US Post Office about to make Fatal Mistake

The US Post Office is about to make an announcement to cut its distribution centers in half. This will save a significant amount of money, but will reduce first class mail delivery times from 1 to 3 days to a minimum of about a week. Before this decision is made, we need to either decide that mail service will be maintained as a subsidized institution that provides vital services to our many businesses or decide to privitize it now before its reduction in reliability destroys its customer base.

Many business failures are the result of a series of small decisions that over time erode customer base. In the end the failure is blamed on the customers' fickle ways with little recognition of how these cost-cutting measures had contributed to the value provided to the customer.

There is no question that mail service has continually changed, but has the post office reacted appropriately to these changes? While express services continue to stay profitable and internet services continue to expand avenues for communication, the post office is losing billions of dollars. To salvage this entity, they must reevaluate their mission statement. Many businesses retain less profitable sectors due to their value to the identity of the company, but they recognize why these sectors are being retained. A good example is Kodak which is still most recognizable to the masses as a camera company even though printing ink cartridges provide most of their profits. To sustain mail service, the postal service will need to expand services into e-mail communication and rapid delivery markets. Without more profitable diversity, the Post Office is doomed if attempts are made to run it as an unsubsidized entity.

The concept of maintaining mail to every citizen is not a profitable business model. If this is the target, mail service will need to be subsidized. As long as that is the understanding, that is fine, but when business practices are applied to a subsidized service it will always lose money or need to significantly reduce service to the outlying (less profitable) elements of the business. Subsidized services can compliment other businesses making for a more profitable society, but when weighed by themselves they continually fall short. Commuter rail service is a good example of this dilema.

Before the Post Office makes this critical decision, it needs to take a  better assessment of its ability to survive in the future as a non-diversified entity providing poor client service. If we are unwilling to maintain postal service through subsidies, then instead of selling off the distribution network, at likely fire-sale prices, the US Post Office should be privatized while it still has significant assets.