Our Financial Plan

In February 2012, we published the most detailed and far-reaching five-year business plan in our history. It set forth strategies necessary to return the Postal Service to financial stability, preserve the affordability of mail and enable us to more readily adapt to a dynamic marketplace.

Validated by independent restructuring experts and set against long-term projected declines in First-Class Mail volume and an immediate liquidity crisis, the plan envisions bold changes to our business model. Some can be implemented immediately and some require changes to laws that govern us.

A central tenet is that the scale of the financial challenge requires all major elements to be pursued concurrently and executed within a short window of opportunity.

The plan achieves annual cost reductions of at least $22 billion by 2016 and full repayment of the $15 billion debt currently owed by the Postal Service to the U.S. Treasury.

Network Changes

Delivery

We deliver to more than 152 million residential and business addresses on a typical day. These operations are managed through 24,852 delivery units frequently co-located with Post Offices. By centralizing delivery operations, adjusting our route structure and using more efficient delivery modes, we will gain significant logistical and transportation efficiencies, amounting to a $3.0 billion annual cost reduction by 2016. Throughout 2012, we consolidated delivery operations in more than 734 locations. In total, we achieved cost reductions in delivery operations of more than $400 million during the fiscal year.

Retail

In May 2012, the Postal Service announced the Post Office Structure Plan, or Post Plan. The Post Plan sets forth a strategy for maintaining 13,000 low foot-traffic Post Offices in rural communities, while also generating $500 million in cost reduction savings. The plan will be implemented through 2014. It would maintain regular Post Office Box hours in rural Post Offices, but would modify window hours according to adjusted earned workhours.

The Postal Service will conduct approximately 13,000 community surveys and meetings over the next two years to determine community preferences regarding window service hours. It is additionally recruiting local businesses to operate Village Post Offices, which would enhance local access, service and support for local communities.

Mail Processing

The Postal Service announced a major consolidation of its network of mail processing facilities in February of 2012 and then released an operational strategy and timeline in May. The first phase of consolidations at 46 locations occurred during July and August of 2012. A second phase of consolidations will resume in February of 2013.

Additional consolidations are planned for 2014, establishing a highly efficient network of mail processing locations that will serve as the Postal Service’s long-term operational and logistical footprint. When fully consolidated, this leaner network will generate annual cost reductions of $2.1 billion.

Business Model Changes

In the absence of legislative reform that enables meaningful operational changes and cost reductions, the Postal Service could incur annual losses as great as $18.2 billion by 2015. Fortunately, such an undesirable outcome is avoidable.

We have worked with the Administration and Congress to make clear our urgent financial condition and the need for a more flexible business model. Legislative changes sought include:

Establish an appropriate schedule of Retiree Health Benefit payments or let us provide healthcare benefits to our employees and retirees independent of the federal system.

Gain the flexibility to adjust delivery frequency to better match mail volumes.

Resolve Postal Service overfunding into the Federal Employee Retirement System (FERS).

Streamline current governance to enable faster decision-making on product and pricing issues.

Enable the Postal Service to market non-Postal products and services.

Provide instructions that require labor negotiation arbitrators to take into account the financial condition of the Postal Service.

The Postal Service five-year business plan is fundamental to the future of the organization and the long-term health of the mailing industry. The plan will shape a profitable future for the Postal Service — while also providing universal, secure, reliable and affordable service to the American public for decades to come.