The United States Postal Service (USPS) is currently grappling with financial challenges. It plans to cut $5 billion in costs and boost revenue over two years. Postmaster General Louis DeJoy stresses to President Biden and Congress the need for these measures. They aim to prevent USPS cash depletion soon.
To boost revenue, USPS plans to expand its package business that competes with private-sector shippers by at least $3 billion. It intends to introduce new products and services aligned with its operating model and modernize its sales and marketing approaches. Additionally, USPS intends to hike prices on monopoly mail items, aiming for an extra $2 billion in revenue. This compensates for declining mail volumes.
To cut costs, USPS plans to trim retail and delivery expenses by $1 billion. They’ll optimize workhours and expedite Sorting and Delivery Centers (S&DCs) rollout. The agency has already achieved some cost savings by planning better and working smarter, resulting in a reduction of 28 million work hours and $1.8 billion in savings in 2023 compared to the previous year. USPS plans to have 100 operational S&DCs by year-end and aims for over 400 within three years. This initiative will streamline operations and lay the groundwork for a predominantly electric next-generation vehicle fleet.
To trim transportation costs, USPS plans to reduce regional network transportation costs by at least $1.5 billion through facility consolidation and more efficient mail and package transportation. It also aims to cut $1 billion from local transportation costs by optimizing delivery routes and reducing underutilized trips.
USPS further plans to decrease processing and distribution costs by at least $1.5 billion by insourcing more logistics needs and improving productivity with additional sorting equipment in its mail processing facilities. The agency is shifting more mail and package volume away from air transportation contractors to its ground transportation network.
Despite the cost-cutting efforts, USPS reported a $6.5 billion net loss in 2023. They attributed it to higher-than-expected inflation and $3 billion in additional payments into the Civil Service Retirement System (CSRS) benefits. DeJoy emphasized the need for continued focus on cost-cutting and revenue generation. He stated that the USPS must adopt bold organizational, operational, and market strategies outlined in its 10-year Delivering for America (DFA) plan to change its trajectory.
The National Association of Letter Carriers (NALC) seeks Postal Service CSRS contribution adjustments. They assert USPS overpaid retirement obligations for decades.