Mar. 27, 2006—In January, RR Donnelley hosted a Marketplace Seminar in New York City focusing on the Postal Service. About 150 people were present to hear Patrick Donahoe, Deputy Postmaster General for the United States Postal Service (USPS), chat about what the USPS is doing, and what plans it has for the future.

Mr. Donahoe noted that last year started out with a grim outlook: a projected $2 billion loss. However, the agency was able to not only turn that around, but exceed every expectation, securing a $1 billion profit, and become completely debt-free for the first time in history. This amazing feat was accomplished through reducing costs and head counts, and increasing productivity to a great degree. Currently, the USPS has just more than 700,000 employees in approximately 30,000 facilities, down from a high of around 800,000 people in 2000.

According to Mr. Donahoe, the USPS has learned, during the past few years, how to attack costs in such a way as to increase revenue and keep the need for rate increases down to a minimum, while at the same time looking to increase the effectiveness of moving the mail.

The challenges the agency faces include an additional two million mail deliveries every year with the associated costs, along with rising healthcare expenses and the rising price of fuel. Historically, the USPS experienced volume growth that kept pace with cost growth, which lasted until the late 1990s. However, in recent years there has been a reduction in first-class mail, which is the primary revenue source to pay the bills.

To make up for this loss, in the next year the USPS plans to focus less on throwing costs at improving first-class mail, and instead will work at improving the mail technology. The USPS sorts 93 percent of the mail automatically, and wants to increase this amount, as well as the accuracy of the sorting. In addition, new measurement tools for periodical mailings are on the agenda to make the process more efficient and as fast as possible. Increasing the predictability of periodical mailings, said Mr. Donahoe, will increase the value to both printers and end users. "We think there is definitely an opportunity [here]. We want to work with the industry to correct [periodical mailing.]"

Overall, the USPS recognizes that mail is not a one-size-fits-all prospect. More than $22 billion is spent every year on mail delivery. To improve the turnaround time and ensure that mail gets to where it needs to go as quickly as possible, as well as continue to reduce that cost, the USPS plans to roll out innovations such as different sorting and delivery strategies for different parts of the country, as well as working with graphic communications industry leaders on a possible redesign of how addresses are applied to flat mail, such as magazines.

"We appreciate your business, appreciate your trust. It is very important that we work together [to improve mail efficiency] and to make your lives easier from a mailer's standpoint," said Mr. Donahoe. "We think there is still value in the mail. The challenge to us as an industry is to stay on that same page."