Copyright 2000 Federal News Service, Inc.
Federal News Service
July 13, 2000, Thursday
SECTION: PREPARED TESTIMONY
LENGTH: 2149 words
HEADLINE:
PREPARED STATEMENT OF WILLIAM J. HENDERSON POSTMASTER GENERAL AND CHIEF
EXECUTIVE OFFICER UNITED STATES POSTAL SERVICE
BEFORE THE
SENATE COMMITTEE ON GOVERNMENTAL AFFAIRS SUBCOMMITTEE ON
INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES
BODY:
Mr. Chairman and members of the
Subcommittee, I am pleased to be here today to discuss the performance of the
United States Postal Service and the very challenging environment we face in the
modem communications marketplace. The insights and support of this Subcommittee
are of great value to us as we work to deliver the benefits of universal mail
service to a growing and more diverse society as it contends with historic
technological change.
When I spoke before this Subcommittee last
September, I reflected upon the enormous progress that postal employees had made
during the last decade of the 20th century in terms of service performance,
financial results, product value, and system modernization. I said then, and it
is true today, that the Postal Service begins this century with the best
performance, planning, technology, and management systems in our history. To
that I can add that we began this century with some of the most favorable
circumstances in our history. Low inflation, high employment, and the longest
economic expansion in American experience have created precisely the kind of
environment that has proven over the years to be most beneficial to healthy mail
volume growth. In addition, the real price of postage has declined over the past
six years, thanks to consecutive rate increases well below the rate of
inflation. Taken together, these circumstances might well have been expected to
drive a surge in volume, revenue, and income. The truth is they have not. In
fact, the latest revenue figures place the Postal Service more than
$400 million short of our $100 million net
income target for the year. This is directly attributable to a weakness in
demand. Although postal products today are a better value in terms of service,
features, and price, we now forecast a potential shortfall of
$700-800 million in total operating revenue for the year.
As I indicated in my testimony last year, the cause of this difficulty
lies in our constrained ability to respond to two historic forces that are
changing the face of 21st century communications and our industry. The
constraints lie in our three-decadeold charter -- the Postal Reorganization Act.
And the forces are the explosive growth of competition and the revolutionary
change brought about by electronic communications and the Internet.
Since 1995, the Postal Service has been seeking to modernize the law
that governs our operations. We have worked closely with John McHugh in the
house to develop a fair, meaningful reform bill. We believe
strongly that the time to implement reform is now, while the
Postal Service is healthy, and before the forces of change
create the type of calamity that precipitated reform in the
1960s.
Competition continues to grow at a remarkable pace. This includes
new inroads from traditional competitors, a profusion of start-up delivery firms
associated with the Internet, liberalized foreign posts that have opened offices
in the United States and purchased American subsidiaries, and the accelerating
growth of electronic alternatives to the mail.
A similar dynamic exists
with the technological erosion of our flagship FirstClass Mail product. This is
exemplified by the action of the federal government, which has been aggressively
promoting electronic payments to vendors and social security recipients, and the
use of electronic filing and payments for taxpayers. There appears to be
unanimous agreement that this trend will continue and it will accelerate. The
only questions are, "How much?" and "How fast?". So far this year, First Class
Mail has grown just 1.4 percent. This barely keeps us at parity when you factor
in population growth that results in a million or more new customer delivery
points being added to our network each year. We anticipate little change in
yearend First-Class Mail volume growth, continuing a decline in growth that has
increased in the last decade. These results are consistent with projections that
show First-Class Mail may begin to decline within a few years and that total
mail volume may top out well before the end of this decade.
I should
note that the scenario of a sustained decline in mail volume presents a huge
management challenge for the Postal Service. Since the Postal Service was
created in 1971, we have only experienced two declines in total yearly mail
volume, both as a result of economic downturns and large postal rate hikes.
Sustained declines would require a major adjustment in the way we do business,
which would be compounded by the fact that many of our costs are fixed and
cannot be readily reduced. For example, although mail volume might decline by
five percent, we would not be able to make similar reductions in the number of
trucks or post offices, nor could we immediately adjust staffing levels. At the
same time, we expect the size of our universal delivery system to continue to
grow in line with growth forecasts for the population. As a result, we must plan
now to deal with growing cost pressures that will be exacerbated by a shrinking
revenue base.
The Postal Service has adopted three strategies to deal
with our very tough competitive challenge. Our first priority is cost
containment. For the immediate and foreseeable future, the most important
strategy for the Postal Service is to maintain our affordability. This is
particularly difficult as rising fuel prices, up-ticks in inflation, and
arbitrator-mandated wage increases will add the better part of a billion dollars
to our costs in the coming year.
In reality, cost control has always
been a focus for the Postal Service. We have saved billions of dollars over the
years by substituting technology for labor and streamlining our operations. In
the last two years alone, through local and national efforts, we have squeezed
more than a billion dollars out of our budget. Nevertheless, slow growth and
shrinking margins continue to threaten our progress, our competitiveness and our
future.
After a careful review of our operations, we have formulated a
multi- year Breakthrough Productivity Initiative, which we are now putting into
effect. In the areas of transportation, purchasing, administration, and
operations, we are reengineering work processes and employing technology to
achieve savings.
Our workforce must get smaller. As much as possible, we
intend to accomplish this through attrition. For some months, we have refrained
from filling administrative vacancies and we are seeking early retirement
authority from OPM. However, if needed, we will use reduction-in-force
procedures to reach needed staffing levels. We are committed to maintaining high
customer service levels and minimizing disruption for employees as we go about
this process.
Our second strategy is to increase revenues by helping our
industry grow. As I have indicated, this is no easy job. Every product line
faces competitive pressure.
Customer service is central to this
strategy. We have in place a comprehensive customer support network that reaches
from our largest customers right down to the neighborhood consumer. Our Business
Service Network serves nearly 15,000 major mailers who account for more than
half of all Postal Service revenue.
Across the country, we have
approximately 300 Postal Customer Councils (PCCs) serving nearly 200,000
customers who represent small and medium size businesses. Each year since 1995,
we have hosted a national PCC meeting by satellite to communicate critical
service and policy messages to these customers.
We also have hundreds of
Consumer Advisory Councils nationwide that provide a voice for communities and
residential customers in local postal affairs. Additionally, we have a network
of Consumer Affairs professionals located at headquarters and our 85 performance
clusters who each year respond to hundreds of thousands of customers inquiries
and engage in significant customer outreach programs. Customers also have access
to around-the-clock support through the Postal Service's award-winning web site
and 1-800, toll-free, service line. The web site receives more than 3 million
hits a day and the phone service responds to more than 5 million inquiries
annually.
I should also note two important umbrella efforts that have
contributed very significantly to the overall success of the Postal Service. We
support the long established Mailers Technical Advisory Committee, which is a
joint mailing industry and Postal Service task force dedicated to improving the
mail system. More than 60 member associations representing all major
mail-related industries in each class of mail work with us to resolve problems,
improve systems, and spur innovation. Each year we also host two National Postal
Forums that bring together thousands of mailing professionals for a premier
industry trade show and educational seminars. Suppliers showcase the latest in
mailing technology and Postal Service experts and officers provide insights on
the direction of the Postal Service and on how to get the most out of the mail.
We are proud of these efforts to advance the professionalism and
efficiency of the mailing industry and to better serve the American people
through an extensive partnership that keeps us in touch with their needs. The
knowledge we gain from these initiatives guides us in our modernization
programs.
We are employing technology to improve performance, add value,
and make it easier for customers to do business with us. We are partnering with
private sector companies to create new customer solutions. This is particularly
important in the international arena and the domestic parcel market, where we
have significant handicaps compared to foreign posts and commercial competitors.
We are working with customers at all levels to improve performance and tailor
our services to their needs.
We are also introducing new features and
products to meet emerging customer requirements. When I met with you last
September, the Postal Service had just introduced PC postage that allows
customers to purchase and download postage over the Internet. This year, we have
continued our transition to the Internet Age with three other traditional
services. It is too early to tell whether these ventures will be successful.
They are small steps into an already crowded pond. However, it is vital that we
get our feet wet, as the Internet increasingly will consume ever-larger portions
of our business. Furthermore, we believe that we bring unique value to this
space. It is the trust, security and ubiquity that we have built up over the
past 226 years of serving the American people. We can help them cross the bridge
to the 21st century and across the digital divide as we have bridged so many
other differences over the years.
As we have seen in past transitional
period, controversial statements have been made about our involvement. At
different times from the same sources, we are either omnipotent or incompetent.
We are trusted Uncle Sam or feared Big Brother. We are out of our league or we
are out to dominate. The truth is we have our hands full trying to stay relevant
in the face of historic and unrelenting change. The General Accounting Office is
now doing a study of these initiatives, which we expect to be completed later
this summer. We look forward to that report and hope that it will bring needed
perspective to this issue.
Our third strategy is the pursuit of
legislative reform, as I have already mentioned. We need a 21st century charter
that recognizes our need to respond to how rapidly the modern world and customer
needs are changing. It remains to be seen if a consensus for reform can be
developed now. But the need for reform will assuredly keep growing.
In
short, these are the best and worst of times. We have achieved record
performance and now we have to improve upon it. We have recorded record budget
surpluses and now we have to tighten our belts and economize like never before.
We have improved the quality and value of our products, but the rules of the
marketplace have changed and we must change with them simply to remain viable.
What has not changed, in our view, is that we have a responsibility to
the American people to ensure a healthy and meaningful postal system. What's at
stake is not just the continuation of perhaps the most visible and personal of
all federal services, but the endurance of a delivery system that touches every
American, helps bridge our vast distances and differences, and binds our nation
together.
So, despite our challenges, the Postal Service is committed to
meet the challenges of the 21st century and to build on our legacy of service to
our nation. We look forward to working with this subcommittee to assure that the
American people can continue to rely on the Postal Service for high-quality,
low-cost mail services.
Thank you, Mr. Chairman, that concludes my
statement.
END
LOAD-DATE: July 19, 2000
