Transformation News
FOR IMMEDIATE RELEASE
April 22, 2002
REMARKS BY POSTMASTER GENERAL JOHN E. POTTER
NATIONAL POSTAL FORUM
SAN DIEGO, CALIFORNIA
April 22, 2002
Thank you, John. And good morning. Thank you for that warm welcome and thank you all for being here this morning at the National Postal Forum. The forum tradition is now in its 34th year. It's also become an invaluable opportunity for the mailing industry and the Postal Service to come together, in a unique national partnership of service.
Since we were together last fall in Denver, that partnership has taken on new meaning. In the wake of the terrorist attacks and the anthrax incidents, our industry was challenged like never before.
But we came together like never before -- the mailing community and postal managers working together to ensure that mail kept moving, working together to rebuild confidence in the mail, and coming together to develop long-term ways to mitigate any other attacks on our system.
The end result of all these efforts was a partnership like never before between business mailers and the Postal Service. My thanks to all the MTAC members, to all the industry associations, and most recently to the Mailing Industry Task Force, co-chaired by DPMG John Nolan and Pitney Bowes CEO Mike Critelli.
Thank you all for your commitment to maintaining a strong Postal Service and our core mission -- that is, regardless of where you live or where you work in this country, regardless of what challenges may confront us, our customers know they can depend on the fundamental right to send and receive mail.
We take that mission to provide universal service seriously. It is in the spirit of that tradition, that I am here with you this morning to talk about the transformation of the Postal Service.
Earlier this month, we submitted a Comprehensive Transformation Plan to the Congress. It is a plan that we produced together, and one in which we all have a stake. Last fall, we asked the mailing industry to give us their input on a draft of the Plan. All the comments were carefully considered - and many of the recommendations were included in the final document.
This morning, I want to begin by sharing some of your thoughts and suggestions. They're just a few of the hundreds of comments we received from business mailing leaders across the nation.
This first one is from a major Northeast communications firm: "For the Postal Service to miss this chance at transformation would be tragic. Our economy cannot withstand a $900 billion disruption. Nine million Americans need their jobs."
This second one is from a major credit card firm in the South: "Customized service agreements with mailers can offer large benefits to the Postal Service in the form of lower unit cost and volume commitments."
And from a noted direct mail corporation in New York: "We would welcome a streamlined rate making process which may allow for more moderate and predictable rate increases."
From a publishing association in the Washington area: "The Postal Service must continue to serve every address, whether it's rural, urban or in the suburbs."
And finally, there's this comment from a consumer in Ogden, Utah who wrote: "I don't think you have to worry that the Postal Service is going to disappear."
Needless to say, we found that last one very reassuring. Actually, in many ways, the quotes reflect what's most important about the Transformation Plan.
This Plan is not about the needs of the Postal Service. It's about you -- and the 9 million people like you -- who work in the nation's mailing industry. It's about people -- the people we both serve, our customers. It's about connecting people -- preserving a national universal mail service that connects 280 million people, 125 million households, and 10 million businesses.
Ladies and gentlemen, if we don't accomplish transformation now, the universal mail service that your businesses and the mailing public rely on will be in jeopardy. You and your business cannot afford to let that happen to you.
I am convinced our Transformation Plan allows us to secure the future of universal mail service at affordable rates and provides us the tools we need to help you grow your business.
This Transformation Plan is all about change, about reexamining every aspect of our existing business model. As you saw in the summary that was included in your information packet when you registered, this Plan is a blueprint for modernizing every aspect of the way we do business.
It's about how we can change our business -- so we can help you do your business. A great writer once said, "We cannot become what we need to be, by remaining what we are."
Let's be clear on one fact about the mailing industry: Hard copy mail is here to stay. Even in the technology age we live in. The very fact that you are sitting here right now is a clear indication that mail is important to your business, and to your customers. It's called relevance.
Regardless of whether your customer lives in a remote village in Alaska, or in Greenwich Village in the heart of Manhattan -- mail is valued by the people you and I serve. Mail is the vital link between individuals, families and friends. But it's also critical to commerce across this nation and the world.
Together there is much we have accomplished to maintain the value and relevance of mail. Over the past 32 years since Postal Reorganization, we have reinvigorated the mailing industry. Since 1970, mail volume has grown from 85 billion pieces to over 200 billion today. But we are now at a point in our history where we need another booster shot. There is much more that needs to be done.
Right now, for instance, we have an opportunity to seek the pricing flexibility you told us you needed. I agree with you. The current pricing system doesn't provide the flexibility needed to make this industry grow.
We also need the flexibility to grow new revenue streams by exploring new products and services. Whenever we make a move to add on, improve or redesign products and services, a host of special interest groups line up to stop us. In the end, neither you nor your customers are served.
We all agree on these issues. But we also recognize we simply cannot make these changes alone. We need your support. Your voice must be heard.
We need the help of our policy makers to legislate postal reforms. If they cannot reach consensus on a business model for the Postal Service, then we will have allowed a valuable national asset to erode and ultimately fail and be wasted.
And who will be hurt by that? You! Your job. Your business. Your organization. Your company's value to your shareholders, to your employees, and to the people you serve would be diminished. Your company's ability to connect with every one of your customers would be lost. All of this would affect your bottom line, just as it would affect ours. In fact, even the nation's economy would be hard hit. Stop to consider that the mailing industry of this nation represents 8 percent of the Gross National Product.
Just as important, the nation would stand to lose a fundamental government service that today, we all take for granted: universal mail delivery.
We can't let that happen. We do need to transform.
This plan for transformation lays out three business models for the Postal Service of the future. Let me take a few moments to explain each one.
For some people, the answer to changing the Postal Service is privatization. For these people, the notion of equitable service is not relevant.
A privatized model would focus on profit. The results might be delivery standards and prices dictated by where a person lives or where a business is located. Metropolitan areas, where volume is greater, might receive better or cheaper service than a rural community.
The privileged might stand to benefit from privatization. But not everyday people. It might be fine for the lawyer in Los Angeles. But not for the sales clerk in Omaha.
The governors of the Postal Service and I do not recommend that the Postal Service be privatized. The mailers and consumers who gave us their input over the past few months overwhelmingly told us there was no support for privatizing the nation's mail service. Nor do we believe that we or our customers are ready to abandon the present national mandate to provide universal service at affordable rates.
The second alternative model is to restructure the Postal Service as a traditional government agency, pretty much as it was through most of our history.
Today, that would mean the solution to decreasing volumes would be direct subsidies - tax dollars. In effect, it would put the Postal Service back on the federal budget. Given the 20 percent deficit we had in the 1960s, that would mean about $15 billion in 2003. The money would have to come from taxpayers' pockets.
Let's remember, here, that no taxpayer dollars are used to fund our normal operations. It all comes from the sale of postage and other products.
We don't want to revisit the past and repeat what happened in the 1960s. Back then, mail came to a screeching halt. There was no capital to improve the infrastructure. Frankly, there was a loss of confidence in the mailing industry.
To restore that confidence, the Congress and the Executive Branch agreed to establish the United States Postal Service. About the same time, the industry and the Postal Service developed National Postal Forum. It led to a true partnership for progress between the industry and postal employees. That partnership gave a jump-start to the business and set the stage for rapid development of the mailing industry in the 1980s and 1990s.
Today, our industry needs another jump start into the future, not a return to the past. We need flexibility to put this Postal Service on a more businesslike footing.
Which gets us to the third alternative: a Commercial Government Enterprise. We believe this is the model that will give us the leverage to meet your changing needs and to maintain our mission of universal service.
But this model is a lot different from what we have today.
First, this model would allow us to use our vast retail and delivery assets to develop new revenue streams. For example, our 38,000 retail outlets and our national door-to-door delivery networks could be made available to private enterprise in joint profit-making ventures.
As a commercial government enterprise, we could introduce flexible pricing. Prices for postal products would still be subject to regulatory review. But we would have the flexibility to adjust prices based on market demand - much in the same way many of your companies are able to do today.
We would also have the flexibility to increase access and convenience to our customers. We would add more locations with longer hours. And we'd have the flexibility to close a number of non-performing retail outlets.
Instead of breaking even as a financial goal, we would want to generate "reasonable returns" - a profit, in other words. So instead of increasing our debt load with the Treasury to finance capital projects, we would rely on our earnings - just as any of your businesses might.
Retained earnings would carry us through tough economic times. And we wouldn't have to resort to high and unpredictable rate increases.
We seek to move to phased rates that are smaller and more predictable. You, our customers, could better plan your annual budgets and control your bottom line.
Now I'm told that's a lot for the Postal Service to expect, especially given all the other priorities our lawmakers have to consider these days. But, all it may take is a little patience and a little help from our friends.
Which reminds me of the young couple who desperately wanted to have a child. They went to their priest and asked him to pray for them. The priest replied, "Well, it so happens I'm going on a sabbatical to Rome. And while I'm there, I'll light a candle for you."
Three years later, the priest returns and goes to the couple's home where he finds the wife pregnant and busily attending to two sets of twins. The priest of course, is elated and asked where her husband is so he can congratulate him.
"He's gone to Rome," came the harried reply. "He's going to blow that candle out."
So if anybody out there wants to light a candle or two for postal reform, I promise I won't blow them out. You've certainly got my blessing.
But there are some steps we are already taking to begin the process of transformation. In effect, we realize we cannot wait for legislative reforms to do the work of change for us. We must make the tough decisions now that will set the stage for making this transformation a success. That means no more sacred cows - including some of the internal restraints we put on ourselves.
To that point, we have announced that we are lifting the moratorium that management put in place four years ago on closing post offices.
Does that mean there will be wholesale closings? No! But what it does mean is that we want to sell stamps where customers shop. What's important to remember here is that we have provided alternative services that have actually improved customer access to postal products. We are selling more stamps at more locations. For example, customers can buy stamps at supermarkets, drug stores, by mail, online, from ATMs, and from letter carriers.
We cannot limit our service to our own brick and mortar retail outlets. We have a unique opportunity before us to offer postal services in more locations where our customers do their shopping.
The next generation of postal retail options will include retail partnerships, fully automated postal centers that also accept credit cards and debit cards, and the Internet.
Second, we will evaluate our existing processing network. With the advances we've made in automation and the changes in our mail mix, we no longer need some of the 400 processing centers we have nationwide. There are opportunities for consolidations that will strengthen the network, strengthen service performance, and reduce costs. For those of you who take advantage of drop-ship discounts, it means fewer locations for you to go to -- and reduced transportation costs.
Third, we will improve our dispute resolution processes. Right now, we spend $300 million a year on labor-management disagreements. By finding new ways to resolve these disputes, we can focus our resources on serving your needs more efficiently.
Fourth, we will build on three straight years of productivity gains. Between now and 2006, we have challenged ourselves to save $5 billion.
To accomplish this feat, we need your help. Reducing the end-to-end combined costs of both our systems is more important now than ever before. We both need to focus on quality issues. That starts with address quality and proper mail preparation, especially on flats.
When it comes to flats productivity, we must find new ways to reduce end-to-end costs. That's why I have asked our Operating Group to explore possible changes in our bundle and pallet make-up requirements. The desired effect will be to reduce the number of packages you have to prepare and we have to open for processing. That cuts costs for you and for us.
I will also be asking MTAC, to publish their recommendations on standardizing publication sizes and label placement.
Tomorrow, postal managers, including our Area Vice Presidents, will have business builder sessions on service initiatives. One new initiative -- called Network Integration and Alignment -- focuses on reducing processing and transportation costs and improving consistency of delivery.
Finally, within the framework of existing legislation, I am committed to modernizing the rate making process. We've begun planning with the Postal Rate Commission to convene a joint summit of all the stakeholders.
This summit will give everyone an opportunity to share with us and the members of the Commission, their ideas for modernizing the entire rate making process. We believe the results of this summit could have far reaching consequences for every company and organization represented in this room today.
Speaking of rates, I want to thank the mailing industry for their support in helping us reach a settlement on the recent rate case. We were able to come to a reasonable conclusion that we all could agree on without protracted and costly litigation. And on that note, I want to reassure you that I am committed to maintaining the new rate structure until at least calendar year 2004.
But success in the marketplace is more than modernizing ratemaking and reducing costs. It's also about growing our business by improving service and enhancing our products.
Our service strategy for the future will be to help you better serve your customers and reduce costs. Maintaining quality service is an across the board proposition for all classes of mail. It's what you told us you expect and will demand.
My commitment to you is quality service. That is the core of our business. Everything we do, every enhancement we make, is intended to maintain our commitment to quality service.
Enhancing our products requires creative solutions. We've become world class experts at using technology to improve productivity. Now it's time to leverage technology to enhance our products and services. For instance, you told us you need more information about your mail. You said that information about your mail was a useful marketing tool. You told us information about your mailing would help you grow your business.
We have responded. For some, it's delivery confirmation for packages. For others, the answer is Confirm, the first "intelligent mail" product that enables mailers to track their letters and flats through each step of the distribution process. This month, the Board of Governors approved a filing with the Postal Rate Commission for a new classification with flexible pricing for this product.
We will not stop there. We also plan to use the delivery confirmation technology to enhance our Certified Mail product by generating electronic return receipts and offering electronic signature capability.
In closing, I want to underscore our commitment to this plan for transformation. I pledge to you that we will do our part to make this Plan a reality. I pledge to you that we will continue our strong service performance focus. And I pledge to you that we will make the changes that are possible now, under the current legislation.
I ask you to join us in that commitment. This plan is not just about the Postal Service. It is about all of us. We all have a stake in securing the future of universal mail service in this country. And I ask for your support to ensure that legacy is maintained and continued well into the future.
The events of September 11th and the subsequent anthrax attacks, have left an indelible mark on all of us in this country. In the weeks and months that followed those events, we all came to realize that we live in a different world. And with that realization is the stark reminder that we cannot do business as usual.
We enlisted the support of the mailing industry, union and management association leaders to create an Emergency Preparedness Plan to protect our customers and our employees from terrorist attacks. Thanks to the Administration and the Congress, we received the necessary funding to begin implementing that Plan. The security of the nation's mail will remain our foremost commitment well into the future.
I am convinced our Emergency Preparedness Plan and our Transformation Plan are key steps in moving beyond where we have been -- and moving toward what we must be.
Ralph Waldo Emerson said it best. "What lies behind us and what lies before us are but tiny matters compared with what lies within us."
With courage and with conviction, we can continue to connect our people, our customers, indeed, our nation, as no one else can - just as we have for more than 200 years... Thank you.
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USPS Transformation