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Wednesday, March 13, 2013

POST OFFICE INEFFICIENCIES

BRYCE ON POLITICS & MANAGEMENT


- How far behind is the USPS operating behind its competitors?

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The United States Postal Service (USPS) recently announced it is going to suspend Saturday deliveries of mail. Actually, we shouldn't be too surprised as paper based mail has been diminishing over the years, thanks to e-mail, electronic banking, and rising postal costs. I know many businesses who avoid the USPS as much as possible and prefer the service of other carriers instead. All of this adds up to a decline in revenues and an increase in expenses for the USPS who is now scrambling to reorganize themselves in order to survive.

One of the key lessons I preach when working with young people is, "Everything begins with a sale." Business functions such as administration, engineering, research and development, and customer service are nice, but all employees should be cognizant of the fact that everything begins with a sale. Consequently, employees should be mindful that everything should be geared towards producing income and minimizing costs. In the case of the USPS, either the product isn't priced properly, or they're running an unproductive operation.

One clear indicator is the amount of profit associated with each employee. To illustrate, let's consider a commercial enterprise, such as the Ford Motor Company, who in 2012 had 164,000 employees. The company had $136.26B in revenues and $128.632B in expenses, leaving an operating profit of $7.628B. If we divide the profit by the total number of employees we find each employee is responsible for incurring $46,512 of the profit. Think of this as a performance measure. It is an important figure which every employee should be cognizant of, yet few companies publicize.

Let's next compare the USPS and its shipping rivals in the same light:

EMPLOYEESREVENUESEXPENSESPROFITPROFIT/EMPLOYEE
USPS546,000 (2012)$ 65.223 billion (2012)$80.964 billion (2012)$-15.741B$-28,830/employee
DHL423,348 (2011)$ 71.169 billion (2011)$70.693 billion (2011)$ .476B$ 1,124/employee
UPS398,000 (2012)$ 54.127 billion (2012)$52.784 billion (2012)$ 1.343B$ 3,374/employee
FedEx300,000 (2012)$ 42.7 billion (2012)$39.494 billion (2012)$ 3.206B$ 10,686/employee

NOTE: Latest available data, courtesy of the corporate web sites and Wikipedia.

Thanks to a considerable operating loss in 2012, USPS employees are operating in the hole. Also notice in the comparison, even though the USPS has the most employees, it has the worst profit performance. Not all of its shipping competitors topped the revenues of the USPS, but all were considerably less in terms of expenses. This may be indicative of the difference between running a commercial enterprise and one operated by the government.

There are actually many variables affecting a company's performance, such as economic issues, changing government regulations, and business decisions, but making each employee mindful of their individual contribution raises their consciousness as to what should be best for the company overall.

Suspension of Saturday deliveries may be a good idea to reduce costs, but I suspect it is another example of a bloated government bureaucracy running amok and needs more serious cuts as opposed to minimizing service. I am reminded of the Bryce's Law, "Do not try to apply a band-aid when a tourniquet is required to stop the bleeding."

Perhaps it's time for a little Enterprise Engineering to flatten this government behemoth. Otherwise, the taxpayers will be asked to once again bail out this model of inefficiency. If it was a commercial enterprise, it would have likely perished by now and its shipping competitors would have taken over (and we wouldn't be discussing the suspension of Saturday service).

If the government is having this much trouble running a monopoly like the post office, imagine what they'll do with Obamacare.

Keep the Faith!

Note: All trademarks both marked and unmarked belong to their respective companies.

Tim Bryce is a writer and the Managing Director of M&JB Investment Company (M&JB) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com

For Tim's columns, see:   timbryce.com

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Copyright © 2013 by Tim Bryce. All rights reserved.

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