USPS Could Save $1 Billion By Combining Delivery Operations, Study Says

The U.S. Postal Service could save about $1 billion annually by closing nearly 10,000 postal facilities that house both retail and carrier functions, according to a study released today.

A plan presented by the USPS’s Office of Inspector General would mean fewer clerks and postmasters but increased labor costs for letter carriers.

"These consolidations [would] reduce facility space costs by $817 million and support labor costs by $566 million, but they also come with additional carrier travel costs of $374 million to obtain the net cost reduction of $1 billion.”

“The greatest opportunities for facility consolidation are with the highest-density ZIP Codes where the space per route is high and otherunits are nearby,” the report says. That’s in apparent contrast to the Postal Service’s own approach to closing post offices, which critics claim overwhelmingly focuses on sparsely populated rural areas.

The OIG’s elaborate costing model shows that “delivery support” performed by clerks and postmasters is most efficient in offices with at least five carrier routes.

Equivalent to 7,000 employees
“The model predicts a significant potential savings of 13.6 million delivery support labor hours,” the report says. Those labor savings, roughly the equivalent of 7,000 full-time employees, “are associated primarily with the consolidation of labor hours of small office postmasters and clerks at the smaller delivery units.”

By reducing the number of combined retail/delivery units from about 24,000 facilities to only 14,000, the plan would tend to lengthen the distance between delivery units and carrier routes. That would add an estimated 3 million hours to the 10.7 million hours currently devoted annually to carrier travel.

Such consolidations would enable large mailers to dropship their mail more efficiently, the OIG notes.

Increased automation and declining mail volume have resulted in excess space devoted to delivery in most post offices, the report says.

“On average, delivery functions occupy 366 square feet per carrier route” but only 130 to 180 are needed, according to the OIG. That creates an opportunity to close high-cost post offices and to move their delivery functions to lower-cost facilities nearby.

The OIG’s model “assumes that retail services in closed delivery units can transition to other existing retail units.”

The reduced facility costs would come from a combination of eliminated rent on leased facilities and from creating opportunities for USPS-owned facilities to be sold, rented out, or used for other purposes.The OIG model does not attempt to account for any revenue losses from having fewer locations that serve customers, nor does it seem to assume any savings from consolidating retail operations.

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