Five-Year Business Plan - USPS
?
Five-Year Business Plan
April 2013
April 16, 2013
Business Environment
This U.S. Postal Service (USPS) business plan ("Business Plan") is designed to communicate to key stakeholders the vital role that the USPS plays in the U.S. economy and important solutions required to return the Postal Service to financial and operational viability and self-sufficiency. Specifically, the document covers ? Challenges facing the organization today ? Actions USPS is planning to take to address its financial position and outlook ? Financial benefits of the identified initiatives and impact on USPS stakeholders ? Overview of continuing actions to confront revenue declines through innovation ? Legislation required to remove restrictions on our ability to address changes in the business
environment ? Business Plan risks and sensitivities
Despite operational improvements which have generated significant cost savings, the financial position of the organization has become untenable
The USPS continues to endure the negative effects of electronic diversion combined with a weak economy and excessive funding obligations
While the USPS has appealed to lawmakers for help with the required changes to the business model, very limited action has been forthcoming ? Complex web of stakeholders with competing interests ? Congress must balance the interests of all stakeholders and all must contribute to achieve a solution
The organization's current financial position requires urgent action to ensure the near-term continuation of communication and delivery via the Postal Service, as well as long-term self-sufficiency
1
April 16, 2013
Continuous Efficiency Improvements Have Helped Mitigate Effects of Business Threats
U.S. Postal Service ranked as the most efficient postal service within the world's top 20 largest economies(1)
The core of an $800 billion mailing industry in the U.S. that employs approximately 8 million people
Delivers ~40% of world's mail
(1) Oxford Strategic Consulting report issued December 15, 2011
Career Employees ? Reduced by 168,000 (24%) 800 during last six fiscal years, without layoffs
696
700
600
685
663
623
584
557
528
500
400
300
200
'06
'07
'08
'09
'10
'11
'12
Total Workhours (Millions)
TFP Cumulative Trend
($ Billions)
$15 Billion of Annualized Savings in the past six fiscal years with workhours reduced 23%
1,500
1,459
1,400
1,423
1,373
1,300
1,200
1,100
1,000 2006
$1.2
2007
$3.2
2008
$12.3
$9.3 1,258 1,183
2009
2010
$18
$13.7
$14.8 $16
$14
$12
$10
$8
1,149
$6
1,122
$4
$2
2011
$0 2012
Postal Service is More Efficient Than Ever
30.0 25.0 20.0 15.0 10.0
5.0 0.0 -5.0
1972
Total Factor Productivity
23.8
1980
1990
2000
2012 2
April 16, 2013
USPS Financial Position has Deteriorated in Recent Years
Pieces in billions
Mail Volume Decline: 25% from 2007 to 2012
Revenue Down $10B (13%) from '07 to '12
250.0 200.0
212
150.0
100.0
50.0
0.0 2007
203
2008
177
2009
171
2010
168
2011
160
2012
$ billions
80.0 $75.0 $75.0
70.0
$68.1 $67.1 $65.7 $65.2
60.0
50.0
40.0
30.0
20.0
10.0
0.0 2007
2008
2009
2010
2011
2012
$0.0 ($2.0) ($4.0) ($6.0) ($8.0) ($10 .0) ($12 .0) ($14 .0) ($16 .0) ($18 .0)
($5.1)
2007
$41B of Net Losses
($2.8)
($3.8)
($8.5)
($5.1)
2008
2009
2010
($15.9)
2011
2012
$ billions
Borrowing Reserves Fully Used
$20
In FY2012, the USPS reached its
Total Debt: FY07 ? FY12
$15 $15 billion statutory
15.0
debt limit.
12.0
13.0
10.2
$10
7.2
$5
4.2
$0 FY 07
FY 08
FY 09
FY 10
FY 11
FY 12
Dire financial position requires urgent action to ensure continued mail delivery and to restore long-term self sufficiency.
3
April 16, 2013
$ billions
$ Billions
30.0 25.0 20.0
$28.0
0.2 0.3
1.6
7.6
15.0
Profit Margins Decreasing Driven by Loss of First-Class Mail
$28.6
0.1 0.5
1.6
7.4
$25.0
0.5
1.4
5.4
$24.8
00..18
1.6
5.7
$24.0
0.2 0.8
1.5
5.9
FY07 ? FY12
$23.7
0.8
2.1
5.5
Packages: Gain of $0.5B
('07 vs. '12)
10.0
18.3
5.0
19.0
17.7
16.7
15.7
15.3
First-Class: Loss of $3.0B
('07 vs. '12)
0.0 FY2007
FY2008
FY2009
FY2010
FY2011
FY2012
First-Class
Standard
Shipping & Packages
International
Periodicals & Other
Profit Margin equals revenue less direct labor and non-personnel costs. It does not include institutional / fixed costs.
4
April 16, 2013
Many Factors Contribute to Continuing Financial Problems
Volume
Mail volume declining due to electronic diversion
Advertising mail is subject to more substitution options
Mail volume highly sensitive to economic changes
Packages are growing ? but much lower profit margins
Scope of products / services limited by law
Price
Capped by inflation Price elasticities are in
flux due to growing alternatives
Declining steadily
Fixed cost base
These trends will continue to put pressure on USPS's ability to provide affordable
universal service
Rising but capped
Rising cost per hour
Universal Service Obligation
Consistent pricing and service for all 50 states plus territories
Postal network costs driven by: ? Delivery points ? Retail locations ? Sortation facilities ? Delivery days & timing
Labor Costs
~80% of total costs COLA increases Federal benefits are
48% of total labor costs Limited flexibility
5
April 16, 2013
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