
Total Shipping Services
Total Mail Volume by Type
*Free mail for the blind included in other category.
(USPS Annual Report, 2009 p 36)
Other serious risks the USPS must consider that will have a direct adverse result on revenue are: Changes in the economy;
Various state legislation proposals which could affect our customers and could reduce our revenue, increase costs, or place an additional burden on their operations.
A significant increase in fuel prices could adversely affect our operating costs. The potential threat of biohazards and other such threats placed in mail. Subject to risks and uncertainties that affect many other businesses, including: Market acceptance of new service and growth initiatives;
Adverse weather conditions or natural disasters, such as hurricanes, which can damage property and disrupt our operations;
International conflicts or terrorist activities and the effects these events may have on business or results of operations; and
Changes in interest rates and foreign currency exchange rates (Annual Report, 2009). Porter’s Five Forces Industry Analysis (External – Industry Environment)
Five Forces Matrix Analysis
Porter’s Five-Forces Industry Analysis
UPS and Fed Ex are strong competitors
Bargaining power of buyers
Monopoly on day-to-day delivery and customer service
Barriers to Entry
Few large players in the industry but other methods are available 3
Bargaining power of suppliers
Initiates a fair venue for supplier
Availability of substitutes
Some of the services can be duplicated, but day-to-day service is monopolized.
Email, online billing and payments
Using Porter’s Five-Forces to analyze the USPS shows the strength of the organization and its capitalization on them. The major threat was the substitution to email that has decreased the mail volume and the profitability of the USPS has suffered just as Porter outlined in his article (2008). UPS and Fed Ex offer similar services but performed them in different ways providing them with a distinctive difference (Porter, 1996). With both, UPS and FedEx as competitors of other services offered by the USPS, partnering with them offered a cost-effective transporting of the product that also included a sustainability objective. With both, UPS and FedEx as competitors of some of the other services offered by the USPS, partnering with them offered a cost-effective transporting of the product that also included a sustainability objective. The barriers to entry are extremely high for the day-to-day delivery of mail volume, and the other services are dominated by both of the competitors as their services are worldwide. The brand loyalty and trust from its customers makes USPS a strong competitor.
Implications of Five Forces
The monopoly that the USPS has on the day-to-day delivery has not and more than likely will not be duplicated. This is an old tradition that has been enjoyed by this organization since 1776. As outline by the five forces matrix, the substitution of email has decreased the volume of mail, but the volume of delivery points has been increasing (Annual Report, 2009). With the steady increase in construction of new homes, apartments, and businesses, the delivery point volume is over 150 million and increasing (Annual Report, 2009). Clearly we are not looking at an organization that will soon be obsolete.
Detailed Value Chain Analysis (Internal Environment)
Customized Value Chain of Activities in Table Form
Customized Value Chain of Activities Table
Services (Care/Tech Support)
The weaknesses of the USPS are connected. The USPS also has regulatory constraints that neither UPS nor FedEx are bound by. The Postal Accountability and Enhancement Act of 2006 (Postal Act of 2006) limits the services that the Postal Service can offer, unlike the competitors, who have no restraints in pricing or services offered (Assessment, 2009). The USPS relies heavily on the revenues directly from customers for the operation of the business; therefore a decline in revenue will result in the organization developing a major financial problem. This is unfortunate because they also possess such a strong network of employees, a strong infrastructure, and brand presence. Any private company with such assets would not be facing the financial woes of the USPS. The USPS is limited in the pricing of the revenue generating products, as set by Postal Act of 2006, are held by a stringent price cap (Assessment, 2009). These conditions do not allow for the self-sustaining organization to be self-sustaining and is facing a financial deficit that will soon reach the maximum cap and will be forced to close its doors (Kamarck, 2009).
Company Skills / Capabilities
The company has three major systems with capabilities that can possibly be used in other capacities. The automation system of the sorting and delivery of the mail, the delivery system network of carriers, and their retail system outlets; has been developed over the last 200 years, is a system within the system that is incredible.
The automation is capable of sorting and classifying mail from its 400 processing plants, with delivery to more than 90 offices across the United States (Annual Report, 2009). This system is linked by highway, rail and air whose workload is pre-determined. For example, a load picked up in one state, taken to another, regardless of the volume of mail, the trip has to be made.
The next system, the direct mail delivery point, has not decreased; in fact, it has steadily increased on an average of approximately 1.5 million per year (Annual Report, 2009). Therefore, the workload of the point of delivery carriers has increased while the mail volume has decreased and the USPS has managed to keep up the demand without increasing fees.
The last being the delivery of the volume mail from one location to another. Regardless of the volume, at this time, the pre-determined route must be conducted. When the customer pays for a first-class letter, that letter is expected to be delivered with the next two to three days. Often, within the same area, the letter can be delivered within 24 hours. Implications of Competitive Analysis
As is evident, all the organizations in the mail transportation business are unique with enough differentiation to be profitable. UPS has its niche, just as Fed Ex has but none can compare to the daily, loyal and trust that is bestowed upon the USPS. This loyalty is one of USPS’ greatest strengths that cannot be match or duplicated by either competitor.
Detailed SWOT Analysis
Strong brand recognition
Sluggish performance of major operating divisions
Expansion of products offered
Declining profits and margins
Strong intellectual property
Low total factor productivity
Extensive network and strong infrastructure
Continue to implement green technology & sustainable solutions Intense competition
New sales initiatives
Economic viability strategy
Current economic state
Benefits package payments
Congressional oversight, other Governmental entities, other organizations and the public
As outlined in the SWOT Chart, USPS is capable of sustainment, but due to other governmental regulatory restraints, is having a difficult time at doing so. The USPS has strong brand recognition, a strong network and infrastructure and strong intellectual property. These strengths make USPS a prominent player in the industry hampered only by the governmental regulatory constraints. The USPS has many trademarks, service marks, patents, copyright, and trade secrets. In leveraging the strength of the extensive network and strong infrastructure, USPS is using the strategy of offering new sales items, such as greeting cards, mailers, and other postal accessories. Capitalizing on the strong brand image, USPS initiated online shopping while incorporating the economic viability strategy for convenience for their customers. A strategy the USPS has adapted, is partnering with the competitors to assist in the transporting of the volumes of mail (Robertson, 2006). Both UPS and Fed Ex transport to every state, every day. This cost-effective strategy is decreasing the operating costs of USPS, while still achieving their mission. The most immediate threat is the payment of benefits that the organization has been forced to pay. This payment as stated by Mr. Potter, Post Master General, in an article by Joe Davidson in the Washington Post “…the Postal Service is the only public or private entity required to prepay health benefit premiums at these extremely high levels.. (2009).”
SCOT Factor Matrix
USPS has the skills and capabilities to compete in this industry. The additional strategy of sustainability and how it affects the operations of the organization are being pursued for an impact on the environment and the bottom line. USPS, for the future must look at continuing these efforts while looking to make drastic changes in the operational format in order for the organization to continue to survive these economic times.
Key Success Factor Matrix
Implications of Analysis
In this industry, the customer and customer service is essential. The customers will be looking for the most efficient mode of transporting their letters and packages to the final destination. USPS has an advantage because they interact with the customers on a daily basis, either visiting the local post office or by the daily deliverance of mail to the residence or business. The strategic locations of these 36,000+ facilities is not matched by any of the competitors yet is recognized as a great advantage. This has forced both competitors to find an avenue to offset this presence. Ownership of these facilities makes the eco-friendly technology very important for the operational cost of operation, therefore offsetting these costs while reducing the carbon footprint.
Analyzing the Company Strategy Type (Part II)
Currently USPS is supporting a Customer Relationship Strategy according to the Vision Plan 2013 (Strategy 2005, p 41). The vision rests on three major strategies: 1) Focus on what matters most to customers.
2) Leverage our strengths to create customer value and profits to invest in continued improvement. 3) Embrace change in the way we respond to emerging customer needs and a rapidly evolving business environment (2009).
With 150+ million points of delivery, the customer is the most important entity in the USPS organization (Annual Report, 2009). The financial support has been the sustaining revenue source since the reorganization in 1971. This relationship has been built during the past 200 years and through many generations. The mail carrier interacts with the customer on a daily basis sustaining that viable relationship.
Analyzing the Company Strategy Moves
Relevant Strategy Moves The Vision plan outlines several strategic moves that the USPS will be implementing within the next several years. They will include building a conservation culture to be implemented throughout the organization focusing first on reducing energy and the impact on the environment. New efficiency standards will be incorporated and will reduce the energy use in facilities, the fleet management and extending efficiency practices to water and other resources. The USPS will be adopting the sustainable business practices of taking the comprehensive life-cycle approach towards their environmental responsibility from the creation to the disposal of a mail piece. Collaborate and partner with the customers, suppliers, employees and the academic and technical community to develop new services, new products and innovation processes to grow the business (2009).
As Porter says in his article, “There are no longer mature industries; rather, there are mature ways of doing business (2009).” USPS is a mature industry and it will take all the experience, skills, knowledge and abilities to make the adaption to sustain this slump in revenues. USPS is working with the competitors, adapting sustainability strategies, and using the network of personnel who personalize the organization everyday to their advantage.
Alignment and Goals Analysis
Alignment Checklist and Unit Goals Matrix
USPS’S Alignment and Goals Analysis
Leverage personal contact, build on trusted relationship
Understanding the customer needs and market trends
Engage employees to be advocates for the mail
Empower the employees to help the business grow
Manage Post Offices as a business by optimizing the retail network. X
Be a sustainability leader and adapt sustainability business practices, and build a conservative culture. X
To maintain the full operation of the organization
Day-to Day Operations
Business units are optimally organized to support the strategy, reduce customer effort, provide and assist customers with consistent experience across all contact points. X
Continue to build the performance-based culture
(Vision 2013, Strategic Plan for 2009 – 2013)
USPS is very much aware of the strengths and has been able to capitalize on them but due to other outside forces, the volume of the mail decreasing, impacted on a decrease in revenues. Now they are in a position where system thinking is necessary to overcome the obstacles of the legislation, the economy and competitors. The employees are also aware of their plight, without the organization; the job security will vanish as well. They are a viable network that USPS recognizes as a valuable asset.
Action Plan Analysis
Relevant Action Plan
Revisit the regulatory structure of USPS
PMG & Executives
6 Mo. – 1 Yr.
Select a business model and regulatory structure based on key requirements and recognized strengths. PMG & Executives
Regulatory structure change to go beyond pricing flexibility. PMG & Executives
Implement business model.
PMG & Executives
1 – 2 Years
Continue to execute sustainable solutions plan and adjust timelines where necessary. PMG & Executives
Experiment with franchising and privatization in pilot project. Research & Development
3 – 5 Years
Expand beyond core business.
PMG & Executives
Evaluate sustainable solutions progress and timeline to complete. PMG & Executives
(United States Postal Services Future Business Model: Analysis & Action, Recommendations, 2009).
USPS is aware that they cannot continue the operational structure of the organization in the present state. They are hampered by the regulatory restraints that are holding the company in its position. This and the regulatory demand that the organization funds the benefits for employees from their operating cash flow has been and will be detrimental, should it continue in the present state. In January, 2009 Representative John McHugh (NY) introduced legislation (H.B. 22) to allow USPS to make a reduced payment to the employee benefits fund. The $5.4 billion payment, the second of its type, will diminish the fund, and force the USPS into a deficit that maybe impossible to continue business as usual. House Bill 22 is asking for a reduced amount to be made of $1.4 billion, and offers a strategic plan for payments and will allow the USPS to remain sustainable.
Fitness Landscape Analysis
Description of Fitness Landscape and Analysis
The USPS enjoyed a monopoly on mail delivery services for more than 100 years. The major competitors United Parcel Services (UPS) and Federal Express (Fed Ex) were founded due to services needed that were not being addressed. UPS was started in 1907 differentiating services of the common carrier. Their services included automatic daily pickup calls, acceptance of checks made out to the shipper in payment of CODs (cash on delivery), additional delivery attempts, automatic return of undeliverable, and weekly billing (UPS.com, 2009). They have remained a leader in this field due to their strong infrastructure and capabilities. By the 1970s it achieved the authority to delivery packages in almost all 50 states. Fed Ex did not make their appearance until 1979. They specialized in overnight delivery of high-priority packages, documents and heavy freight (Fedex.com, 2009). By the 1980, Fed Ex had clearly taken the lead in overnight and heavy freight delivery with an infrastructure that was able to track the package from pickup to delivery (Fedex.com, 2009).
Implications of Analysis
The whole strategic process is, as Hamel states, “…is not to find a niche within the existing industry space but to create new space that is uniquely suited to the company’s own strengths—space that is off the map.” (1989) Today, that is exactly what USPS has to do to achieve and maintain successful operations. As stated in the Harvard Business Essentials, USPS must think of strategy as a plan for controlling and utilizing their resources (human, physical and financial) (2005). This requires the strategist to look at the whole company, to look at the competitors’ company and then to find that space. USPS accepted that and created alliances with UPS and Fed Ex interacting in a self-organizing manner (Stacey, 2007 p 215). Once the strategic process begins, the strategic intent, the most difficult process is then implementation. This process takes the whole company adopting the strategic plan, even if the plan does not agree with their personal values. Each adopting strategic plan must be clear to everyone and the employee must be shown how it is directly related to their perspective position and how every position is valuable in order for the implementation to be effective and provide the company with the best possible outcome.
As Hamel explains, executive management must do the following:
Create a sense of urgency;
Develop a competitor focus at every level;
Provide the employees with the skills needed to work effectively;
Allow the company to conquer one strategy before attempting another; and
Establish and review comprehensible milestones (1989).
Each strategic adaption requires strategic intent for implementation. Boid Analysis
USPS is aware that for sustainability, it must make changes that will take it into the future. The rate of the decline in mail volume is accelerating faster then the organization can compensate with cost-effective strategies. With the new strategic vision plan for the next five years, the USPS has adapted the following strategies: The first is to focus current relationships on market innovation: The philosophy initiative will be to communicate to the different stakeholders to share information on technical or operating issues. The plan is to expand these relationships and to target and possibly adapt new and profitable opportunities.
New stakeholders will be invited to offer fresh perspectives and collaboration techniques.
To create a more effective product development and innovation process: This goal is to develop new services, methodologies, processes and service developments to the market as quickly as possible. Working with the core businesses, the plan is to be more productive in the use of our assets, expand the product lines, and to optimize the marketing channels.To partner to create new products and services: USPS will be searching for opportunities to leverage their assets with strategic alliances with partners that will complement or extend our services, specifically with the retail facilities. Implementing strategies such as: outsourcing, in-sourcing, entering profitable postal-related markets, expanding services through government agency partnerships, and to assist agencies to better serve citizens, while generating new and profitable revenues; to ensure its own sustainability (Vision Plan, 2009).
Implications of Analysis
With the threat of the one of the oldest institution closing its doors, many
are looking for answers. This is a country-wide dilemma and all stakeholders should be aware and willing to do what is necessary to keep this vital mode of communication open.
Industry Evolution Modeling
Industry Evolution Modeling Description and Analysis
The USPS is very much aware of its environmental footprint, as well as the footprint of the processed mail. Working toward a more sustainability work, they are looking at several options. The recent renovation of the rooftop of the Morgan Processing facility in New York City, has been estimated a saving for USPS of $30,000 per year (Anonymous, 2009). The article continues with the roof renovation details that include a variety of plants and grasses, 70 percent light weight aggregate and 30 percent compost, 14 benches made from Forest Stewardship Council certified lumber (2009). This green roof will reduce storm water runoff and save on heating and cooling costs. The USPS owns many of their facilities so this strategy will continue as saving/reducing cost is part of the vision and sustainability plan. They are also looking to offer a paperless mail. Currently, the volume of mail being delivered is marketing advertisement, which is usually produced on recycled paper.
Implications of Analysis
Strategies such as reducing the ecological footprint, reducing fuel usage, and the paperless initiative are advances in the right direction. These initiatives will reduce the operating cost for the organization, plus over time, will begin to contribute to the value of the company. Strategies such as these are clear indicators that strategic intent and system thinking are involved in the strategic processes being implemented.
Life Cycle Assessment
LCA Modeling Description and Analysis
The USPS has complex systems of networks that work as one system. This system links each household, business and other organizations in the United States every day they deliver mail (Slentz, 2009). From the point of pickups, (free standing mail boxes, retail facilities, and home mail boxes) the mail starts the journey to the final destination. Whether that is in the next town, state or country; they all travel the same route until it is
deposited into the final drop box.
The process used is three-tiered:
Approximately 400 mail processing plants linked to more than 36,000 Post Offices, Branches, and contracted postal retail units by contractor-operated multi-modal rail, highway and air transportation logistics (2009). From the Post Office to approximately 150,000 delivery routes then onto every household and business in the United States making this a “universal service” according to Slentz (2009). The adoption of sustainable business practices will focus on a comprehensive life-cycle approach incorporating environmental responsibility form the creation of the disposal of a mail piece measuring the greenhouse gas emissions’ baseline for the long-term of reducing the carbon footprint.
U S POSTAL SERVICE (USPS) MAIL DELIVERY PROCESS
& Business) USPS CONTRACTOR
Implications of Analysis
USPS understands and accepts its responsibility and is actively working to erasing their ecological footprint. This strategy is a win-win for both the organization and the stakeholders.
Compliance to Innovation Analysis
Compliance to Innovation Description and Analysis
Being compliant is not new to the USPS, as they operate currently under very stringent regulatory controls that make doing business as we know it, impossible. These controls have impacted greatly with the organization’s ability to maintain financial sustainability in regards with pricing, new developments and employee benefits. Working within the constraints, USPS is able to utilize sustainability initiatives that will comply with the regulatory controls and allow the organization to work on the financial deficit.
Implications of Analysis
Change must occur if this historical institution is to remain viable. If it looks like a business, acts like a business, then it must be able to
function as a business. To achieve this, a change must occur as Yamashita says in his article on complex adaptive systems, just like nature, everything must change including business (Annual Report, 2009). It will be necessary for the USPS to be “self-sustaining” but not with the legislative controls holding the reins while the company is facing the real truth that it cannot survive in this present state of control.
Sustainable Value Framework Analysis
Detailed Analysis of All Four Quadrants
Investing in continuous improvement
Building a performance-based culture
Providing excellent customer experience
Reduce customer effort
Make the most of the carrier services
Build on trusted relationships
Build on the reach and capability of the network
Manage Post Offices as a business
Start with customer needs
Understanding customer needs and market trends
Build on domestic strengths and grow international business
(Vision Plan, 2009)
Implications of Analysis
USPS is internally working to empower their employees to customer sensitive needs and to build on the trusted relationship that is deeply rooted in the US culture. They are seeking to provide excellent customer experiences; reducing distractions inflicted by bureaucratic forms and the inefficient processes. USPS is looking to making the most from their offices and carriers for the betterment of the organization.
Externally, USPS is looking to understand the customer needs and the market trends by opening the lines of communication and to create a more comprehensive view of our customers and their postal needs. USPS wants to strengthen their domestic presence while looking to grow the international market.
Two major issues are current and pressing for the United States Postal Services to continue its operation:
Benefit Fund Contribution
If these two issues are not satisfied, then the closing of the doors for the historical USPS will be inevitable. The regulatory restraints stemming from the Postal Act of 2006 restrain and have created price floors on competitive products and price ceilings on non-competitive products. This forces USPS to look at innovation solutions, but here, again there are restrictions on what they can, and cannot offer. The USPS is promulgated to be a self-sustaining organization, but with the current regulatory restraints and the declining volume of mail, a declining revenue base, self-sustaining may be virtually impossible. Congress is asking the USPS to be competitive in the ocean of this industry, and to do so without using any tools that are available to their competitors. Congress must look at the policies that are in place that are forcing the organization to do what no other company in the United States are responsible to do: To provide for future employees. In light of the situation, there will be no future for the company, so no future employees. Many have offered suggestions to the USPS stemming from one day less of delivery, closing of post offices, to diversification. It is obvious that something has to be done and we are out of time, the mail volume trend shows a steady decline and that is reflected in the USPS decline in revenue. In the 2009 report, Accenture found that diversification was a major key component to a successful postal organization, but unless the regulatory restraint is lifted, it cannot be done (Berthon, 2009). The strategy plan submitted by the USPS, Vision Plan 2009-2013, outlines where they must go from here. Mintzberg states it best in his article in the Harvard Business Review, “that most successful strategies are visions, not plans (1994).”
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