By January 9, 2006 3 Comments Read More →

Instead of raising stamp rates, the USPS should cut costs

csmonitor.com

I agree with this writer, in principle, that the United States Postal Service should look to cut costs before increasing postal rates (it’s up from 37 cents to 39 cents today).

The writer lists a number of ways to cut costs, but they pretty much ignore lean princples and basic process improvement methods (as the Canadian postal service has used with great success).

The Toyota Production System mindset says that prices are set by the market. It’s hard to tell what the true “market price” for standard postal service is, given the monopoly that the USPS has. Overnight mail, where there are obvious competitors like FedEx, UPS, and DHL, truly has market-set prices.

In the TPS model, Profit = Price – Costs, where you reduce costs (not just by laying people off) to reach your profit target. Under the old mindset, which I assume the USPS uses, you set Price = Cost + Profit, where you feel you are entitled to a particular profit and you set the price accordingly.

This article does reference one of my favorite W. Edwards Deming quotes:

“It is not necessary to change. Survival is not mandatory.”

I doubt, given their semi-private monopoly, though, that the USPS survival is anything but guaranteed. It will probably take a really special leader to get the USPS to really change.

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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3 Comments on "Instead of raising stamp rates, the USPS should cut costs"

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  1. Anonymous says:

    I agree with your views. But compared to USPS, there are many other pvt orgs in USA trying to use their monopoly for settings the prices as well as not bothered about customers.

    One example I can quote is “Verizon”.

  2. Anonymous says:

    I strongly suspect that the folks at the USPS know how to reduce costs, but are constrained from doing so for politcal reasons. The monopoly argument is a bit thin, as they likely do have competition for most if not all of their areas of business. Email, online bill presentment and payment, etc. are facts of life. It is likely more expedient to raise prices rather than tick of the public by say, cutting back on rural delivery or Saturday deliver, fighting with the unions, etc. Funny how Fedex and some of the competition don’t do that kind of thing – I guess there isn’t any profit in it.

    I think a clear example is what happened in the UK a few years ago. The Royal Mail was losing a lot of money, the government. public and regulators were not willing to support a price increase, so the difficult decision to drop twice a day delivery ended up not being so difficult after all.

    As for going lean, great idea. It obviously is doable, but it takes a total rethink of current USPS practices, where more mechanization and larger batches seem to be preferable to changing corporate culture. GM and Ford are still struggling to get their. Getting the largest postal administration in the world to change is a bit of a stretch, in spite of the fact that some of the competition is trying to head in that direction.

  3. Anonymous says:

    Since gasoline prices have doubled, it anazes me that any orginization that relies so heavily on fuel to complete its mission,haven’t raised their prices more.If the postal service were to be privatized many rural deliveries would have to be cut for profitability reasons.

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