United States Postal Service Sai Gajjala, Tim Huffman, Sarah Meadows, Bruce Wayne

Introduction Overview of the United States Postal Service (USPS) Disruptors USPS Response Alternatives Recommendation Overview Disruptors Response Alternatives Recommendation

Overview The United States Postal Service (USPS) is a government organization that was established in the early 1800s by Congress, and held to a Universal Service Obligation (USO), requiring it to deliver mail to U.S. residences six days a week. The USPS is regulated by Congress. The USPS is considered a private, government business and does not accept any tax revenue. All funds are received through business operations (e.g., paper mail, packages, office supplies, postage, passport and government documentation). The USPS delivers approximately 40% of the world’s mail. The USPS has $70 billion in operating expenses and has been operating at a loss since 2006. Overview Disruptors Response Alternatives Recommendation

PESTEL ANALYSIS Political- Congress has been slow to react Economical- Limited to US market Social- Union presence creates limitations Technological- Rapid communication and technological development (internet) Ethical- Strong union resistance to operational changes (layoffs, job replacement) Legal- congress influence on USO

SWOT Analysis Strengths Weaknesses Opportunities Threats Large, well developed logistics network Over 20,000 retail locations Brand recognition Outdated business model Lots of Pensioners (Top Heavy) Strong Unions Opportunities Threats PO Boxes Government Services Profitable services The Internet Large Private Distributors Overview Disruptors Response Alternatives Recommendation

Key Issues 4 strong employee unions 4,000 locations operating below $28,500 at a loss Universal Service Obligation (USO) regulated by congress Profitability skewed on different product and service offerings Federal government is unable to provide more than 3 billion per year Overview Disruptors Response Alternatives Recommendation

Disruptors The USPS has been losing business because due to advancements in technology over the last couple decades: Telephone Fax machine Email Smartphones & computers Large distributors (e.g., Amazon, UPS, FedEx) Overview Disruptors Response Alternatives Recommendation

USPS Response The USPS attempted several response, which were all thwarted by their unions or Congress USO: Partnership with Staples (office supply store) Decrease delivery days from 6 to 5. Tried to close locations, as opposed to changing infrastructure Overview Disruptors Response Alternatives Recommendation

Recommendations AI & Autonomous Vehicles Leverage technology for distribution Partnerships Partner with FedEx, UPS, Amazon, & Walmart Innovation & Agile Operations Make USPS leaner & more agile Overview Disruptors Response Alternatives Recommendation

Alternative 1: AI & Autonomous Delivery Benefits AI and robotics have the potential to be responsible for a more efficient safer society Autonomous vehicles are more likely to be utilized for delivery of goods Drones have had pilot programs tested and recently approved for delivery by FAA Drawbacks Requires unprecedented investment but more sustainable for long term operations Would create liabilities that exceed current limitations Infrastructure & current legalities Overview Disruptors Response Alternatives Recommendation

Alternative 2: Partnership Benefits Amazon has recently become the largest public company on earth Synergistic with current workforce in regards to amount of employees bound by union pensions Drawbacks Creates reliance on a third party for revenue Partners may require incentives for involvement May limit the hiring of independent contractors and create stronger reliance on unions Overview Disruptors Response Alternatives Recommendation

Recommended Plan: Innovation & Agile Operations Pilot programs for the 4,000 locations operating at a loss These locations become PO Box pickup for locations in given zones Mail continues to be delivered for pick-up only at centralized locations Distribution channels Incorporate data findings for demonstration to congress about centralized mail services Premium delivery option is Overview Disruptors Response Alternatives Recommendation

Recommended Plan: Pilot Program Dissolve the USO to decrease service obligation in favor of more modern business models. We propose petitioning congress by conducting a pilot program with our recommendations as a proof of concept: Close 4,000 of the USPS’s lowest performing locations: $285 Million in savings. Location will be enrolled in pilot program. Pilot program overview: Build more Post Office (PO) Boxes within the non-operational USPS locations. Install self-service mail/package kiosks. Reduce mail delivery to 5x per week. Implement Premium Mail Subscription services. Overview Disruptors Response Alternatives Recommendation

Premium Mail Subscription Services Annual Rate 50 Million delivery points 150 Million delivery points Pick-up Services $50 $2,500M $5,000M $7,500M Drop-off Services Pick-up & drop-off Services $75 $3,750M $11,250M Overview Disruptors Response Alternatives Recommendation

Financial Implications Pilot program is a low cost solution Increased profitability from new recommended pricing model. Cost savings: Limited delivery points Leaner USPS store operation model Overview Disruptors Response Alternatives Recommendation

Operational Implications Freeze hiring Age out some of the current workforce to reduce severance costs. Offer buy-out option as incentive to leave: $5,000 Maximize PO Box establishment Reduce pick-up locations Invest in automated sorting processes: writing recognition Overview Disruptors Response Alternatives Recommendation

Conclusion Overview of the United States Postal Service (USPS) Disruptors USPS Response Alternatives Recommendation Overview Disruptors Response Alternatives Recommendation