- Sen. Tom Carper's Postal Service Reform Act of 2018, if passed, will allow the United States Post Office to ship alcohol and minimize rate increases after 11 years of net losses.
- The bill also requires the USPS to come up with a plan to manage its debt, taking into account "projected changes in mail volume, projected changes in the number of employees needed to carry out the responsibilities of the Postal Service, the long-term capital needs of the Postal Service, including the need to maintain, repair and replace facilities and equipment and the distinctions between market-dominant and competitive products."
- The reform aims to stabilize the USPS as an integral part of domestic and international supply chains, despite rumors that the USPS is in danger of bankruptcy and could need a taxpayer bailout.
The Postal Service delivered a record number of packages during the 2017 holiday season, but it continues to operate in the red and is $15 billion in debt, raising concerns about its financial health.
The USPS has been a major player in the rise of e-commerce, and while it may seem counterintuitive, Amazon, FedEx and UPS are some of the USPS' biggest customers. If the USPS is in financial hot water and reform is passed to improve its operations, it could affect shipping rates for e-tailers and consumers. Not only that, but if the bill passes, companies that sell alcohol — especially e-commerce startups — could have more flexible shipping options.
InsideSources reported last week the USPS is mismanaged and could need a taxpayer bailout (according to the Taxpayers Protection Alliance), but Steve Tracey, executive director of the Center for Supply Chain Research at the Pennsylvania State University, thinks that's unlikely.
"Based on the math, that tends to tell me their operations are improving, and the debt is from the last three years, and 20% of the debt is from the last fiscal year," he told Supply Chain Dive. "To say that it’s mismanaged and misrun, that is a broad mischaracterization, in my opinion. The vast majority of its debt is liabilities, the vast majority I’m betting is from pension benefits. In that circumstance, the USPS would not be unique. There are a number of organizations that have large scale unfunded liabilities related to healthcare pension benefits. If you just focus on the operations, you say, ok they've got $15 billion in debt, 80% of that was acquired in the last three years, but that’s been declining, so that doesn't jive with mismanagement."
However, the debt is still significant, which is why the reform bill wants the USPS to develop a long-term solvency plan and with five-year updates.
Tracey believes if the USPS were allowed "more dynamic pricing flexibility as a market participant," then the USPS might be able to turn a profit. But big changes to how the USPS operates would affect supply chains. Some companies may have to rearrange supply chains or absorb higher costs if USPS shipping rates increase or if rules and regulations regarding differently sized packages change.
"The downside to that is there are mandates on the certain services the USPS is allowed to provide," Tracey said. "So there are some cases where they have to provide services where they lose money, because they’re mandated by law. So you have pricing limitations pushing the price per unit down. That math equation could be fixed by changing the price equation and changing the cost structure. Managers hands in this situation are tied, because they can only do what they’re mandated by law."
For now, the bill freezes rate increases, so while the USPS overhauls operations, supply chains and consumers won't have to worry about more expensive packages. But going forward, supply chains and specifically 3PLs may need to pay attention to how the USPS is reformed, because even subtle changes to its operations will likely have ripple effects throughout the shipping industry.