Is the US Postal Service on its last legs?

Future of USPS

With letters, bills and even junk mail coming into your inbox instead of your post box, the US Postal Service was always going to suffer.

It has been estimated that the US Postal Service (USPS) will undergo a 10 billion “piece” volume decrease this year, in part to increased e-mail use of 'snail mail' but primarily because of crippling debt and increasing competition in the private sector.

Competition from companies like FedEx and UPS have seen the USPS propose a drastic shake-up; they have, in order to cut costs, announces plans to stop Saturday delivery, raise delivery prices, reduce national workforce by 30,000 people, and reduce overtime opportunities.

The idea behind the plan to reduce to a five-day week has previously worked for the company in 2009, when it recorded a $3.8 billion deficit. However, the USPS is now saddled with $10 billion in debt and is only allowed to borrow a maximum of $15 billion to bail itself out.

However FedEx and UPS have not had the same woes, posting record profits (2009 saw FedEx make a total revenue of $35.5 billion and $98 million in profits while UPS made $45.3 billion in revenue and $2.2 billion in profits) and having no problem staying afloat, so why is USPS failing?

Rules and regulations

The USPS has never had it easy; rules and regulations have long dictated how the service can charge and handle everyday business. As such, this has crippled the company's ability to make a steady profit.

When the likes of UPS and FedEx can charge whatever they want, it immediately gives USPS a disadvantage. However, private companies are most likely going to feel the sting of USPS's new strategy.

USPS and private companies have a mutually beneficial arrangement with USPS frequently delivering more than 400 million pieces of mail for them each year. In return, USPS contracts private firms to deliver packages via air. However, by suspending Saturday services, FedEx and UPS will no doubt see their margins suffer as a result.

They won't be the only ones; companies that rely on USPS such as Amazon and eBay will no doubt suffer as a result, and is likely that they will be forced to form a partnership with a private company to resume services. If private firms do pick up these lucrative contracts, USPS's standing will become even weaker.

While the latest series of cutbacks is hoping to reduce USPS's deficit, it is simply the latest in a long, long line of cost saving measures. Since 2002, the company has cut costs by $43 billion by reducing overtime limitations, shrinking workforce, and renegotiating contracts, but the debt keeps mounting.

To the outsider, it looks like USPS is fighting a losing battle. Will the latest measures be enough to keep the company afloat or is the US Postal Service destined to sink?

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