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USPS Update – Good News/Bad News

Community Direct Mail Industry Insights | July 27, 2021

USPS Direct Mail

USPS Plan to Improve Peak Season Performance

The postal service had a bad peak season performance with mail being delayed for months in some instances. The two main factors affecting the postal services’ poor performance were labor shortages on top of record-breaking package volumes. The USPS is still experiencing pockets of spotty service shortcomings. The USPS is responding to the labor shortages by onboarding new employees at a very rapid pace. Unfortunately, their training is not keeping up with their hiring and the USPS has lost their grasp on a fundamental practice of any material handling business which is FIFO or “First In First Out”. FIFO is what would control against mail getting buried in a large facility and not uncovered in a timely manner. As they identify shortcomings in the FIFO training in one facility, they creep up in another which has made the prediction of these service faults very difficult. Exacerbating the labor shortage is the additional paid leave for COVID that has been granted to federal employees. Unlike private sector employees who can receive up to 80 hours of paid leave, these federal employees can receive up to 600 hours of leave. That’s 15 weeks of paid time off that is putting a serious burden on the remaining postal workforce to not only keep up with the movement of mail but also train new employees. The federal leave is available so long as the program has funds or until September 30th assuming funds remain available until then.

USPS Not Allowed to Limit Volume 

While it seems every business in the country has felt the encumbrance of labor shortages, the USPS is not allowed to limit their volumes like UPS and FedEx were able to do during peak season. When UPS and FedEx did that it pushed additional volume onto the USPS’s shoulders and helped create the fiasco of 2020 peak season. Since the start of the year the USPS has altered their logistics paths to accommodate more on the road mail volume to combat the shrinking air freight capacity of national airlines. These differences are reflected in the new, slower service standards that the USPS has pushed out. In addition to the tweaks in mail flow the postal service has also leased additional Package Support Annexes and Peak Annexes which are located parallel to strategic NDC’s to help accommodate the additional package volume from the peak shipping season. This move is intended to free up the plants that sort letter and flat mail so they aren’t grid locked by package volume in an effort to prevent the historic delays that were seen last peak season. In addition to the 124 leased properties to accommodate volume the USPS has purchased new equipment to create capacity for an additional 4.5 million packages per day. The end goal for all is to have a drastically improved 2021 peak season.

August 2021 Postage Increase

The USPS has been granted additional pricing authority by the Postal Regulatory Commission as of November 2020. The USPS has finally exercised that new authority and filed a postal rate increase that is going into effect August 29, 2021. The new rate authority grants three new provisions through which the USPS can raise postal rates in addition to the existing Consumer Price Index (CPI) thresholds that have been in place since the Postal Act of 2006 signed into law by President George W. Bush. Within that law there was a review period 10 years after the signing of the law which allowed for a review of the effectiveness of the provision accounting for rate increases. The review has taken several years since it began in 2016 and what we are seeing today represents the finding of that review. The USPS now has the ability to increase rates by 1.1% to cover unpaid retiree health benefits, 2% for any mail class that doesn’t cover its costs, and 4.5% for volume loss. The overall average price increase is 6.8% however flats and periodicals bear the brunt of the increase as you will see below.

The rate approximate increases for August 29, 2021 are as follows:

With all of these increases it becomes more important than ever before to take advantage of any discounts available to you. Speak with your sales or customer service representatives about drop-shipping, commingling, and co-mailing to help offset some of these costs if you aren’t participating in those programs already. Also check into the USPS promotions and incentives as a way to reduce your postage spend. In 2022 the discounts for most promotions are going to be doubled. You can review 2021 promotions calendar here: USPS 2021 Promotions Calendar link

Chris Demetreon
Director of Mailing Operations
Kingery Printing Company

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