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As discussed in Chapter 2, when a product or service is in the decline stage of its life cycle, cost control is critical. Currently, demand for postal services is in the decline stage in many, if not most, countries. The decline is due to two main factors.
Digital communication has greatly reduced the number of letters being sent. In the U.S., first class mail volume has dropped to 20% of what it was in 1997. Similarly, Canada Post reported a decline from 5.5 billion letters delivered annually 2 decades ago to only 2 billion today.
Parcel delivery—once a potential growth area—has increasingly been dominated by private competitors such as UPS, FedEx, and Amazon, which can operate flexibly without the regulatory obligations imposed on government-run postal services.
As a result, national postal authorities are incurring substantial financial losses: $9.5 billion in the U.S., $1 billion in Canada, and $427 million in the UK. There are several ways to cut costs, and different countries are taking different approaches:
Job cuts The most obvious way to reduce costs is to reduce the number of employees. The U.S.P.S. has announced plans to eliminate 10,000 positions, largely through voluntary retirement incentives, while Deutsche Post in Germany anticipates cutting 8,000 jobs.
Close facilities The U.S. is considering closing some of its 31,000 post offices when their leases expire. Canada is going to close some mostly rural post offices. On the other hand, a new law in Germany requires the postal service to not close any of its current facilities.
Rural delivery
In the U.S., Canada and England the postal authorities are required to provide universal service to all addresses and for facilities to be open 6 days a week. In Germany the expectation is 5 days per week. Universal service is costly as it requires more time to deliver mail to rural areas than to urban areas.
Door to door delivery Canada has transitioned many households from door-to-door delivery to centralized community mailboxes, a shift projected to save $300 million annually. A majority of Canadians already receive their mail through community, apartment or rural mailboxes.
Extended delivery times In some countries the required time to deliver mail may be increased. In Germany the expected time is now 3 days rather than the former 2 days. In all countries delivery of mail could be delayed by a day or more.
Classroom discussion questions:
1. What else can you suggest to save money?
2. Is it reasonable to expect the post office to deliver to very rural addresses?