Earlier today the United States Postal Service (USPS) said that there will be a change coming at the top sooner than later, with USPS Postmaster General Louis DeJoy having notified the Postal Service Board of Governors “it is time for them to begin the process of identifying his successor.”
DeJoy was named the 75th Postmaster General in May 2020, replacing Megan Brennan, whom served in the role from 2015-May 2020. He was the fifth Postmaster General to come over from the private sector, going back to when the USPS, in 1971, became an independent establishment within the Executive Branch. DeJoy’s background has a heavy logistics and supply chain focus, having more than 35 years of experience. And during his tenure as chairman and CEO of New Breed Logistics, he spent years collaborating with the USPS, Boeing, Disney, Boeing, Verizon, Disney, and United Technologies, among others, providing supply chain logistics, program management, and transportation support, said the USPS.
As for next steps, USPS officials said that the Governors of the Postal Service, in tandem with key stakeholders, will start the process of identifying a new candidate to serve as the next USPS Postmaster General and Chief Executive Officer.
In a letter to the Board of Governors, DeJoy explained that Postmaster General is a demanding role made more difficult by what he called the devastating condition the USPS was in when he first started in his position, while adding that there was “an almost unceasing resistance to change—without offering any viable solutions—from stakeholders motivated by parochial and political purposes.”
And he noted that in his early days on the job, during the onset of the pandemic, the USPS was in disarray and on a crash course to run out of cash in 60 days, while also having incurred two decades of losses for a cumulative $90 billion, coupled with more than $20 billion in deferred facilities maintenance. Also, at that time, the USPS’s 10-year projections forecasted another $200 billion in expected losses over the next decade.
DeJoy also observed that the USPS business model has been broken for more than two decades, citing how the organization is comprised of 31,000 national facilities serving as origination points for 260,000 routes stretching more than 168 million delivery points at least six days a week, calling it a massive structure requiring precise alignment between revenue producing products and services, the cost of operations, and the performance expectations USPS offers to its customers.
“This alignment requirement was long ago ignored or abandoned causing catastrophic losses, diminished viability of our products, and significant service performance disappointments,” he wrote.
That situation led to the USPS Board of Directors and USPS associates to move forward with the organization’s “Delivering for America” plan, which was introduced in 2021, and focused on achieving financial sustainability and service excellence, in order to meet customer and business needs. DeJoy said that the plan had multiple objectives, such as paying attention to the USPS’s legal obligations to provide prompt, reliable and efficient service and be financially self-sufficient. He also stated that it requires USPS to cover its costs through the sale of Postal products and services through the running of a cost-effective operation.
What’s more, DeJoy provided a list of major strategies and identified outcomes needed for the USPS to stay on the right path for future decades to come, including:
- transportation cost reductions of $2 billion annually;
- mail processing cost reductions of approximately $1.5 billion annually;
- revenue growth initiatives of approximately $5 billion;
- a significant incentivized reduction in the workforce to right-size the organization enabled by an improved operating model;
- a major deployment of new vehicles;
- an air and ground network modernization that rivals those of its formidable competitors;
- maintenance, rehabilitation and equipping efforts to several thousand facilities to recover from years of neglect;
- a suite of new package shipping products to generate billions in new revenue at a lower cost;
- a sales organization that successfully penetrates the marketplace;
- an engaged and productive workforce; and
- new rules for mail and package flow that aggregate and accelerate significant volume
Rob Martinez, founder of San Diego-based parcel consultancy Shipware, told LM that under DeJoy’s leadership, the USPS has undertaken significant financial and operational reforms, leading to some improvements in financial metrics and viability. But conversely, he noted that these changes have also led to service delays and Post Office closures, particularly in rural areas, higher postage costs (which many argue has contributed to volume declines in First Class mail), and customer dissatisfaction and distrust.
“It will be interesting to see which candidates will be considered by the USPS Board of Governors to replace DeJoy,” said Martinez. “After a tumultuous five years of constant change at the hands of an outsider, the Board may again consider individuals with a background in postal operations.”
And Gordon Glazer, Independent Parcel Consultant, USPS Specialist, explained that there more than a few questions to address as DeJoy is set to soon leave the USPS, including: What will his successor do with the existing Delivering for America (DFA) plan (he said that the Postal Regulatory Commission believes it is fundamentally flawed)?; Can any of the changes be salvaged? Is there a way to make the DFA plan workable? And will the new administration continue the focus on profits over service performance?
“The USPS must remain relevant and competitive,” said Glazer. “To be relevant, it must maintain consistent service performance. The price to ship via USPS won’t matter if the service is unacceptable to the buyer. As service performance degrades, volume drop is inevitable. As volume decreases, it becomes iteratively more expensive to move each piece, further straining revenue. This is the beginning of a ‘death spiral,’ as subsequent price increases and service degradation will be necessary to balance the drop in volume, thus perpetuating the spiral.
It is my hope that the new leader will focus on returning the USPS to relevancy by focusing on service performance instead of profits. In the short term, I would reverse the recent changes implemented to reduce the workshare from consolidators. Consolidators are not the enemy; rather, they are collaborators in the mission to drive postal volume and relevancy. They use out-of-the-box thinking and private money to drive innovation and service performance, leveraging outside resources while maintaining a positive client experience. It works well for all stakeholders.”
As for potential replacements for DeJoy, Glazer said that three solid, very qualified candidates have been suggested, including Robert Taub, current vice chair of the Postal Regulatory Agency, with Glazer observing that the Postal Regulatory Commission (PRC) stated in an advisory that the USPS will see little benefit and that the new Regional Transportation Network (RTN) is unlikely to create a more efficient network. The second candidate suggestion is Thomas Day, said Glazer. Day is also a PRC member and former USPS executive. And the third candidate suggestion, cited by Glazer, is is James Cochrane, former Chief Marketing Officer who currently heads the Package Shippers Association.
“I like all three,” said Glazer. “If I had to guess, I believe the current administration will promote Mr. Cochrane due to his strong connections to all stakeholders and because he is the only one of the three not in a regulatory position.”
Earlier this month, the USPS issued fiscal first quarter earnings results, which saw some annual gains.
Operating revenue, at $22.499 billion, increased 4.1%, annually, paced by what the USPS called strategic price increases, as well as a strong political and election mailing season. Net income, at $144 million, marked a solid turnaround, compared a $2.1 billion net loss a year ago, largely driven by various strategic initiatives through the organization’s “Delivering for America” plan. Total quarterly volume, at 31.015 million pieces, rose 1.8% annually.
