The United States Postal Service (USPS) has faced growing criticism in recent years over declining service quality and reliability. However, assessing why USPS struggles requires a nuanced look at the agency‘s complex operations and unique challenges. This analysis will examine key factors that contribute to USPS‘s service problems.
Financial Struggles Lead to Tough Tradeoffs
USPS has lost over $90 billion since 2007 due to dropping mail volume and growing retirement benefit costs. First-Class Mail volume has dropped over 40% since 2001, while package volume has boomed over 50% amid e-commerce growth (see Table 1). However, packages make up just 5% of USPS volume, limiting revenue gains.
| USPS Mail Volume | 2001 | 2020 | Change |
|---|---|---|---|
| First-Class Mail | 103 billion | 55 billion | – 47% |
| Packages | 1.9 billion | 7.3 billion | + 284% |
Source: USPS OIG
To cut expenses, USPS has consolidated processing plants, reduced employee hours, lowered delivery standards times, and taken other unpopular steps. These moves enable short-term savings but degrade service quality.
For example, after standards were relaxed in 2015 to permit 2-5 day delivery times for First Class mail, audit data showed just 88% of mail was delivered on time (see Figure 1). Poor on-time performance frustrates customers dependent on reliable delivery.
Source: USPS OIG audits
USPS‘s situation requires difficult tradeoffs between financial viability and customer service. Additional revenue sources are needed to prevent further service reductions that could drive more customers away.
Infrastructure and Technology Lag Behind
While e-commerce has fueled package shipping growth, USPS relies on a vast processing infrastructure geared more towards letters than packages. Much of this infrastructure is outdated, with sorting equipment several decades old contributing to missorted mail and unrouted packages.
USPS also lags private carriers in adopting package tracking and routing optimization technology. For example, while UPS and FedEx utilize sophisticated software to optimize drivers‘ pick-up and delivery routes, most postal carriers follow static routes that are inefficient amid changing volumes.
Upgrading USPS‘s extensive infrastructure is an enormous challenge. Replacing aging processing equipment nationwide requires $10 billion in capital investment. New vehicles to enhance package delivery efficiency demand another $9 billion (see Table 2). While USPS has outlined ambitious modernization plans, legacy facilities and systems will continue driving inconsistent performance for years.
| USPS Modernization Needs | Estimated Cost |
|---|---|
| Processing equipment upgrades | $10 billion |
| New delivery vehicles | $9 billion |
Source: USPS 10-K Filings
Impacts Are Harshest for Rural Areas
Declining services at rural post offices and reduced delivery days severely impact small towns. Lengthy travel is often required to access alternate post offices in rural regions, where 21% of residents lack home broadband access making online alternatives difficult (see Figure 2).
Source: Federal Communications Commission
Yet reliable, consistent postal services are essential for rural region health. Mail delivers key goods like medications and packages to rural homes. USPS cutbacks strain rural businesses as well, which rely heavily on USPS for affordable delivery services.
As USPS balances accessibility and costs, it must carefully weigh public impacts based on geography. Supporting rural post offices with community-supported business models could help match services to local context.
Postal Workforce Challenges Also Play a Role
USPS employs over 500,000 postal workers tasked with processing and delivering America’s mail. However, declining employee engagement and retention issues create frontline workforce challenges.
In recent federal surveys, just 36% of USPS executives and managers rated agency morale as positive. Turnover exceeded all large federal agencies from 2016-2020 at nearly 40% (see Table 3). Insufficient staffing contributes to backlogs during peak periods. Hiring and overtime costs also rise.
| Agency | Employee Turnover |
|---|---|
| USPS | 38% |
| Defense Department | 29% |
| Veterans Health Admin. | 24% |
Source: GAO analysis
Boosting frontline morale with expanded training, better scheduling equity, and increased advancement opportunities could aid retention. But ingrained cultural issues also likely require leadership change to fully address.
USPS Faces Uphill Battle to Compete with Private Carriers
For all its current troubles, USPS still delivers 47% of the world’s mail at the lowest postage rates. However, competitors like UPS and FedEx invest far more in technology, infrastructure upgrades, and customer service improvements (see Table 4).
| USPS | UPS | FedEx | |
|---|---|---|---|
| Capital investments | $4.9 billion | $13 billion | $8.6 billion |
| J.D. Power customer satisfaction score | 775 / 1000 | 801 / 1000 | 793 / 1000 |
Source: Company financials & J.D. Power surveys
USPS does maintain key advantages in first- and last-mile delivery built on its unrivaled network. To leverage these strengths, win back customers, and drive sustainability, USPS requires greater capability to pursue new business opportunities.
Nuanced Solutions Needed for Complex Situation
USPS‘s financial challenges and service declines stem from both external constraints and internal issues. Key drivers range from drop-offs in profitable mail to legislative burdens, aging infrastructure, and workforce problems. There are no quick fixes.
Lasting solutions will require collaborative support across policymakers, regulators, industry partners, and legislative reform. Near-term relief from retiree pre-funding mandates and increased flexibility on pricing and new services are critical first steps.
But USPS must also prioritize modernization investments to improve productivity and reliability. Upgraded tracking and scanning capabilities would bolster visibility and accountability. Streamlined consumer access to performance metrics at local, regional, and national levels would further transparency.
With so many American individuals, businesses, and communities relying on the mail, all stakeholders have a shared interest in ensuring USPS‘s viability as an anchor institution. But restoring the public trust demands substantive, tangible service improvements from USPS itself.
