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11/30/2016 07:30 AMJohn Callan has a question he likes to stump people with: What brand has every single American as a customer? Responses often include Coca Cola, MacDonald’s, and big discount stores like Walmart, but those are incorrect. In fact, nobody has ever given him the right answer. It’s the U.S. Post Office.
“The post office is like Rodney Dangerfield. It gets no respect,” says John, a longtime Essex resident.
Given the size of postal business, that’s pretty astounding. There are some 34,000 post offices in the United States, “more than Walmart and McDonald’s put together,” John, a post office consultant, points out.
He notes that the United States Post Office (USPS) has more than 600,000 employees, of whom 200,000 are letter carriers. Then there are the vehicles: USPS has more than 200,000 of them, making it the owner of the largest civilian vehicle fleet in the entire world. The letter carriers deliver mail to some 150 million addresses and return or forward it at no extra charge if it is undeliverable.
All this is currently available to anyone who mails a first class letter for 47 cents. (In January 2017, the price of a first class stamp will go up to 49 cents.)
“How good is the post office? It’s the best in the world and by far the least expensive,” John says. “Letters are delivered in a few days. That’s remarkable.”
Although at this time of year, customers line up at postal windows, the postal service is facing major challenges on many fronts. There is increased competition in sending packages. In addition, electronic communication has meant that the volume of first class letters is dramatically down.
“Even Christmas cards are plummeting. People would rather send a message or a greeting digitally,” John points out.
And, while many people like to receive bills in the mail as a reminder that it is time to pay, most now prefer to remit electronically.
John points out that the federal statutes under which the USPS now operates make its situation more difficult. The postal service has been a part of government since America’s Colonial era. Benjamin Franklin was the first postmaster. It was a cabinet department starting in 1872, but a 1971 act converted USPS to an independent federal agency. Since the Postal Accountability and Enhancement Act of 2006, the Post Office has had to pay $5.5 billion annually to prefund employees medical costs, leaving the service with a massive ongoing debt burden. And, John notes, USPS gets no subsidy from the federal government to underwrite expenses.
“Amtrak gets a government subsidy, but the post office doesn’t and they can’t increase prices so they are between a rock and a hard place,’ John says.
For seven years John has run a seminar, Postal Vision 2020, to examine how the USPS needs to adapt to meet competition in the Internet age. In fact, the name of the upcoming conference in March 2017 is Business Not as Usual. One of the focuses of the meeting will be parcel delivery, an area John thinks USPS has to rethink.
There are already new ways USPS is delivering packages. In many cases, delivery means cooperation between the Post Office and otherwise competing delivery services like FedEx and United Parcel Service through a program called “the last mile.” The private services deliver to the local post office, which then delivers packages to local consumers.
“FedEx realized that the post office could deliver for under $2 and it cost them $3.50,” John explains.
John sees other ways that the post office and competing private deliverers can cooperate. He describes this economic model as “cooptation,” “a combination of cooperation and competition.”
For instance, he suggests that the Post Office could do the bulk of parcel delivery in rural areas. Private carriers, in contrast, might concentrate on delivering packages in cities.
“After all, we are all interested in a green world and that would mean instead of three of four companies driving around, there would only be one truck on the road,” he says.
One of the changes in delivery John would like to see is the ability for private carriers to deliver into individual mailboxes. Now, only postal service carriers can use mailboxes, which means many private deliverers have to leave packages on front steps. That situation, he points out, leaves to a widespread phenomenon called “porch shopping.” After a delivery truck leaves a package in front of the house, a thief comes along and takes it.
“Some of those thieves actually just follow the trucks,” John says.
More changes are in the offing, according to John, as Amazon, one of the overarching giants of ecommerce, is now organizing to deliver packages on its own with its new service Amazon Flex. The service, based on the model popularized by the car service Uber, employs part-time drivers to deliver.
“USPS will deliver for Amazon until they figure out how to do it for themselves,” John says.
And he adds all of us had better get ready for robots and drones in the mail delivery business because in 10 years we will see both.
John grew up on Long Island and was selected as a prestigious Morehead scholarship winner to attend the University of North Carolina, from which he graduated, as a Russian major. Instead of speaking Russian, after college he went to another English-speaking country, Australia, looking for both employment and new horizons.
He returned to the United States planning to sell Australian products here. That didn’t work out as he had planned, but a temporary job appeared when he was asked to drive a racehorse to the Santa Anita track in California. That ultimately led to a business transporting racehorses by air around the world—exciting, he conceded but “dangerous, not something to do long term.”
Meanwhile, he had met the founder of DHL courier service and went to work there, learning enough about running an air courier business to start his own, Calico International Courier. His firm specialized in flying mail for oil companies to offshore drilling rigs. After he sold that business back to DHL, John continued to serve in executive positions in other firms, many in the courier and delivery business.
With the startup company Milestone Systems, he developed Click and Send, a program to create shipping documents online. Ultimately, it became the model for USPS’s Click-N-Ship program.
In 2001 John created his own consulting company, Ursa Major Associates, focusing on logistics and innovative strategy in the field of postal and parcel delivery. John chose the name Ursa Major as homage to his love of sailing, a pastime since childhood. Ursa Major is the constellation that contains the seven stars of the Big Dipper, which in turn point to the North Star, a classic celestial guide for mariners.
As the holiday season approaches, John says he and his wife Linda will use mail services both old and new. She will mail some letters and packages at the post office.
“And she will probably order some things from Amazon,” John says.