U.S. Postal Service
Foreign Posts' Strategies Could Inform U.S. Postal Service's Efforts to Modernize
Gao ID: GAO-11-282 February 16, 2011
The foreign postal operators (foreign posts) in industrialized countries in GAO's review have been experiencing declining letter mail volumes and have modernized their delivery and retail networks to address this challenge. As requested, GAO reviewed the innovations and initiatives that foreign posts are using and the lessons the U.S. Postal Service (USPS) might learn to help it address plummeting mail volumes and record financial losses. This report examines initiatives foreign posts have implemented to improve mail delivery and retail networks and related results, and modernization strategies used by foreign posts that can inform consideration of proposals to improve USPS's financial condition and customer service. GAO selected foreign posts in Australia, Canada, Finland, Germany, Sweden, and Switzerland as case studies based on characteristics, such as delivery and retail changes and country size and location. GAO reviewed foreign posts' documents, including annual reports and strategic plans related to delivery and retail network changes and innovations. GAO met with foreign post officials, toured their retail facilities, received briefings on their delivery and retail networks and other areas, and met with regulators, labor unions, and mailers to obtain their views on the effects of their posts' modernization efforts. USPS generally agreed with GAO's findings and mentioned both its own modernization efforts and the barriers it faces.
The foreign posts GAO reviewed have developed alternative delivery choices for customers that, according to the posts, have reduced costs and improved customer satisfaction and service. All of these posts now offer digital (purely electronic) or hybrid mail (a blend of physical and digital) options. Some posts offer parcel pick up at retail facilities like grocery stores, which are open longer than post offices, and are often owned and operated by businesses that partner with the posts, thus reducing costs. One post allows customers to pick up parcels from a publicly-located machine, or parcel locker, that is available 24 hours a day. The selected foreign posts have modernized their legacy brick and mortar retail networks in response to customers' changing use of the mail. For example, they have expanded retail access through alternatives such as Internet sales and partnerships with retail businesses such as grocery stores or pharmacies, while reducing the number of post-owned and -operated facilities. According to all of the posts, retail modernization has either (1) improved customer service, in some cases because the partner stays open longer, or (2) reduced operating and labor costs, by closing post-owned and -operated facilities, or both. The foreign posts faced resistance to change and challenges similar to those USPS faces, and they have used strategies that could be helpful to USPS as it moves forward with plans to modernize its own delivery and retail networks. In particular, they relied on outreach and communication strategies to inform public officials and customers of increased access to products and services and help gain acceptance for retail network changes. A few posts also developed labor transition plans or strategies under which they provided training, relocation and job search services, and financial incentives to support employees who were negatively affected by the modernizations. While USPS has taken steps in the past year to generate ideas for modernizing its retail and delivery networks, the experiences of foreign posts suggest that it will be critically important for USPS to fully develop and implement similar outreach, communication, and labor transition strategies.
GAO-11-282, U.S. Postal Service: Foreign Posts' Strategies Could Inform U.S. Postal Service's Efforts to Modernize
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United States Government Accountability Office:
GAO:
Report to the Ranking Member, Subcommittee on Federal Workforce, U.S.
Postal Service and Labor Policy, Committee on Oversight and Government
Reform, House of Representatives:
February 2011:
U.S. Postal Service:
Foreign Posts' Strategies Could Inform U.S. Postal Service's Efforts
to Modernize:
GAO-11-282:
GAO Highlights:
Highlights of GAO-11-282, a report to the Ranking Member, Subcommittee
on Federal Workforce, U.S. Postal Service and Labor Policy, Committee
on Oversight and Government Reform, House of Representatives.
Why GAO Did This Study:
The foreign postal operators (foreign posts) in industrialized
countries in GAO‘s review have been experiencing declining letter mail
volumes and have modernized their delivery and retail networks to
address this challenge. As requested, GAO reviewed the innovations and
initiatives that foreign posts are using and the lessons the U.S.
Postal Service (USPS) might learn to help it address plummeting mail
volumes and record financial losses.
This report examines initiatives foreign posts have implemented to
improve mail delivery and retail networks and related results, and
modernization strategies used by foreign posts that can inform
consideration of proposals to improve USPS‘s financial condition and
customer service.
GAO selected foreign posts in Australia, Canada, Finland, Germany,
Sweden, and Switzerland as case studies based on characteristics, such
as delivery and retail changes and country size and location. GAO
reviewed foreign posts‘ documents, including annual reports and
strategic plans related to delivery and retail network changes and
innovations. GAO met with foreign post officials, toured their retail
facilities, received briefings on their delivery and retail networks
and other areas, and met with regulators, labor unions, and mailers to
obtain their views on the effects of their posts‘ modernization
efforts. USPS generally agreed with GAO‘s findings and mentioned both
its own modernization efforts and the barriers it faces.
What GAO Found:
The foreign posts GAO reviewed have developed alternative delivery
choices for customers that, according to the posts, have reduced costs
and improved customer satisfaction and service. All of these posts now
offer digital (purely electronic) or hybrid mail (a blend of physical
and digital) options. Some posts offer parcel pick up at retail
facilities like grocery stores, which are open longer than post
offices, and are often owned and operated by businesses that partner
with the posts, thus reducing costs. One post allows customers to pick
up parcels from a publicly-located machine, or parcel locker, that is
available 24 hours a day.
The selected foreign posts have modernized their legacy brick and
mortar retail networks in response to customers‘ changing use of the
mail. For example, they have expanded retail access through
alternatives such as Internet sales and partnerships with retail
businesses such as grocery stores or pharmacies, while reducing the
number of post-owned and -operated facilities (see figure). According
to all of the posts, retail modernization has either (1) improved
customer service, in some cases because the partner stays open longer,
or (2) reduced operating and labor costs, by closing post-owned and
-operated facilities, or both.
Figure: Foreign Posts‘ and Partner Retail Facilities in 2009:
[Refer to PDF for image: stacked vertical bar graph]
Foreign Post: Australia Post;
Nonpost-owned and operated: 81%;
Post-owned and operated: 19%.
Foreign Post: Canada Post;
Nonpost-owned and operated: 39%;
Post-owned and operated: 61%.
Foreign Post: Itella (Finland);
Nonpost-owned and operated: 87%;
Post-owned and operated: 13%.
Foreign Post: Deutsche Post (Germany);
Nonpost-owned and operated: 98%;
Post-owned and operated: 2%.
Foreign Post: Posten AB (Sweden);
Nonpost-owned and operated: 88%;
Post-owned and operated: 12%.
Foreign Post: Swiss Post;
Nonpost-owned and operated: 12%;
Post-owned and operated: 88%.
Sources: GAO analysis of foreign posts‘ data; logos used with
permission from Australia Post, Canada Post, Itella, Deutsche Post DHL,
Posten AB, and Swiss Post.
[End of figure]
The foreign posts faced resistance to change and challenges similar to
those USPS faces, and they have used strategies that could be helpful
to USPS as it moves forward with plans to modernize its own delivery
and retail networks. In particular, they relied on outreach and
communication strategies to inform public officials and customers of
increased access to products and services and help gain acceptance for
retail network changes. A few posts also developed labor transition
plans or strategies under which they provided training, relocation and
job search services, and financial incentives to support employees who
were negatively affected by the modernizations. While USPS has taken
steps in the past year to generate ideas for modernizing its retail
and delivery networks, the experiences of foreign posts suggest that
it will be critically important for USPS to fully develop and
implement similar outreach, communication, and labor transition
strategies.
View [hyperlink, http://www.gao.gov/products/GAO-11-282] or key
components. For more information, contact Phillip Herr at (202) 512-
2834 or herrp@gao.gov.
[End of section]
Contents:
Letter:
Background:
Foreign Posts Are Offering More Alternatives to Traditional Delivery
in an Effort to Increase Customer Service and Convenience and Decrease
Costs:
Foreign Posts' Modernized Retail Networks Have Increased Access to
Products and Services, Improved Customer Service, and Reduced Costs:
Strategies Used by Foreign Posts to Modernize Delivery and Retail
Networks Could Help Inform USPS Modernization Efforts:
Agency Comments and Our Evaluation:
Appendix I: Overview of Foreign Posts' Universal Service Obligations:
Appendix II: Objectives, Scope, and Methodology:
Appendix III: Comments from the United States Postal Service:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Foreign Posts Retail Facilities in 2009:
Table 2: Overview of Key Universal Service Standards by Country:
Figures:
Figure 1: Names of Foreign Posts and Logos Used in Report:
Figure 2: How Digital Mail and Hybrid Mail Services Work:
Figure 3: Digital and Hybrid Mail Services Available through Foreign
Posts:
Figure 4: Delivery Alternatives for Letters or Parcels Available
through Foreign Posts:
Figure 5: Example of DP DHL Parcel Delivery Locker in Germany:
Figure 6: Swiss Post Virtual Online Store's Web Link:
Figure 7: Posten AB Partner Outlet Showing Services Available at
Grocery Store in Stockholm, Sweden:
Figure 8: Canada Post Retail Partner Outlet:
Figure 9: Australia Post Nonpostal Products and Services:
Figure 10: Nonpostal Products for Sale at Itella Retail Outlet in
Helsinki, Finland:
View GAO Components:
Video showing Posten AB's (Sweden) public campaign effort.
[End of section]
United States Government Accountability Office:
Washington, DC 2058:
February 16, 2011:
The Honorable Stephen F. Lynch:
Ranking Member:
Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy:
Committee on Oversight and Government Reform:
House of Representatives:
Dear Mr. Lynch:
Foreign postal operators (foreign posts) in industrialized countries
have seen mail volumes decline and electronic communication and
payment alternatives (referred to as electronic substitution of mail)
take the place of traditional mail. In addition, their legacy
infrastructure remained larger than necessary to handle declining mail
volumes. Over the past 10-20 years, foreign posts have engaged in
strategic efforts to modernize their delivery and retail networks to
address these challenges. For example, they are taking advantage of
technological innovations and partnerships to facilitate new delivery
services, such as offering hybrid mail, an electronic service
combining physical and digital mail delivery options. Additionally,
many foreign posts are planning to make or have already made changes
to modernize their delivery and retail networks. For example, some
foreign posts have installed parcel pick-up lockers in public
locations as an alternative to home parcel delivery, or have
transitioned from traditional post offices to partner-owned and -
operated facilities. These retail and delivery modernization efforts
encompass aspects of "universal service," such as requirements related
to delivery of the mail and other access to postal retail services and
facilities, among other areas.[Footnote 1] (See appendix I for more
information on universal service.)
Similarly, the U.S. Postal Service (USPS) faces declining mail volumes
and changing use of the mail. Mail volume fell from 213 billion pieces
in fiscal year 2006 to 171 billion pieces in fiscal year 2010--or
about 20 percent. This decline resulted from the recession as well as
electronic substitution. However, USPS has not been able to cut costs
fast enough or generate sufficient net revenue to offset the lower
mail volume and revenue that have occurred as customers have moved to
electronic substitution of the mail. USPS has introduced a number of
initiatives and efforts to reduce its costs and to try to mitigate
expected future losses, but its financial condition and future
viability will continue to be a concern as electronic substitution
increases and mail volumes continue to drop.
Congress seeks to learn how USPS can effectively address its
challenges and return to financial viability. The Postal
Accountability and Enhancement Act of 2006 mandated that we report in
2011 to the President and Congress on options and strategies for long-
term structural and operational reforms of USPS, including the
experiences of other countries.[Footnote 2] Because of concerns about
USPS's deteriorating financial condition and future viability, we
completed this work early and reported to Congress in April 2010 with
options and strategies for financial viability.[Footnote 3] In that
report, we discussed the challenges to USPS's business model and
options to address these challenges, including improvements to its
retail, delivery, and mail processing operations. Further, we noted
that we planned to address the experiences of foreign posts in a
separate review. The subcommittee[Footnote 4] requested that we review
foreign posts in order to learn lessons for USPS related to
technological innovations, as well as cost savings and efficiencies
achieved through changes in delivery and retail networks. In
accordance with this request, we addressed the following objectives:
1. What major initiatives have foreign posts implemented to improve or
enhance mail delivery, and what have been the results?
2. What major initiatives have foreign posts implemented to improve or
enhance their retail networks and what have been the results?
3. What modernization strategies have foreign posts used that could
help inform USPS and Congress as they consider proposals to improve
USPS's financial condition and customer service?
To address our three objectives, we employed a case study approach and
selected from among industrialized countries six countries based on
changes in delivery and retail networks, innovations and technology
(from a literature review), rank of broadband usage per 100
inhabitants, nature of business or diversification, convenience and
cost of travel, country population, location and size of the country,
number of delivery points in 2008 (last year data were available), and
2008 mail volume (last year data were available). We used this
information to select countries that have made changes to adapt to the
changing use of mail and communication.
For each of the countries we selected--Australia, Canada, Finland,
Germany, Sweden, and Switzerland--we reviewed foreign posts'
documents, including annual reports and strategic plans related to
retail and delivery network changes and innovations. We met with the
postal operators and toured their innovation centers, retail
facilities, or both. We also received briefings on their retail and
delivery networks, strategic planning, and other matters. We observed
a number of demonstrations of the foreign posts' innovations. In
addition, we met with regulators, labor unions, and private sector
mailers to gain their perspectives on the effects of the modernization
efforts. Following the in-country interviews, we requested additional
data and information on each foreign post's strategies, goals, and
results related to its modernization efforts. We also met with USPS
officials to discuss innovations and strategies related to USPS's
retail and delivery network but we did not compare these innovations
to those of foreign posts. We also did not assess whether the foreign
posts' operational changes were profitable since that information is
either proprietary or not consistently reported. In 2009, we reported
on USPS's efforts to reduce costs and improve delivery efficiency.
[Footnote 5] We have another ongoing review that will examine in more
detail USPS's use of and plans for retail alternatives and the
challenges it faces related to implementing the alternatives. (See
appendix II for more details on the scope and methodology for this
review.)
We conducted this performance audit from January 2010 to February 2011
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
Declining letter mail volumes and increasing electronic substitution,
which have accelerated with the recent recession, have reduced postal
revenues for both the foreign posts and USPS. Additionally, foreign
posts told us they, like USPS, faced high infrastructure and workforce
costs. Some foreign posts began to modernize their delivery or retail
networks, or both, as early as the 1990s. One of the factors
precipitating these changes occurred when the European Union began to
establish a timetable for the gradual ending of monopolies of letter
markets, in its 1997 Council Directive.[Footnote 6] In 2008, the
European Union directed its members to fully "open" their domestic
letter markets to competition by 2010 (i.e., remove their monopoly on
delivering letter mail).[Footnote 7] In doing so, the European Union
stated that it wanted to "allow sufficient time to put in place the—
modernization and restructuring measures required to ensure long-term
viability under the new market conditions" of the posts.[Footnote 8]
In all six countries we reviewed, the posts were experiencing
challenges related to declining mail volumes or high infrastructure,
labor, or operating costs, or both, which necessitated the need for
modernization. See figure l for a list of the six foreign posts we
reviewed, including how we identified them in this report.
Figure 1: Names of Foreign Posts and Logos Used in Report:
[Refer to PDF for image: illustrated table]
Country: Australia;
Official name of postal operator: Australian Postal Corporation[A];
Web site (English): [hyperlink, http://auspost.com/au];
Brand or Logo used in report: Australia Post;
Referred to in report: Australia Post.
Country: Canada;
Official name of postal operator: Canada Post Corporation;
Web site (English): [hyperlink, http://www.canadapost.ca/];
Brand or Logo used in report: Canada Post;
Referred to in report: Canada Post.
Country: Finland;
Official name of postal operator: Itella Corporation;
Web site (English): [hyperlink, http://www.itella.com];
Brand or Logo used in report: Itella; Posti[B];
Referred to in report: Itella.
Country: Germany;
Official name of postal operator: Deutsche Post DHL;
Web site (English): [hyperlink, http://www.dp-dhl.com];
Brand or Logo used in report: Deutsche Post DHL;
Referred to in report: DP DHL.
Country: Sweden;
Official name of postal operator: Posten AB;
Web site (English): [hyperlink, http://www.posten.se/m/startpage];
Brand or Logo used in report: Posten AB;
Referred to in report: Posten AB.
Country: Switzerland;
Official name of postal operator: Swiss Post;
Web site (English): [hyperlink, http://www.swisspost.com];
Brand or Logo used in report: Swiss Post;
Referred to in report: Swiss Post.
Sources: GAO; logos used with permission from Australia Post, Canada
Post, Itella, DP DHL, Posten AB, and Swiss Post.
Note: To view each foreign post's Web site, click on the corresponding
link. Web sites were accessed on February 11, 2011.
[A] Australia Post and associated trade marks, whether registered or
unregistered, are owned by the Australian Postal Corporation.
Australia Post reserves the right to take action to stop any
unauthorized or infringing use of its trade marks.
[B] The Itella and Posti names and logos are protected symbols and
trademarks of the Itella Corporation.
[End of figure]
USPS is facing similar challenges as other industrialized nations'
posts. For example, USPS has a brick and mortar retail infrastructure
it cannot afford to maintain. However, USPS currently manages more
retail outlets--approximately 32,500--than all of the foreign posts we
reviewed combined. In addition, USPS has twice as many delivery points
as any foreign post we studied--USPS delivers to 151 million homes,
businesses, and post office boxes. Another challenge that USPS
experienced was a record loss of $8.5 billion in fiscal year 2010.
Thus, as we have reported, without substantial changes to its business
model, USPS's ability to fulfill its mission through self-supporting,
businesslike operations is not sustainable.[Footnote 9]
Foreign Posts Are Offering More Alternatives to Traditional Delivery
in an Effort to Increase Customer Service and Convenience and Decrease
Costs:
All of the foreign posts discussed in this report have implemented
various initiatives to complement or enhance traditional delivery by
offering customers more alternatives to send and receive letters and
packages.[Footnote 10]
Traditional Mail Delivery and Challenges:
Traditional delivery methods for foreign posts of letters, packages or
parcels, and advertising mail, can include:
* post office boxes,
* carrier-to-home (to a customer's door or mail box), and:
* cluster boxes (grouping of boxes for customers in a particular
neighborhood, instead of individual mail boxes at a personal
residence, which are often found within a housing development).
Although letter mail volumes have been decreasing, some foreign posts
expect parcel volumes to strengthen as economic conditions improve,
particularly with the emergence of online shopping and small business
growth. According to foreign post officials we spoke with, customers
have been increasingly changing the way they use and receive their
mail. With increasing Internet and broadband access[Footnote 11] and
related changing use of the mail, use of traditional mail has been
declining as customers find more convenient and faster ways to
communicate. Several of the posts we met with said that customers were
using various electronic means to conduct their daily business, such
as paying bills online, sending postcards and greeting cards
electronically, or receiving news and other periodicals via the
Internet instead of hard copy (all referred to as e-substitution).
[Footnote 12] This changing use of the mail was a primary factor
driving changes in the way the posts do business. In addition, foreign
post officials told us they have a significant amount of costs
associated with delivering traditional letter mail and packages. Some
posts have been experiencing increases in the number of delivery
points every year, at the same time that mail volumes overall have
been declining. Australia Post and Canada Post officials told us the
number of addresses has generally grown each year by about 200,000
addresses. A few of the posts attribute a major part of their costs to
delivering the mail (also known as the "last mile").
Given all of these factors, the foreign post operators we met with
have begun to focus on adjusting or downsizing their delivery networks
and providing multi-channel approaches to give their customers more
choices in how they send and receive mail.
Foreign Posts Have Introduced a Number of Alternatives to Traditional
Mail Delivery:
Hybrid and Digital Mail:
All six posts we met with offered some form of digital or hybrid means
of sending and receiving mail, and several of the posts reported
increased customer service and satisfaction as a result of these
offerings. Digital mail is communication between a sender and a
recipient through completely electronic communication (this could
include personal e-mail and electronic bills and other communication
with businesses). While postal experts have a variety of definitions
for hybrid mail, there is no consensus on the exact definition. In
this report, we use the term "hybrid mail" to describe different ways
of sending and receiving mail and communication using a blend or
combination of electronic or digital mail and physical forms. For
example, an item--a bill, letter, card, or other communication--is
electronically transmitted, processed and converted into a letter post
item for physical delivery to the addressee. Figure 2 illustrates
examples of digital and hybrid mail services, and figure 3 shows
examples of their availability through the six foreign posts we
reviewed.
Figure 2: How Digital Mail and Hybrid Mail Services Work:
[Refer to PDF for image: illustration]
Digital mail (electronic sending and receiving):
* Sender:
Sender logs into secure system maintained by postal operator using
login name and password and sends electronic message.
* Transmission:
Electronic message is securely transmitted to recipient‘s electronic
message inbox.
* Recipient:
Recipient logs into system from a computer or other device (such as an
Internet-enabled cell phone) using login name and password.
* Electronic delivery (receipt):
Recipient retrieves message electronically.
Hybrid mail (a combination of electronic and physical sending and
receiving): Digital to print:
* Sender:
Sender logs into secure system maintained by postal operator using
login name and password and sends electronic message.
* Transmission:
Electronic message is securely transmitted to recipient‘s electronic
message inbox.
* Recipient:
Recipient logs into system, as described above, and can choose to have
postal operator print a hard copy of the message and deliver it to
recipient‘s physical address.
* Physical delivery (receipt):
Recipient receives physical mail piece.
Hybrid mail (a combination of electronic and physical sending and
receiving): Print to digital:
* Sender:
Sender prepares traditional mail and addresses it to recipient‘s
physical mailing address.
* Transmission:
Mail is transported to a postal operator facility.
* Scanning:
Mail piece is scanned or otherwise digitized by the postal operator
and securely transmitted to recipient‘s electronic message inbox.
* Electronic delivery (receipt):
Recipient logs into system, as described above, and retrieves message
electronically.
Source: GAO (analysis).
[End of figure]
Figure 3: Digital and Hybrid Mail Services Available through Foreign
Posts:
[Refer to PDF for image: illustrated table]
Postal service: Australia;
Description of digital and hybrid mail offerings by the six foreign
posts:
eLetter®–-Australia‘s eLetter business unit includes several
subsidiaries that provide logistics and printing services,
including hybrid mail, among others. It offers a complete mail
solution from design, preparation, and addressing to
delivery and archiving. eLetter includes a print and processing
network across Australia, which has nationally located
sites where mail is sent digitally for printing at locations closest
to the final delivery points.
Postal service: Canada;
Description of digital and hybrid mail offerings by the six foreign
posts:
epost™-–Canada Post‘s free (to consumers) online bill presentment
service allows customers to view, pay, and manage bills and financial
documents electronically. Allows archiving for up to 7 years. The epost™
box is a secure, Internet-based service. Customers select mailers to
receive bills and other documents from.
epost™2.0–-Currently under development, this service will add to the
current epost™ electronic bill presentment services offered by Canada
Post, including adjacent secure online services, government services,
and consolidation of documents. In addition, secure delivery boxes
mirroring physical mailing addresses will be introduced. Canada Post
will require identity authentication before assigning a user account
and entitlement to the electronic delivery box.
Postal service: Finland;
Description of digital and hybrid mail offerings by the six foreign
posts:
Netposti-–Free service offered to users to receive various types of
addressed letter mail through a secure electronic postbox. Each
digital mail box is linked to a single person, and letters that
otherwise were received physically are now received electronically. In
practice, letters are channeled to the electronic postbox in the
hybrid mail process, where the print shops match all letters against a
Netposti customer preference database. Matching can be done with the
physical street address or some other identifier (like a social
security number) that is included in the data stream for hybrid mail
operators. Letters received through this service look the same in
electronic format as they would in physical format, but they can
include data elements that help streamline other electronic processes,
such as invoice payment. Digital mail is secure since content is not
transferred through the public Internet, and user identification is
authenticated. Netposti also offers archiving of documents and mail
for up to 7 years free of charge, and users can receive various types
of letters, such as pay statements, bills, health care sector
documents, and digital magazines. Netposti recipients and users can
receive mail from only senders they have approved.
Postal service: Germany;
Description of digital and hybrid mail offerings by the six foreign
posts:
E-Postbrief™-–Allows customers to communicate securely via the
Internet. When customers register for the service, they are required
to authenticate their identity by presenting an identification card or
passport. All communications sent and received via the E-Postbrief™
secure gateway are end-to-end encrypted. Cost is the same as for a
letter. In cases when an E-Postbrief™ is sent to a recipient who is
not registered for the service or if the sender chooses this option, the
E-Postbrief™ will be printed by DP DHL and delivered physically.
Documents sent and signed through E-Postbrief™ are legally binding and
confidential.
Postal service: Sweden;
Description of digital and hybrid mail offerings by the six foreign
posts:
e-Letter–-A hybrid mail delivery service that allows customers to e-
mail letters to be delivered physically to non-e-mail recipients.
Posten AB prints the letters at dedicated print locations and then
delivers them physically via the post.
Postal service: Switzerland;
Description of digital and hybrid mail offerings by the six foreign
posts:
SuisseID–-Offers secure identification and digital signature
capabilities for its customers. Customers receive an identification
card or USB device after presenting proof of identification at a Swiss
Post retail office. SuisseID uses high-grade security technology for
secure login and legally valid digital signatures.
Swiss Post Box-–Registered customers can have their physical mail
received, scanned, and delivered by Swiss Post. Customers can choose
how they would like to accept their mail. After receiving an initial
scanned image of the front and back of a physical piece of mail (for
example, a letter), a customer can request that Swiss Post (1) open
the mail, scan the entire contents of the mail, and send the contents
electronically to the customer; (2) leave the mail unopened and have
the mail sent to the customer‘s physical address; or (3) shred the
mail piece.
Sources: GAO (analysis); logos used with permission from Australia
Post, Canada Post, Itella, DP DHL, Posten AB, and Swiss Post.
[End of figure]
A video depiction of Swiss Post Box, described previously, is
available here. (Accessed on Feb. 9, 2011)
[Side bar:
’We want to change the way people think about the last mile”-as no
longer physical, but digital.“
Source: Swiss Post official. End of side bar]
While there is no consensus on a definition of hybrid mail, there does
seem to be agreement that the way customers communicate is changing,
and moving more toward a digital environment. According to Canada Post
officials, in order to stay relevant to customers, the Post began to
make a number of revisions to its corporate plans and strategies in
2005, focusing more on electronic and hybrid options. Over the years,
Canada Post has been engaged in a number of efforts to reinvent,
update, and enhance customer use of the mail through digital
alternatives. Canada Post officials observed that some initiatives
were successful, while others failed because they may have been ahead
of their time. For example, according to a Canada Post official, epost
2.0 will be an improvement on a former digital offering and will be
introduced within the next 2 years. Some postal officials see digital
and hybrid mail as the "new last mile" and are gearing toward
incorporating more digital mail delivery options for their customers.
Foreign postal officials told us that their digital and hybrid mail
options offered three benefits. First, some of the officials said
these digital and hybrid mail services offer enhanced security and
trust. They told us that they use their customers' trust and loyalty
in the "brand" of the postal operator to illustrate that digital and
hybrid mail communications through the postal operator are secure.
According to an Itella official, the biggest advantage of NetPosti was
mail security. The official said that a NetPosti account was not as
easily accessible as an e-mail account and its contents. The primary
concern for Itella was ensuring security of the mail. Swiss Post
created its Suisse ID to incorporate security encryption on the actual
identification card or Universal Serial Bus (USB[Footnote 13]) used by
customers to sign into their accounts. This encryption provided
customers with a secure encryption whenever they logged in. Customers
must have their identification verified in person at a post office
before receiving the SuisseID.
[Side bar:
’...for those who want the speed of an e-mail but with the security of
a letter.“
Source: DP DHL 2009 Annual Report, describing E-Post Brief. End of
side bar]
Second, officials at three of the six posts we spoke with offered
their customers who use digital or hybrid mail solutions the
opportunity to archive not only their digitally transmitted mail, but
other documents as well. NetPosti offered archiving of all data and
documents for 7 years free of charge. Customers could also bring into
their NetPosti accounts personal files, such as scanned receipts, for
a fee. Swiss Post offered customers the option to archive their
documents.
Third, three of the six foreign posts offered hybrid mail options
combined with a "platform of services." This platform offered
integration between the sending and receipt of mail (letters, bills,
cards, etc.) in a mixture of electronic and physical forms, along with
other electronic capabilities such as archiving data for the customer
(including the mail itself, as mentioned above), and financial
services, such as bill presentment or bill pay and bill consolidation.
For example, Swiss Post offered its Suisse ID customers a number of
options, including bill pay and receipt, marketing services, and
electronic archiving.
Posts reported that these digital and hybrid mail initiatives have
resulted in increased convenience and customer satisfaction, primarily
because they make mail more accessible. A number of the foreign posts
mentioned wanting to be where their customers shop or work, a goal
that affected posts' decisions about where to locate services.
Officials with Swiss Post stated that their products are not only
about making money but also about decreasing the cost of delivering
the mail, which for Swiss Post they estimated was more than 50 percent
of its operating costs.
Pick Up at Retail Store Counter:
Several of the posts we spoke with have partnered with major retailers
as well as individual stores and shops, such as grocery and drug
stores, to provide a number of postal products and services to their
customers, including parcel pick up. These stores offer more
convenient locations and longer hours than traditional post offices.
This partnering was part of a major transformation in the foreign
posts' retail networks, and part of an approach to provide multiple
alternatives and choices for customers. In Sweden, Posten AB customers
receive a notice, sent as a text message or a hard copy by the letter
carrier, that they have a package available for pick up at a retail
store counter convenient to them.[Footnote 14] They then take the
paper notice to show the text to a postal retail partner outlet, such
as a grocery store, and pick up the package. Posten AB officials noted
that customer service has improved, evidenced by customers' more
timely pick up of these packages and parcels (reduced from an average
of about 10 days to about 3), longer hours of access to these
services, and an increased number of service points.
Canada Post offers a variation on alternative parcel pick up with its
community boxes, similar to cluster boxes (see figure 4). Some
community boxes have parcel boxes built in. Carriers leave a note
along with a key in the private box of a customer with a parcel
delivery, and leave the parcel itself in the parcel section of the
community box. If there is no parcel section, the carriers leave the
parcel elsewhere for customer pick up (for example, at a convenient
retail outlet).
Swiss Post customers can use Swiss Post's PickPost service at no
additional cost. With PickPost, customers can select a time and place
most convenient for them to pick up their parcels. Customers register
online and receive a personal customer number. When customers place an
order, for example, for a parcel delivery, they provide the sender
with the address of their chosen PickPost collection point (there are
approximately 350 countrywide). The customers are then notified by
text or e-mail as soon as the item has been delivered. They have 7
days to retrieve the parcel from the location.
Four of the posts we spoke with use partnerships or contracts with
private sector businesses and shops to offer their customers parcel
pick up. Both Posten AB and Australia Post use retail partners to
offer postal products and services in place of traditional post
offices. Canada Post has a network of authorized dealers it contracts
with to offer postal products and services.
Figure 4: Delivery Alternatives for Letters or Parcels Available
through Foreign Posts:
[Refer to PDF for image: illustrated table]
Delivery option: Traditional post office;
Australia: [Check];
Canada: [Check];
Finland: [Check];
Germany: [Check];
Sweden: [Check];
Switzerland: [Check].
Delivery option: Home delivery;
Australia: [Check];
Canada: [Check];
Finland: [Check];
Germany: [Check];
Sweden: [Check];
Switzerland: [Check].
Delivery option: Cluster boxes;
Australia: [Empty];
Canada: [Check];
Finland: [Check];
Germany: [Empty];
Sweden: [Check];
Switzerland: [Check].
Delivery option: 24-hour automated parcel locker;
Australia: [Empty];
Canada: [Empty];
Finland: [Empty];
Germany: [Check];
Sweden: [Empty];
Switzerland: [Empty].
Delivery option: Pick up at nonpost-owned retail counter;
Australia: [Check];
Canada: [Check];
Finland: [Check];
Germany: [Check];
Sweden: [Check];
Switzerland: [Check].
Delivery option: Digital and hybrid mail;
Australia: [Check];
Canada: [Check];
Finland: [Check];
Germany: [Check];
Sweden: [Check];
Switzerland: [Check].
Sources: GAO (analysis); logos used with permission from Australia
Post, Canada Post, Itella, DP DHL, Posten AB, and Swiss Post.
[End of figure]
As mentioned previously, foreign post officials told us they improved
customer service by offering parcel pick up at more convenient
locations with later hours and realized some reduction in costs due
to, for example, offering services and products through shops that
were nonpost-owned. This helped posts to decrease their infrastructure
costs and rightsize their workforces to accommodate changes in their
networks.
Parcel Delivery Machines:
In 2002, DP DHL introduced its "Packstation," a set of automated,
stand-alone lockers where packages are sent and received, and as of
2010 had 2,500 nationwide. Packstations are typically located in high-
traffic, public locations such as train stations. Figure 5 shows an
example of a DP DHL Packstation. Customers can sign up for delivery
(free of charge to both the sender and the receiver) and have their
identity verified in person by the Post. When customers want to
receive parcels at a Packstation, they can give the Packstation as the
delivery address (instead of their home address). The parcel is then
delivered to the Packstation and the customers are notified via text
message or e-mail that they have a package. Delivery to a Packstation
eliminates the need for home parcel delivery for the postal operator
and allows customers to pick up their parcels more conveniently,
according to DP DHL. Packstations can also be used to dispatch small
packets and parcels 24 hours a day, 7 days a week. As of the end of
January 2011, DP DHL had more than 1 million registered users who
could collect or send parcels. According to the DP DHL officials, self-
service parcel pick up machines have enhanced customer service and
convenience because customers can use them at any hour of the day. We
observed a demonstration of DP DHL's Packstation at its Innovation
Center. According to DP DHL officials, DP DHL created its Innovation
Center in part, for specialists from academic, industrial, and
technological fields to exchange information about logistics
solutions. The center offers a method for networking and development
of solutions from start to finish, and visitors to the center can view
DP DHL's developments.
Figure 5: Example of DP DHL Parcel Delivery Locker in Germany:
[Refer to PDF for image: photograph]
Source: Deutsche Post DHL.
[End of figure]
Swiss Post also offered a parcel locker-style delivery option for its
customers. Customers could receive their parcels at a parcel box,
which is a large, lockable storage box at the entrance to a
neighborhood. Both DP DHL and Swiss Post noted that their parcel
locker options were aimed at increasing customer service and
convenience, and decreasing costs related to delivering packages (the
last mile).
Perhaps one of the most dramatic examples of changes to delivery
frequency and hybrid mail offerings was Itella's Antilla Living Lab
trial. Antilla is a small village in the countryside near Porvoo,
Finland, where Itella was testing new ideas for service in remote
areas. Changes in customers' use of the mail and digitization, among
other reasons, motivated Itella to begin this trial, which involved
124 households and 17 small companies. Mail was physically delivered
to customers' homes or businesses 2 days a week. On the 3 other days
that mail was delivered, it was placed in assigned post lockers
located near the Antilla village main shop. Customers received a text
message daily letting them know if they had mail, so they could decide
whether to travel to the postal locker and retrieve their mail. Any
mail not retrieved was delivered to the customer on 1 of the 2 days
when mail was delivered to the home or business. First and second
class letters were scanned and then delivered electronically to the
customer's NetPosti digital account. These letters were then placed
back in their envelopes and delivered in paper form. Customers could
also receive letters directly to NetPosti from selected senders
digitally without having to convert the letter to physical format.
Foreign Posts' Modernized Retail Networks Have Increased Access to
Products and Services, Improved Customer Service, and Reduced Costs:
All of the foreign posts we met with have modernized their legacy
brick and mortar retail networks in response to customers' changing
use of the mail.
All Posts Have Increased Access to Alternative Retail Points:
All of the foreign posts we met with offer increased access to retail
products and services. As communication has changed and broadband
usage increased, foreign posts have adapted their offerings to better
fit their customers' needs. Alternative retail points are points of
service other than traditional postal retail facilities or post
offices owned and operated by the postal operator. Examples include
postal counters at retail partners such as a grocery store in Sweden
or a pharmacy in Canada, as well as the postal operators' Web sites,
among others.
Internet Access and New Mobile Applications:
All of the posts we met with provided customer access to online
services. The six posts offered a range of services on their Web
sites, from sales of stamps and other products to online bill payment.
Figure 6 shows Swiss Post's online store where a customer can buy
stamps and chocolate, create postcards, and perform numerous other
transactions, such as subscribe to magazines and register for Swiss
Post Box, described previously.
Figure 6: Swiss Post Virtual Online Store's Web Link:
[Refer to PDF for image: depiction of web site]
Source: Swiss Post.
Note: To view Swiss Post's virtual online store, click anywhere on the
figure. To return to the report close out of the store Web site. Web
site was accessed on January 12, 2011.
[End of figure]
In addition to online offerings, all six of the foreign post we
reviewed have developed postal applications for mobile devices.
Partnerships with Private Firms Offer Posts Increased Access to Postal
Products and Services and Decreased Postal Costs:
Foreign posts told us they have decreased operating costs (largely
facility-and labor-related) by forming partnerships with private-
sector entities that own and operate retail sites. As table 1
indicates, the majority of the foreign posts we met with maintained a
network with a majority of partner-owned and -operated retail
facilities rather than their own traditional post offices. For
example, in 2009, about 98 percent of DP DHL's retail network was
owned and operated by partners.[Footnote 15]
Table 1: Foreign Posts Retail Facilities in 2009:
Australia Post:
Post-owned facilities: 827;
Post-owned (percentage): 19%;
Nonpost-owned: facilities: 3,606;
Nonpost-owned (percentage): 81%;
Total: 4,433.
Canada Post:
Post-owned facilities: 3,955;
Post-owned (percentage): 61;
Nonpost-owned: facilities: 2,548;
Nonpost-owned (percentage): 39;
Total: 6,503.
Itella (Finland):
Post-owned facilities: 140;
Post-owned (percentage): 13;
Nonpost-owned: facilities: 960;
Nonpost-owned (percentage): 87;
Total: 1,100.
Deutsche Post (Germany):
Post-owned facilities: 400;
Post-owned (percentage): 2;
Nonpost-owned: facilities: 16,400;
Nonpost-owned (percentage): 98;
Total: 16,800.
Posten AB (Sweden)[A]:
Post-owned facilities: 300;
Post-owned (percentage): 12;
Nonpost-owned: facilities: 2,200;
Nonpost-owned (percentage): 88;
Total: 2,500.
Swiss Post[B]:
Post-owned facilities: 2,065;
Post-owned (percentage): 88;
Nonpost-owned: facilities: 283;
Nonpost-owned (percentage): 12;
Total: 2,348.
Source: Foreign posts.
Note: All percentages are rounded to nearest whole number.
[A] Posten AB told us its figures are approximate.
[B] Swiss Post has a majority of post-owned facilities (per the
numbers above) versus nonpost-owned facilities, primarily because
Switzerland has a tradition of customers paying bills in person at a
post office. Swiss Post officials said they are considering
alternatives for about 420 of their post offices by the end of
2011(for example, replacing them with retail partners).
[End of table]
Posten AB in Sweden has dramatically changed its postal retail network
since 2001, replacing all traditional brick and mortar post-owned and
-operated post offices with partner-owned and -operated retail
facilities.[Footnote 16] In visiting a postal retail partner outlet at
a grocery store in Stockholm, a sign in front clearly displayed the
services offered inside (see figure 7). Four or five of the store's 20-
25 employees were trained to work at the postal counter. One employee
said he spent about 4 hours a day selling postal services and products
and the rest of the time he sold nonpostal items. We witnessed him
moving back and forth, like a photo counter clerk at a drugstore. If
he had questions, he could call a Posten AB-operated phone assistance
service line. He said he liked the work because there was little down
time.
Figure 7: Posten AB Partner Outlet Showing Services Available at
Grocery Store in Stockholm, Sweden:
[Refer to PDF for image: photograph]
Source: GAO.
[End of figure]
Figure 8 depicts another example of a partnership between a postal
operator and a private business.
Figure 8: Canada Post Retail Partner Outlet:
[Refer to PDF for image: photograph]
Source: GAO.
[End of figure]
All of the posts we interviewed reported positive results as a result
of retail modernization in one or both of two key areas: (1) customer
service, which has improved because, for example, the retail partner
is open for more hours during a day and open on a weekend versus a
traditional post office, and (2) savings in operating and labor costs
achieved by closing post-owned and -operated facilities.
In Australia, 81 percent of retail facilities were owned and operated
by partners and were mostly located in commercial areas. When
Australia Post modernized its retail network, some post offices were
moved to newer, lower-cost smaller structures, such as facilities in a
commercial area "where the shoppers are." For example, we visited an
Australia Post partner's retail facility (licensed post office) in
Kilmore, Australia that was relocated from the outskirts of town to a
strip mall and Australia Post officials said the move saved the Post
20 percent in operating costs.
Foreign Posts Have Experienced Mixed Results from Nonpostal Retail
Products and Services:
Some foreign posts have traditionally offered banking or financial
services, while others no longer do. Three of the posts that we
visited were continuing or seeking to expand these services. For
example, Swiss Post and Australia Post, which have traditionally
offered financial or banking services, offered in-person bill paying
services. Swiss Post also provided some financial services and was
seeking a banking license. Australia Post provided banking services as
an agent for more than 70 banks and financial institutions. Similarly,
DP DHL and its partners offer banking and financial services.[Footnote
17] Other posts--Itella and Posten AB--have experienced mixed results
from offering nonpostal services.
Several foreign posts made government services available. Australia
Post and Itella offered government services in their retail
facilities, including those in remote or rural areas where citizens
may have difficulty traveling to a large city. For example, Itella
offered voter registration services as well as fishing licenses.
Itella and the Finnish Ministry of Justice first established a
framework for the voter registration service under which local
government officials could choose whether to make advance voting
available in post offices in their municipalities. Itella officials
reported that in 2010 Itella offered this service to 127 post offices
and its goal was for 93 post offices to provide this service.
Australia Post reported its identity verification service was used,
for example, when applying for a government service or to open a bank
account. This service was a successful revenue-generator, according to
Australia Post, leveraging the trusted brand of the Post and provided
a needed government service in rural areas. For example, citizens
seeking to work with children could fill out an identity verification
application in order to initiate a required background check. A senior
official noted that services such as assisting a customer with a
passport application would generally need to be provided in person,
with assistance, rather than online. Figure 9 depicts a retail
employee in Australia assisting a customer with questions related to
nonpostal services.
Figure 9: Australia Post Nonpostal Products and Services:
[Refer to PDF for image: photograph]
Source: © Australia Post Corporation 2011. All rights reserved.
Material must not be reproduced without permission.
[End of figure]
[Side bar:
"...the value of our staff...cannot be underestimated and will remain
a key value proposition well into the future."
Source: Australia Post official. End of side bar]
All foreign posts have traditionally sold postal products, such as
stamps and envelopes at their retail facilities. In the past 5 years,
several posts began selling other retail products as a means to
increase revenue. For example, Itella exclusively partnered with a
major Finnish design firm to license merchandise including designed
packaging, gift wrapping, postcards, and gift items, resulting in what
it reported as a successful partnership. Itella officials noted that
sales of other nonpostal products, such as jewelry and candy, have not
been as successful. They said selling luxury items such as jewelry
required focused work by the salespeople to make the sale. In
addition, they said the market for luxury items was limited. Officials
reported that although candy was inexpensive, sales have not been
successful because candy was available for purchase in so many other
places. Figure 10 depicts nonpostal items for sale.
Figure 10: Nonpostal Products for Sale at Itella Retail Outlet in
Helsinki, Finland:
[Refer to PDF for image: photograph]
Photograph includes an enlargement of an example: candy for sale.
Source: © Itella Corporation 2010.
[End of figure]
In Australia, officials told us some nonpostal products such as
children's books sold well. However, their future plans place less
emphasis on selling products and more on selling services, including
identity and financial services. Both Posten AB and Canada Post
introduced alternative retail products. Canada Post officials stated
they discontinued many of the sales because the products were not
making money. However, a number of the services--including the selling
of money transfers, wireless prepaid, and long distance services,
among other government services--have been maintained and are growing.
In most cases, we were unable to determine the revenue generated from
retail products and services because the information was proprietary
or it was not reported.
Strategies Used by Foreign Posts to Modernize Delivery and Retail
Networks Could Help Inform USPS Modernization Efforts:
Foreign posts have faced resistance to change and challenges similar
to those USPS faces, and they have developed communication, outreach,
and labor transition strategies to address stakeholder concerns and
address resistance to changes.
Key Lessons of Foreign Posts' Modernization Efforts:
Lessons to be learned from foreign posts' experiences modernizing
their retail and delivery networks include the following:
1. Strategic outreach and coordination with governments can address
political resistance. Foreign posts have developed public relations
campaigns to inform both national and local government officials as
well as the public about the need for modernization and the benefits
of improved access to services. They have also coordinated with local
governments to resolve concerns raised by communities affected by
facility closures.
For example, Sweden's Posten AB developed a comprehensive public
campaign and communication effort to inform its stakeholders of what
is perhaps one of the most expansive and earliest examples of retail
network transformations of any of the posts we met with. (Video of
Sweden's national campaign effort, courtesy of Posten AB.) Part of
this communication effort was intended to help change the perception
of "the post as a place" to "the post as a service." Despite this
extensive and planned effort, Posten AB officials said the Post's
brand and customer satisfaction ratings suffered, taking 10 years to
recover.
[Side bar:
’We needed to change the mindset of our customers from the Post as a
Place, to the Post as a Service.“
Source: Posten AB official. End of side bar]
2. Strategic communication and outreach with mailers, small
businesses, and retail customers. Foreign posts communicated with and
reached out to customers to increase acceptance of changes and to
better meet customers' needs, including providing alternatives before
implementing major retail network changes. In some cases, they have
established ongoing outreach with their customers to determine how
they can best serve them. In addition, when adjustments to the posts'
retail networks meant that alternative facilities would be further
away for some customers than their traditional post offices, the posts
emphasized that the new locations would have extended operating hours.
Posten AB and DP DHL officials, in Sweden and Germany respectively,
told us they made efforts to show customers and other stakeholders
that although post-owned and -operated retail facilities were closing,
the new retail partnerships offered more access points and made postal
products and services more convenient to obtain.
If Swiss Post planned to close, replace, or relocate a post office,
the Post was required by law to attempt to reach an agreement with the
affected community, according to officials. Typically, Swiss Post
approached the area officials first and offered a variety of
solutions, such as creating an alternative retail access point if a
partner could be found. The Post negotiated with the local community
on the best way to address closures or moves. Although Swiss Post
owned 88 percent of retail facilities at the end of 2009, it reported
that it was considering increasing the number of nonpost-owned
facilities. In some cases, such as in Australia, when closures or
relocation were planned, the affected community first had an
opportunity to propose an alternative.
3. A labor relations strategy can ease transition. Foreign posts also
anticipated employee resistance and developed strategies to address
how changes could affect employees and to assist employees in making
the necessary transition to changes in operations. For example, for
retail network changes--such as closures--strategies were developed to
assist employees in making the necessary transition to any downsizing.
Foreign postal officials told us that although they viewed the
modernization efforts as necessary, some of the labor changes were
unpopular; however, they also said that support for affected employees
helped alleviate some of the resistance the posts faced. In most
cases, either the foreign posts negotiated changes with the labor
unions or created industrial relations (labor relations) strategies to
help transition the workforce, or both. For example:
* Australia Post created a labor relations policy that was central to
how it managed structural change, which involved reducing excess
staff. This policy was known as the RRR Agreement:[Footnote 18]
- Redeployment to other areas of the business. Australia Post
sometimes needed to retain and attract more employees in certain
areas. To do this, Australia Post could redeploy an employee from one
area to another job or facility.
- Retraining to provide skills required in new positions. In some
cases, if employees were not redeployed, Australia Post could retrain
the employees.
- Redundancy. When Australia Post needed to reduce the number of
positions, it tried to obtain them through voluntary means, using
incentives to encourage employees to retire.
* Itella reported a number of ways in which it supported its employees
through changes in Finland:
- Career consultants worked with employees to find new placements
within Itella when they would lose their jobs.
- Job-seeking training was provided in collaboration with the Finnish
government's employment office, which helped employees fill out job
applications and search for jobs.
- Outplacement services within Itella helped employees find new jobs
in other companies or helped employees set up their own business.
- Monetary support measures helped to alleviate the effects on the
individual in case of redundancy, relocation, or a change from full-
time to a part-time employment.
* Posten AB officials noted that labor was not as resistant to changes
in Sweden as in some other countries, in part, because labor was
represented on Posten AB's governing board, which ultimately helped
the relationship between management and labor.
Strategies Used by Foreign Posts Could Help USPS Gain Critically
Needed Support as It Plans and Implements Network Modernization
Efforts:
USPS has taken steps to modernize its retail and delivery networks,
but, as we have previously reported, it faces ongoing challenges
related to legislative restrictions and stakeholder resistance to
changes.[Footnote 19] Some stakeholders have been concerned about how
USPS's network changes might affect jobs, services, employees, and
communities, particularly in small towns or rural areas. According to
some members of Congress, and others, post offices are an important
aspect of small towns, providing them with an economic and social
anchor. Another concern is that inadequate USPS financial resources
could impede efforts to optimize postal mail processing, retail, and
delivery networks by limiting available funding for transition costs.
In addition, concerns have been raised about whether USPS should be
allowed to introduce new products and services that are not directly
related to postal activities. Some of the steps USPS has taken to
modernize include the following:
1. Issued an action plan that outlined a general modernization
strategy. USPS issued a plan on March 2, 2010,[Footnote 20] that
identified modernization strategies for addressing financial
challenges associated with declining letter mail volumes. Among other
changes, USPS requested flexibility to:
* Change delivery frequency. Adjust delivery days to better reflect
current mail volumes and customer usage.
* Expand access. Modernize customer access by providing services
"where the customers are." Increase and enhance customer access
through partnerships, kiosks, and improved online offerings, while
reducing costs.
* Expand products and services. Permit USPS to evaluate and introduce
more new products consistent with its mission, and allowing it to
better respond to changing customer needs.
2. Identified the need for legislative clarification and changes.
After issuing its action plan, USPS developed legislative proposals
for changes needed to implement its action plan. In September 2010,
Senator Carper introduced a bill that included some of USPS's
legislative proposals related to these areas.[Footnote 21] Senator
Collins introduced another bill that included a provision to encourage
USPS to enhance its retail presence and consider the impact of any
changes to retail facilities on small communities and rural areas.
[Footnote 22]
3. Conducted initial outreach to stakeholders and is developing a more
detailed long-term strategy for modernizing its retail network and
services. Senior USPS officials we met with stated that they are
continuing to work on developing strategies for modernizing their
retail and delivery networks. USPS plans to make these details public
in early 2011.[Footnote 23] USPS has held a number of meetings to
involve stakeholders in this ongoing discussion, such as a 2010
innovation symposium whose goal was to discuss potential initiatives
to help address its financial sustainability. Similarly, USPS has
begun a dialogue with its customers, including major mailers, through
its previously mentioned innovation efforts.
As USPS moves forward with its modernization efforts, the experiences
of foreign posts suggest that outreach and communication strategies
will be critically important to help it address concerns raised by the
public, Congress, postal unions, and the Postal Regulatory Commission.
In recent testimony we discussed some of the public policy questions
related to legislative proposals that require congressional decisions
to determine how USPS should modernize to achieve sustainable
financial viability.[Footnote 24] For example:
* Should USPS have greater flexibility to rightsize its retail network
and workforce, which may involve closing post offices and moving
retail services to alternative commercial locations that are often
open more days and longer hours?
* Should it retain retail facilities and provide new nonpostal
products and services to help it cover costs and generate net revenues?
Foreign posts did not plan and implement changes to their networks,
nor realize results, overnight. In many cases they planned for the
modernization 10-20 years in advance, and were met with a great deal
of stakeholder resistance. Thus, Congress and USPS urgently need to
make critical decisions about actions USPS will take to restore its
financial viability. In doing so, they can potentially learn from a
number of strategies that foreign posts have used to modernize their
networks.
Agency Comments and Our Evaluation:
We provided a draft of this report to USPS for review and comment.
USPS provided comments in a letter from the Chief Financial Officer/
Executive Vice President dated February 4, 2011. These comments are
presented in appendix III and our evaluation of them is summarized
below. USPS also provided technical comments, which we incorporated
where appropriate.
USPS generally agreed with our conclusion that it must pursue
modernization and that modernization could be more quickly and
effectively instituted if legal and political barriers are removed.
USPS suggested that we use the word "improve," rather than
"modernize", when discussing its retail and delivery networks. USPS
believes some stakeholders interpret modernize to mean automate.
Further, USPS stated that many of its modernization and optimization
efforts in the areas of delivery, networks, access, and products and
services have been underway for some time and that political barriers
have slowed these efforts. We recognize that USPS has made changes to
its retail networks by transitioning to alternative retail locations,
and we are evaluating these efforts in an ongoing review. However, in
this report we focused not only on delivery and retail changes made by
foreign posts, but also on the strategies used to address resistance
to change. We thus use the term modernization to emphasize much more
than automation. USPS also stated that incremental steps are not going
to get the USPS where it needs to be to serve its customers in the
21ST century. USPS listed some modernization efforts it described as
similar to those mentioned in this report. Finally, we share USPS's
view that there is an urgent need for actions that will restore its
financial viability and modernize it to meet the challenges of the
21ST century.
We are sending copies of this report to the appropriate congressional
committees, the Postmaster General, the Chairman of the Postal
Regulatory Commission, and other interested parties. In addition, the
report will be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions regarding this report, please
contact me at (202) 512-2834 or herrp@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to
this report are listed in appendix IV.
Sincerely yours,
Signed by:
Phillip Herr:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Overview of Foreign Posts' Universal Service Obligations:
Retail and delivery modernization efforts of postal operators
encompass aspects of "universal service" or "community service," such
as requirements related to delivery of the mail and access to postal
retail services and facilities, among other areas. In the United
States, annual appropriations language mandates mail delivery 6 days a
week.[Footnote 25] The Postal Reorganization Act of 1970 placed
requirements on delivery and retail access standards by mandating that
the USPS provide "prompt, reliable, and efficient services to patrons
in all areas and shall render postal services to all communities" as
well as "...a maximum degree of effective and regular postal services
to rural areas, communities, and small towns where post offices are
not self-sustaining."[Footnote 26]
Table 2: Overview of Key Universal Service Standards by Country:
Country: Australia;
Key domestic delivery access standards:
* Required to provide delivery 5 days a week for at least 98% of all
delivery points;
* Delivery address within or adjacent to city must be delivered the
next business day after day of posting;
Key domestic retail access standards:
* Required to operate at least 4,000 retail outlets, of which 2,500
must be located in rural or remote areas;
* In metropolitan areas, at least 90% of residences shall be located
within 2.5 km (1.56 miles) of a retail outlet;
* In nonmetropolitan areas, at least 85% of residences shall be
located within 7.5 km (4.66 miles) of a retail outlet.
Country: Canada;
Key domestic delivery access standards:
* Required to deliver 5 days a week where logistically feasible;
* Will deliver letters within a community within 2 business days;
within a province within 3 business days; and between provinces within
4 business days;
Key domestic retail access standards:
* Required to provide retail postal outlets, including both corporate
post offices and private dealer-operated outlets, which are
conveniently located and operated so that:
- 98% of consumers will have a postal outlet within 15 km (9.32 miles);
- 88% of consumers will have a postal outlet within 5 km (3.11 miles),
and;
- 78% of consumers will have a postal outlet within 2.5 km (1.55
miles);
* Maintains a federal government moratorium on the closure of rural
post offices. Has a community outreach consultation process that
addresses unusual cases.
Country: Finland;
Key domestic delivery access standards:
* Required to provide delivery 5 days a week;
* Shall deliver 85 percent of Priority (first class) letters by the
following workday and no less than 98 percent of priority letters by
the second work day;
Key domestic retail access standards:
* Every Finnish municipality must have at least one postal outlet.
Country: Germany;
Key domestic delivery access standards:
* Required to provide a minimum of one delivery per working day;
* 80% (on average over the year) of letters must be delivered on the
first working day after posting;
* 95% (on average over the year) of letters must be delivered by the
second working day after posting;
Key domestic retail access standards:
* Minimum of 12,000 fixed-location postal facilities nationwide,
offering basic postal services as defined by the German Postal Act;
* At least one post office in every town of 2,000 or more persons;
* In towns with 4,000 or more persons, a post office must be within
2,000 meters (1.24 miles) of every mailer;
* In rural areas, there must be at least one post office per 80 sq.
km. (49.71 sq. miles).
Country: Sweden;
Key domestic delivery access standards:
* Required to provide delivery at least 5 days a week;
* 85% of first class letters shall be delivered the next working day;
* 97% of first class letters shall be delivered within 3 working days;
Key domestic retail access standards:
* Density of access points must take into account the needs of users.
Country: Switzerland;
Key domestic delivery access standards:
* Required to deliver at least 5 days a week;
* Home delivery required to all permanently inhabited settlements
(households);
* Will deliver 97% of the mail to its end destination in 1 day;
Key domestic retail access standards:
* Must operate a nationwide network of post offices that offer all
universal services and are available to all sections of the population
within a reasonable distance;
* Mandated to take account of regional concerns in the various parts
of Switzerland.
Source: Foreign postal operators.
Note: Australia Post generally refers to universal service as
community service.
[End of table]
[End of section]
Appendix II: Objectives, Scope, and Methodology:
The objectives of our work were to describe (1) what major initiatives
foreign postal operators (foreign posts) have implemented to improve
or enhance mail delivery, and what have been the results; (2) what key
initiatives foreign posts have implemented to improve or enhance their
retail network and what have been the results and (3) what strategies
used by foreign posts in their modernization efforts can help U.S.
Postal Service (USPS) as it tries to improve its financial condition
and customer service.
To describe the major initiatives implemented by foreign posts in mail
delivery and retail networks, and the results of those initiatives, we
initially reviewed documents, presentations, and articles from a
variety of postal experts, trade journals, and textbooks, related to
postal innovations in the digital, retail and delivery areas. We also
conducted interviews with experts in the international postal field.
We then employed a case study approach to select six countries from
among industrialized countries, using the following criteria:
* change in delivery frequency,
* change in retail network,
* use of innovations and technology,
* rank of broadband usage per 100 inhabitants, and:
* convenience and cost of travel.
In addition to the above criteria, we also considered the following to
ensure that our selection of the countries included a range of
characteristics:
* country population,
* location and size of the country,
* number of delivery points in 2008 (last year data were available),
* 2008 mail volume (last year data were available), and:
* regulatory framework and business model.
After applying these criteria we selected six countries--Australia,
Canada, Finland, Germany, Sweden, and Switzerland--and conducted site
visits to each, where we met with the foreign posts and a number of
postal stakeholders to gain their perspectives on the effects of
modernization efforts. These stakeholders included:
* regulatory agencies,
* private sector companies and businesses with partnerships with
foreign posts,
* mailer and marketing associations,
* private sector mailers, and:
* labor unions.
In addition, we observed a number of demonstrations of foreign posts'
innovations, toured their retail facilities, and received briefings on
their retail and delivery networks, strategic planning, innovation
strategies, and other areas.
We reviewed foreign post documentation including annual reports from
2006 to 2010, strategic plans related to retail and delivery network
changes and innovations, reports on postal services and products, fact
sheets on foreign post innovations and initiatives, and sustainability
reports and strategic reviews. In addition, we also reviewed
documentation from foreign posts' stakeholders such as foreign post
regulator studies; and position papers related to foreign posts'
modernization efforts.
We also distributed a request for information to the six foreign posts
we reviewed, to gain additional information regarding goals,
strategies, and results of the initiatives implemented by the posts.
Some of the information we received from the foreign posts in response
to our request for information was not complete, and most data we
requested was not quantified by the posts. In addition, the
information we received was not consistent across the six foreign
posts. We did not assess whether the foreign posts' operational
changes were profitable since that information is either proprietary
or not consistently reported.
To describe how the strategies used by foreign posts could help USPS,
we reviewed USPS's action plan entitled Ensuring a Viable Postal
Service for America: An Action Plan for the Future, reports from the
USPS Office of Inspector General and the Congressional Research
Service, relevant congressional testimonies, pending postal reform
legislation, and our past work. We also interviewed key officials from
USPS to address innovations and strategies related to their retail and
delivery network.
We conducted this performance audit from January 2010 to February 2011
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix III: Comments from the United States Postal Service:
United States Postal Service:
Joseph Corbett:
Chief Financial Officer:
Executive Vice President:
475 L'Enfant Plaza, SW:
Washington, DC 20260-5000:
202-268-5272:
Fax: 202-268-4364:
[hyperlink, http://www.usps.com]
February 4, 2011:
Mr. Phillip Herr:
Director, Physical Infrastructure Issues:
United States Government Accountability Office:
Washington, DC 20548-0001:
Dear Mr. Herr:
Thank you for the opportunity to review and comment on the draft
report titled U.S. Postal Service: Foreign Posts' Strategies Could
Inform U.S. Postal Service's Efforts to Modernize (GA0-11-282).
The Postal Service appreciates the Government Accountability Office's
(GAO) evaluation of the strategies used by foreign posts to address
mail volume decline, insufficient revenue, and legacy infrastructure
challenges. We also agree with the conclusion that there is an urgent
need for Congress and the United States Postal Service to make
decisions and take actions that will restore the Postal Service's
financial viability and allow it to continue to evolve as a
profitable, market-responsive 21st Century organization.
This report is informative and forward-looking. It supports our
position that regardless of whether legislative changes such as those
proposed by Senator Thomas Carper, Senator Susan Collins, and others
are made,[Footnote 1] the Postal Service must tirelessly pursue
modernization and adjust its business model in every way currently
possible. The report does not include comparisons of the Postal
Service in its analysis of the foreign posts' activities. It is
important to note that the Postal Service has been engaged for years
in numerous modernization efforts. On GAO's Highlights page, when the
GAO mentions the Postal Service "modernizing" its retail and delivery
networks, we recommend the wording be changed from "modernize" to
"improve". This will eliminate confusion over the word "modernize"
which some stakeholders interpret to mean "automate". As illustrated
by the GAO's earlier report on the Postal Service's financial
viability,[Footnote 2] and by the Postal Service's 2010 Action Plan,
[Footnote 3] many of the Postal Service's modernization and
optimization efforts in the areas of delivery, networks, access, and
products and services, have been underway for some time.
Such efforts at the Postal Service can be found in all aspects of our
organization. For example, just as foreign posts have improved their
retail networks by transitioning to alternative retail locations and
online applications, which provide a combination of increased hours
and convenience to customers, so has the Postal Service pursued such
changes. The Postal Service has sought to engage its stakeholders on
altering the frequency of delivery to five days a week, which
substantially reduces our highest cost activity and better matches
costs with declining volumes. We have expanded product and service
offerings to better meet evolving customer needs, such as the
successful Priority Mail flat rate products.
Many of the foreign posts' innovations and initiatives highlighted in
this report were possible, at least in part, because of actions taken
by their governments and regulators.[Footnote 4] To a great extent,
the six foreign posts featured in the report possess the flexibility
and authority to rightsize their networks and workforces and introduce
new products and services to meet customers' evolving needs and
interests. Aspects of the Postal Service's modernization could be more
quickly and effectively instituted if legal and political barriers are
removed to provide greater flexibility.
As the report correctly notes, the measures taken by these foreign
posts did not produce results overnight, and initially many of them
were not popular with stakeholders. In most cases, realizing results
and gaining stakeholder support has taken years, if not decades. As
much as we might hope the experiences of these posts reveal surefire
solutions for our specific challenges, they do not, and we appreciate
GAO's acknowledgment of that.
Incremental steps and slow processes are not going to get the Postal
Service where it needs to be to serve 21st Century customers. That is
why we are working hard every day to address the challenges facing us.
In fiscal year 2010, we reduced expenses by $3 billion, bringing total
cost savings over the last three years to $10 billion. Our workforce
today is smaller-”by 100,000”-than it was three years ago. Closure of
all Airport Mail Centers was completed in 2010 and over the next two
years we plan to save up to $500 million leveraging our alternative
access locations to allow for the closing of more than 2,000 of our
current locations. At the same time, within current constraints, we
are expanding our partnerships, alternate access (i.e., Internet,
contract postal units, retail stores, stamps by mail), and products
and services such as Flat Rate boxes, Carrier Pickup, and Click-N-
Ship. We will continue to look for-”and act on”-every available
opportunity to control costs and raise revenue.
We appreciate the work that the GAO has done in recent years to help
inform the discussion of the Postal Service's challenges and long-term
viability. We particularly appreciate the many opportunities afforded
us to discuss these issues with you and members of your staff. We are
committed to working with Congress and all of our stakeholders to
modernize the Postal Service, return to financial viability, and best
serve our customers and the United States.
Sincerely,
Signed by:
Joseph Corbett:
Appendix III Footnotes:
[1] Including, for example, changes to the aggressive retiree health
benefits prepayment schedule required by law (the 2010 payment
accounted for $5.5 billion of the Postal Service's $8.5 billion net
loss) or an adjustment of the Postal Service's overpayment into the
Federal Employees Retirement System.
[2] U.S. Postal Service: Strategies and Options to Facilitate Progress
toward Achieving Financial Viability, GA0-10-455 (April 12, 2010).
[3] [hyperlink,
http://www.usps.com/strategicplanning/pdf/ActionPlanfortheFuture
March2010.pdf].
[4] To assist with modernization of their posts, some foreign
governments have, for example: assumed legacy costs; required post
competitors to contribute to universal service obligation (USO) costs
or allowed for broad product and service offerings.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Phillip Herr, (202) 512-2834 or herrp@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Teresa Anderson (Assistant
Director), Tonnyé Conner-White, Elizabeth Eisenstadt, Brandon Haller,
Armetha Liles, Margaret McDavid, Sarah McGrath, Joshua Ormond, and
Crystal Wesco made key contributions to this report.
[End of section]
Footnotes:
[1] For example, according to Deutsche Post DHL officials, the Post
must maintain a minimum of 12,000 postal retail outlets, and in terms
of delivery, Canada Post officials stated that Canada Post is required
to deliver letters and basic parcels 5 days a week to every resident
and business, among others.
[2] Pub. L. No. 109-435, § 710 (Dec. 20, 2006).
[3] GAO, U.S. Postal Service: Strategies and Options to Facilitate
Progress toward Achieving Financial Viability, [hyperlink,
http://www.gao.gov/products/GAO-10-455] (Washington, D.C.: Apr. 12,
2010).
[4] The Subcommittee on Federal Workforce, Postal Service and the
District of Columbia Committee on Oversight and Government Reform,
U.S. House of Representatives requested this work during the
111THCongress. In the 112tTHongress, its name changed to the
Subcommittee on Federal Workforce, U.S. Postal Service and Labor
Policy, Committee on Oversight and Government Reform, U.S. House of
Representatives.
[5] GAO, U.S. Postal Service: Mail Delivery Efficiency Has Improved,
but Additional Actions Needed to Achieve Further Gains, [hyperlink,
http://www.gao.gov/products/GAO-09-696] (Washington, D.C.: July 15,
2009).
[6] Council Directive 97/67/EC, 1997 O.J. (L15/20) 7.
[7] The 2nd European Union Directive adopted steps for the opening of
the letters market to competition by January 2009. Council Directive
2002/39/EC, 2002 O.J. (L176/24) 1. The deadline for European Union
members to fully open its letter market was extended to December 31,
2010, by the 3rd European Union Directive with the exception of 11
countries. 2008/6/EC, 2008 O.J. (L52/20) Three of the foreign posts we
visited--Finland, Germany, and Sweden--are members of the European
Union.
[8] 2008/6/EC, 2008 O.J. (L52/4).
[9] [hyperlink, http://www.gao.gov/products/GAO-10-455].
[10] In addition to delivery alternatives offered by foreign posts,
foreign posts had competition for letter and parcel delivery. For
example, in Sweden a private firm delivers mail and competes with
Posten AB.
[11] As of September 2010, in 27 of 30 Organization for Economic Co-
operation and Development (OECD) countries, broadband access has been
deployed to 90 percent or more of households. OECD is a unique forum
through which governments of 30 democracies work together to address
the economic, social, and environmental challenges of globalization.
[12] E-substitution, according to a number of postal experts, has had
one of the most significant impacts on mail volume and demand over the
last decade.
[13] USB is a specification established by computer and peripheral
(camera, mobile phone, memory, hard disk, etc.) manufacturers that
enables high speed communication between the computer and other
peripherals. A computer can send and receive data as well and control
the operations of the various peripherals that are connected to it via
the USB port.
[14] This requires prior registration by the customer to determine
where packages will be delivered for that customer, which depends on
where the recipient lives.
[15] DP DHL officials told us that during 2011, the remaining DP DHL
post offices will be transformed into partner outlets or Postbank
finance centers.
[16] Posten AB has retained 300 business centers that it owned and
operated, but officials told us they were in the process of changing
these business centers into mail acceptance points, with no sales
counters.
[17] At 850 PostBank branches, DP DHL partners offer all DP and
Postbank products and services as well as customized consulting for
Postbank financial services.
[18] The agreement covered Australia Post's primary unions, which
included the majority of its workforce.
[19] [hyperlink, http://www.gao.gov/products/GAO-10-455].
[20] USPS, Ensuring a Viable Postal Service for America: An Action
Plan for the Future (Washington, D.C., March 2010). This plan is
available at the following Web address: [hyperlink,
http://www.usps.com/strategicplanning/_pdf/ActionPlanfortheFuture_March2
010.pdf] (accessed on Jan. 6, 2011).
[21] Postal Operations Sustainment and Transformation Act of 2010
(Post Act), S. 3831, 111TH Cong. (2010).
[22] U.S. Postal Service Improvement Act of 2010, S. 4000, 111TH Cong.
(2010).
[23] USPS officials told us they are updating their retail strategy.
We have recently initiated a review that will assess these details
when they become available.
[24] GAO, U.S. Postal Service: Legislation Needed to Address Key
Challenges, [hyperlink, http://www.gao.gov/products/GAO-11-244T]
(Washington, D.C.: Dec. 2, 2010).
[25] For example, see Pub. L. No. 111-117, 123 Stat. 3034, 3200 (Dec.
16, 2009).
[26] Pub. L. No. 91-375, § 2, 84 Stat. 719 (Aug. 12, 1970), codified
at 39 U.S.C. § 101(a), (b).
[End of section]
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