Report on Privatisation of United States Postal Service (Essay Sample)

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Report on Privatisation of United States Postal service
Introduction
Inefficiency in the United States Postal Service (USPS) can be considered a major drawback to the growth potential of the postal service and effective service delivery capabilities to customers. This comes at a time when the demand for postal services has considerably gone down due to the advent of the internet which allows people to send online mails; and courier companies which conveniently deliver parcels and goods to customers. It has been constantly established that there are huge discrepancies in the quality of service; with the postal service experiencing numerous challenges in the management of mail and parcel delivery. The need for a more sustainable business model is thereby inevitable and USPS must take consider changing its strategy to ensure that customers receive the best possible service. It will also ensure that the postal service can earn enough revenue to run its own operations.
Studies on privatisation of public entities have indicated that organizations can derive greater efficiency through increased focus on profitability, competitiveness and customer relations. The results include better service delivery, effective financial management including cost cutting and better returns for the organization. In addition, privatisation allows for the employment of highly qualified individuals to implement strategy and hence improves performance of organizations.
This report seeks to offer a more sustainable business model in the form of privatisation; which is expected to improve the United States Postal Services as it seeks to offer better and gain the trust of to its customers.
Why USPS could be a crisis waiting to happen: A review of current state of affairs
Inconsistency and service delays
It is apparent that the US Postal Service has been unsuccessful in maintaining consistency and ensuring timely delivery of services; with a high number of complaints on late correspondence being reported and customers expressing the service’s level of unreliability. This can be blamed on the organization’s business model and numerous failed attempts at implementing new strategy aimed at improving service delivery. In this relation, it is imperative for the management to scrutinize its internal architecture and thereby determine the issues at hand; then work towards adopting a business model that will promote growth (Gallego, Rubalcaba and Hipp, 2013).
USPS internal architecture
The organization
The United States Postal service is an independent government agency that is vested with the responsibility of providing postal services. USPS is an employer to over 600,000 individuals and operates over 200,000 vehicles. Given that the Postal service is expected to serve all Americans, its operations span through all geographical regions of the United States. It is also expected to serve citizens equally in terms of price and quality.
The fact that USPS is a government corporation means that it is directly affected by the challenges that face such firms, including, poor management, substandard customer services and huge debts due to low revenue and over-reliance on government subsides. As a non-profit firm, the USPS is often faced by shortages in revenue; more so because of the uniform rates that it is expected to provide, yet some distances are far off and quite expensive. This has been a cause of concern as the Postal Service seeks subsidy to cater for some of its expenditure following the rising bills. This has however received major rejection as opponents suggest that organizations should not be helped at the expense of the tax payer and that they should work to manage their costs.
Products and services
Postal services are the core business of USPS. Through the years, USPS has been relied on to provide postal services until the emergence of other private postal service companies such as FedEx and UPS. The state of service delivery seems to be generally flawed as customers complain of late deliveries and failed mails.
Recently, there was a reported case of mail tossed into a ravine by a delivery man, which raised concern over the reliability of USPS in delivering mail to customers. The Postal Service responded by indicating its commitment to quality service to customers and this is what USPS must strive to demonstrate in future as it seeks to promote service delivery.
USPS response to undelivered mail found dumped in ravine
Vision, strategies and tactics
USPS recognises that the quality of service needs to be revamped and this has led to the adoption of various strategies aimed at improving the quality of service. A promising strategy, but which otherwise failed in execution was to operate USPS like a hard-nosed business firm through cost-cutting, improved investment in customer service and adoption of innovative measures to promote efficiency. This was executed through cutting on the number of staff by encouraging older employees to retire early and introduction of sophisticated systems for sorting and routing mail to reduce handling per piece. This did not work out well because with the unanticipated failings in the systems, the Postal Service was unable to deal with the huge number of mails coming in as the now reduced number of staff could hardly manage the work load. The result was more inefficiency and late delivery of mail. In a twisted turn of events, more workers had to be hired, though accompanied by mechanization to promote service delivery. This improved conditions gradually but costs increased and there was need to increase rates to manage the expenditure.
The Postal Service is thereby in a cost versus expenditure dilemma because as it seeks to promote efficiency through more mechanization, better working conditions, tighter management and efficient routing, the costs must rise and so will the labor costs per unit. The question is whether these costs should be transferred to the taxpayer through increased rates. Given its role as a public corporation, this might face resistance from the public and operating like other businesses may not be an option. Furthermore, another challenge is that the government is less willing to invest in revamping the organization and taking up its debts and it is only logical that USPS is placed in the hands of private investors to deal with the challenges of funds shortage.
Mail delays due to inefficiency could lead to a reduced number of clients as they seek more efficient postal services from the private sector
Competition and competitor strategies
The contemporary business world demands for organizations to implement strategies that set them apart from others in the industries they operate, as this is the only way to maintain a decent customer base (Bharadwaj, Varadarajan and Fahy, 1993). Organizations must outdo themselves and create a brand that clients can be loyal to. Customers expect the best quality, the best price and reliability and competitiveness can only be assured through meeting these expectations (Sachdev and Verma, 2002). In a comparison with the United Parcel Services (UPS), UPS offers a guarantee of next-day delivery for parcels going 150 miles and 3 days for 1500 miles while USPS delivers local packages going up to 300 miles on an average of 3 days. While UPS has demonstrated 98 percent achievement of its set goals, a study showed that USPS’ delivery rate was spread between 6 to 20 days. Customers love convenience and assurance and USPS could be losing out greatly to the private sector which is more committed to meeting customer needs. This comes at a time when customers have greater choices as more courier companies, which are highly committed to service delivery emerge.
Privatisation as the new business model for USPS
The analysis above demonstrates the need for improvement of USPS service delivery model in a bid to promote customer service. This can only be achieved with adequate resources, a tight management and profit-oriented motive (Slack and Lewis, 2002). This will allow the organization to act like a real business, with clear-cut objectives and commitment to service delivery to attract customers and hence deliver quality services (Shleifer, 1999).
The privatization of public corporations is a trend that has proved to be quite effective in many countries seeking to gain optimal benefits from state corporations. The privatization strategy has been singled out as an effective way to enhance efficiency, improve quality of products and services, encourage innovation, cost management and quicker delivery (Slack and Lewis, 2002). It is believed that privately managed corporations are likely to be well managed and consequently more profitable. This is because the management is more profit-oriented and that they are likely to be well governed in order to effectively compete with others in the market (Vickers and Yarrow, 1991). Privatization literature suggests that public corporations are more likely to improve their performance if they are converted into private corporations and this is expected with the Postal Service once it is privatized (Sneyd and Rowley, 2004).
Privatisation will promote greater innovativeness in the Postal Service and consequently improve efficiency. Megginson and Netter (2001) note, that private firms are more innovative and proactive in terms of meeting customer needs because they are focused on staying ahead of competition. This is unlike public corporations which are assured of continued operations with the support of the government even when they make significant losses. As private firm, the managers at USPS are more likely to invest in research and design, greater product benefits, better quality products, exceptional customer service. In addition they often invest in h...