Report: New USPS top exec DeJoy is focused on making changes to improve the bottom line

When President Trump named logistics veteran Louis DeJoy as the new Postmaster General and CEO of the United States Postal Service (USPS), in May, to replace, Megan J. Brennan, it came with the expectation that some changes would be coming to the financially beleaguered organization.

One reason for that is that DeJoy is only the fifth Postmaster General to come over from the private sector, going back to when the USPS, in 1971, became an independent establishment within the Executive Branch. And another reason was related to Dejoy’s heavy logistics and supply chain focus, having more than 35 years of experience. During his tenure as chairman and CEO of New Breed Logistics, he spent years collaborating with the USPS. Boeing, Disney, Boeing, Verizon, Disney, and United Technologies, among others, providing supply chain logistics, program management, and transportation support, said the USPS.

DeJoy joined the USPS at a time, when the organization has had major financial issues over the last several years. Some of the things causing this financial pain include: an ongoing decline in First Class Mail revenues and volume, due an ongoing migration from mail to electronic communication and transaction alternatives; a decline in Marketing Mail revenue; and its $33.9 billion retiree health benefit prefunding obligation, which it defaulted on from 2012-2016.

While it is no secret that the USPS’s bottom line has been, and remains, a major cause for concern, especially amid the ongoing COVID-19 pandemic, which has seen a significant uptick, a recent article in The Washington Post made it clear that DeJoy clearly intends to make “major operational changes,” with the goal of making the USPS a profitable and better managed organization.

Perhaps the most telling objective from DeJoy, according to the article, via internal USPS documents cited in the article, was that he wants USPS staffers to “leave mail behind at distribution centers if it delayed letter carriers from their routes,” with the mail left behind to be delivered the following day. This marks a sharp difference from how things typically work, with the Post saying, “postal workers are trained not to leave letters behind and to make multiple delivery trips to ensure timely distribution of letters and parcels.”

What’s more, the article observed that the combination of the USPS’s fiscal outlook, the White House’s insistence on the USPS increasing its package rates, private sector competitors taking major steps to boost their respective delivery network, and USPS leadership saying at the onset of the COVID-19 pandemic that the USPS could be insolvent by October, are all looming, as the organization tries to right the ship.

One way to do that, according to the article is for the USPS to position itself as a “low-cost package carrier, as parcels make up a growing portion go the agency’s volume and profits,” while volumes from paper mail continue to shrink. That has been evident in its earnings calls, which have, especially of late, pointed to the strength and growth of the USPS Shipping and Packages unit.

Another objective outlined in the article is that the USPS is keen in reducing its transportation costs, pointing to late and extra trips accounting for $200 million on an annual basis, with the USPS focusing on addressing what is causing these delays and make the needed adjustments. Other potential cost cutting measures it identified incude prohibiting overtime and cut down on measures used by local postmasters to augment light staffing issues.

Gordon Glazer, senior consultant for San Diego-based parcel consultancy Shipware LLC, told LM that he thinks Congress has been hard on the USPS with onerous demands such as the prefunding of healthcare retiree benefits and also went a couple of years without a Board of Governors.

“The 2006 Postal Accountability and Enhancement Act changed how the Post Office determines prices going forward, with a fair degree of autonomy on the competitive/shipping services side of the house and the old school full oversight methodology on the Market Dominant /Mailing products,” said Glazer. “Things were going well back then until the financial meltdown in 2008 crushed the more profitable First Class Mail (FCM). It takes $2.50 in shipping to make up for $1 of FCM. This massive loss of FCM volume created the cash shortfall and is when the $5B annual healthcare obligation began piling up.  It requires congressional action to fix.  

And he added that politics is at play, too, with a USPS Board of Governors all appointed by President Trump, with a Trump-picked Postmaster General and CEO in DeJoy and a Trump agenda to discredit the mail, raise pricing and make the USPS uncompetitive, likely with the ultimate goal of selling it off. 

“One might think the days of our beloved Post Office are at an end,” he said. “Cries for privatization from carpet baggers hungry for the slaughter make their cases. Relax, this is not that. This first directive from PMG Joy is in many aspects positive.  Labor costs are the biggest component of postage and by focusing on eliminating overtime due to processing delays makes a lot of sense to me… keep a tight schedule and do an autopsy on delayed processing after the fact.  It makes no sense to have folks standing around or making extra trips back to the station just to support performance numbers.  It is better to fix it structurally then to throw money at the problem.  While I remain very concerned about the future of the USPS, let's give Mr. DeJoy some latitude to control costs like a well-run business should be doing in tough times.

And Jerry Hempstead, president of Orlando-based Hempstead Consulting, said that when looking at the USPS’s P&L, its costs are almost all employee-related.

“Out of $22 billion in operating expenses all but $4.5 billion were labor related,” he explained. “Nobody has had the guts to take this issue on. If there is no overtime the labor unions are going to just let mail sit to create complaints so that management relents. My suggestion has been for two decades now that ‘mail’ (not parcels) only get scheduled for delivery two days a week. So you get Monday and Thursday, Tuesday and Friday or Wednesday and Friday. There isn’t anything important any more that comes in the mail. At least nothing that can’t wait a day or two. Mail has passed its time. It’s been replaced by e-mail and social media for advertising. If you actually saved your mail for a week or two and went through it you will see it all ends up in the recycle bin.”

As for DeJoy, he noted that his predecessor, Brennan, left the USPS in far worse shape than when she took the position, and he added that with the USPS broke, it is time to let someone new try to fix and improve things, with the understanding that it is likely to come with some pain.