The economy has taken a toll on the United States Postal Service and there has been less mail coming through this past year. In 2007, the United States Postal Service recorded over 211 billion units of mail, where in 2008 it had dropped to 202. 7 billion units. Being that this is a digital age, the company feels that this could become a concern. Since the rise of the internet, it was predicted that paper mail and documents would go into a decline and that it would eventually be ruled out by instant messaging and email.
With the increase of free email services, text messaging, wireless internet, even the ability to get PDF files, spreadsheets and documents on your phone, you no longer have to go through a postal service. The amount of mail being generated had been on an increase from 1970 to 2007. Perhaps the digital age has finally caught up. At the end of 2008, the company reported a loss of $2. 8 billion due to the lower amount of mail being generated for the year. This is something that they are going to have to be aware of and pay close attention to.
Another challenge that they are having is with the consideration of service. There are a number of classes, types, sizes, and weights that they have to consider and they need to figure out the best way to assign the mail to their transportation resources. Because other companies like UPS and FedEx have been investing in optimization technology for transportation, USPS has recently decided to go that route as well but that puts them behind (Morton, 2008). High Oil Prices have been increasing the company’s price on refined fuels.
Due to the rising price of crude oil since 2004, the company has high transportation costs which can impact operating expenses. In 2004, crude oil was around $37 a barrel. In June of 2008, it reached almost $150 a barrel and this affected their margins. Although the price of crude oil per barrel is much less now then from last summer, the price of oil is starting to rise again which is going to give the United States Postal Service more problems if it keeps continuing to rise (United States Postal Service, 2008).
Intense competition is another threat that USPS faces. Price, frequency and capacity of scheduled service, the ability to track packages, the extent of geographic coverage, reliability and innovative service offerings is what is focused on in the industry and as of now, their top competitors have strong financial resources along with their operational resources (United States Postal Service, 2008). Also, their competitors have the ability to expand their operations in the United States which can have a harmful effect to their business.
As of right now, their top competitors are UPS and FedEx and their businesses both have less revenue spent on labor (roughly 40%-55%) but USPS spends around 75%. The Postal Act of 2006 was another external factor that played a part in increasing their expenses. They were required to pay $5. 6 billion to prepay the health benefits for retirees. In February, the head of the United States Postal Service, John Potter, asked Congress to remove $2 billion of the funds off their books.
In the long run, the act will help them but it couldn’t have come at a worse time because now the postmaster general is telling Congress that they are in a “financial crisis” and something must be done to help keep them running on a six-day week. Recommendations After doing the SWOT Analysis on USPS it is much clearer to see what this company needs or could do in order to survive in this economy and in turn boost sales. With the online market on the rise, USPS can improve its online services to be able to reduce overhead because customers may order services by themselves.
With the advertising market also growing, USPS can work on selling ads to more companies and obtain affiliation or relationships with other businesses to become their main service provider of Priority Mail and Package services. Knowing that the USPS is a government funded company, appropriate officials can request new regulations that allow the company to be more flexible with pricing. Lastly we also recommend the company to invest more on fuel efficient vehicles like, hybrids, in order to save on the consumption of gas.