There are many ways to cut costs. Ask any company that has tried to reduce costs. Or even look at your own household situation. You can cut down on take-out dinners, cancel a vacation, or drop a gym membership you aren’t using anyway. But at a certain point, you realize some costs are just not in your control. You can’t do much about what the utility company charges you or what it costs to fix your car when it breaks down.
The same is true for the U.S. Postal Service.
Our recent white paper, Examining Changes in Postal Product Costs, found that over a 10-year period, the Postal Service has made good progress in cutting product costs, even though the number of delivery points increased. That is, when the main cost factors over which the Postal Service has no real control are accounted for, unit costs were lower in fiscal year (FY) 2015 than in FY 2006 for three of the four products studied — First-Class Mail, Standard Mail, and Package Services. Only Periodicals’ unit costs increased.
Unit costs are the costs of handling, processing, and delivering a mailpiece within a given mail category (without adjusting for weight, drop-shipping, or other specifics).
We found that the main external factors driving unit cost changes from FY 2006 – FY 2015 were inflation, product mix, individual product volume change, and overall volume decline. The report attributes the remaining change in unit cost to other factors, some of which are at least partially within the Postal Service’s control. These include productivity improvements, service modifications, and wage reductions.
This raises some interesting questions for the Postal Service and its stakeholders about which strategies might best help keep costs in check going forward. What strategies would you recommend?