Chapter 2 Postal Operations

publication Memo to Mailers, and a recently launched Web page for mail service providers The annual PCC Leadership Conference was held in April at the National Postal Forum. National PCC Day was held on September 20 via a live nationwide satellite broadcast from Arlington, Texas. The Postmaster General delivered the keynote address to more than 15,000 business mail customers. PCC “workshopin- a-box” seminars help local businesses and nonprofit organizations get the most out of their mail. A PCC Small Business Resource Guide was also published during the year to promote PCC membership.


The Mailers’ Technical Advisory Committee (MTAC) provides a venue for the exchange of technical information and recommendations about mail-related issues and services. MTAC is composed of major mailing associations and organizations that work collaboratively with the Postal Service to enhance the value of mail for the benefit of the entire mailing industry. A development during 2006 was the addition of a Flats Sequencing System (FSS) workgroup to the already existing groups for Seamless Acceptance and Induction, Optimization of Preparation and Entry, Service Measurement and Improvement, and Address Accuracy. Workgroups related to Address Quality and Move Update were recently completed.


The Postal Service’s Corporate Customer Contact (CCC) function provides customers with convenient, toll-free access to a broad range of services through a comprehensive network of toll-free numbers. This network responds to queries ranging from general information, such as postage rates and the hours and locations of local postal facilities, to submitting change-of-address (COA) orders and tracking packages. CCC accepts customer orders for stamps through 800-STAMP-24 and also provides support for e-mail customer contacts submitted through the Contact Us page on CCC also continues to add value to My Post Office, an Internet application that enables approximately 30,000 Post Offices to better manage end-to-end daily processes. My Post Office is used to communicate customer phone requests (e.g., pickups, holds, redeliveries, and COAs) and deliver corporate alerts to local Post Offices.


The Postal Service sponsors a Mail Technology Strategy Council, which includes representatives from the mailing, paper manufacturing, printing, packaging, mail equipment, and information technology industries. Council members provide independent advice on developments in technology that are likely to impact the mailing industry. Members provide insight on the direction in which technology is moving and how these trends might be used to enhance the mailing industry. The group not only reviews hardware and software developments, but also puts these developments in the context of applications and business processes.

B. Mail Volume and Service Performance

1. Mail Volume

The Postal Service contracts with Global Insight, Inc., to provide ongoing economic analyses and projections and uses those forecasts to develop its Integrated Financial Plan. For the 2007 Integrated Financial Plan, the Postal Service relied on Global Insight’s July 2006 projection. Based on that forecast, the Postal Service expects gross domestic product (GDP) to increase by 2.7% in 2007, down 0.4% from the July 2005 forecast.

Mail volume is positively affected by economic growth, which slowed by 0.3% in 2006 and is projected to slow a further 0.7% in 2007. Economywide retail sales, an economic indicator for Standard Mail and workshare First-Class Mail, grew 3.8%, but are expected to fall to 1.4% growth in 2007. Volatile energy prices, the cooling housing market, rising interest rates, and American auto manufacturers’ elimination of price incentives are expected to reduce growth in spending on durable goods. A projected retail sales slowdown in 2007 leads the Postal Service to project a lower growth rate for Standard Mail volume and a small decline in workshare First-Class Mail volume.

Postage rates increased on January 8, 2006, as required to meet the 2006 escrow funding obligation of Public Law (P.L.) 108–18. As recommended by the Postal Rate Commission and as approved by the Postal Service Board of Governors, rates for most mail classifications increased by 5.4%. In response to this first rate increase in 4 years, total volume growth is expected to slow even as overall revenue increases. Standard Mail again is expected to contribute the greatest share of volume growth, while First-Class Mail volume, particularly single-piece letter volume, will continue to decline.

The Postal Service projects a continuation of the downward trend in First-Class Mail volume. In the past, employment had been an indicator for single-piece First-Class Mail growth, but volume has declined for several years despite strong employment and economic growth. The decline is the result of the electronic diversion of bills and statements and the absence of new hardcopy applications. Future First-Class Mail volume growth is expected to be transitory as volume will continue to be impacted by longterm trends in communication and payment technologies. The moderate growth in employment projected by Global Insight will not drive volume increases sufficiently to overcome the negative impacts of diversion.

Priority Mail volume increased for the second consecutive year in 2006. This rebound is likely the result of several factors. Private sector competitors have increased their prices, while through the first quarter of 2006 the Postal Service has kept its prices stable. Moreover, private sector competitors have instituted and increased surcharges to cover higher costs in such areas as delivery to residential customers, delivery to rural customers, and fuel. Concurrently, the Postal Service has made Priority Mail service easier to use by introducing the flat-rate box and by bringing the Post Office to the customer with online postage and Carrier Pickup