How can you tell if a post office is losing money?

One of the ways US Postal Service plans to cut expenses is the closure of 2,000 “money-losing” post offices. Sounds reasonable- any business would be eager to shed operations that aren’t pulling their weight. But it raises the question- how do you know when a post office is losing money?

You’d think it would be a simple matter of looking at the office’s books, and comparing revenue to expenses- and you’d be wrong. In most cases, very little of the revenue collected at a PO window or bulk mail unit actually pays for services provided by that post office. If you buy a book of Forever stamps your local office, and use them to mail letters from, say, your work location, the post office credited with all of the revenue has done none of the work you paid for. A bulk mail unit may collect millions every year for mailings that are promptly trucked to drop locations elsewhere, and never even get near the PO that pockets the revenue.

Almost half of the cost of mailing a letter is the labor intensive, delivery part. The rest is transportation and processing en route- none of which is normally handled by the office that collected your money.

So how do you decide if an office is losing money if you can’t just look at the office’s balance sheet? Unfortunately there is no easy answer. You could calculate a delivery “workload credit” by measuring delivery volume, but you’d need to do it by class and rate, and you’d also need to differentiate by delivery type- box, rural, walking route, etc. While the USPS does track that sort of data as part of the rate setting process, it doesn’t do it down to the individual post office level.

So how will the USPS come up with its list of PO’s to be closed? Your guess is as good as mine…

  • Trish Brown

    What about ODIS?

  • brian

    ODIS/RPW uses random sampling to estimate origin and destination volumes- it doesn’t sample every office, and is only valid down to the SCF (3 digit) level.

  • Marcia

    “How can you tell if a post office is losing money?” Apparently, if it is open! With annual losses in the billions, I am thinking there cannot possibly be one single post office that is profitable. This was an insightful blog, thanks for sharing!

  • Lenny

    There no practical way to look at it from a cost vs. revenue standpoint. A level 20 office can be losing a million dollars a year simply because they have to pay 25 city carriers, but a bulk mail unit can be turning a multi million dollar profit because of the incoming revenue and lack of delivery function. By using that logic, you would be closing almost all of the large offices and keep the level 13 offices open.

  • brian

    Exactly. That’s why I wonder about all of these statements people make about the number of “money losing” post offices without explaining how they came up with their numbers.

  • Dan

    The USPS will cut off it’s nose to spite its face if they close offices that provide “distribution points” for our products and services – a Level 13 office might not break even while a Level 23 office makes a tidy profit – if we take any number of offices out of the equation the post office will reduce its ability to distribute products and services – if the USPS doesnt find some way to become more competitive in areas that generate the highest profit – aka expedited services(Express Mail and Priority Mail) then any downturn in our economy will wreak havoc on our bottom line – you can’t look at one office and say that it hasnt made a profit ever since it opened and thusly it would make sense to close it – eliminating one delivery day and perhaps even one service day would go a long way towards making the Postal Service profitable – but, closing offices is not the answer!

  • JimmyL

    Prior comment concerning 25 city carriers. Was a time for 25 carriers that there were only 1 supervisor. Now, per 25 carriers you’ll see 5-8 or more jobs involved to manage these 25 carrier jobs. Paperwork creates nothing more than paperwork. No reason for so many extra people involved on a job that’s already being being done by one person (craft). As you can see, this does add up. Bonus for nothing but proper paperwork.

  • Barebones

    Eliminate every single “District” office (all 74 of them), plain and simple. They serve no useful purpose to the Constitutional mandate for “universal service” to our nation. The number of “supervisors” includes each of the 74 districts employing anywhere from 25-75 ‘supervisors’ of ‘supervisors’.

    Fed Ex and UPS only operate in areas to maximize profits. That would be approx. 25% of the country. This is not an equal comparison.

    Speaking of comparisons, for the PMG to compare Postmasters to the “Maytag” repairman is comical, ironic, and finally opens a window into the organizational ‘vision’ to undermine and at the same time lay the blame at those who are most dedicated to the success of this USPS.

    Carriers, clerks, mailhanders and other craft employees are the backbone and key to the Postal Service, but the unions that ‘represent’ them are doing them a great disservice during this difficult time.

  • Herman Weber

    Whom ever believes that the Postal Service is losing any money, is very gullible indeed. Post Office distributions centers are calling overtime in record amounts. We have people working 12hr days, 6 days a week. Do you know of any business that is losing money and simultaneously demanding overtime?
    The “losing money” bull crap stems from the cheap asses who do not want to offer a good contract or any kind of cash incentives. Isn’t that what you tell your relatives when they ask you for money? “I can’t do it man, I’m broke.”
    Smarten up people. Post office is doing just fine.

  • Poor Richard

    The PR campaign is being orchrestrated by our guardians. Thanks for the loyal support, RNC.

  • PaidUp

    No, the Post Office isn’t doing just fine. With the Congressionally mandated overpayments to CSRS pensions, and the Congressionally mandated “pre-funding” of future employee healthcare, we’re being driven into the ground. That $8.5 Billion loss last year was almost completely attributable to these “mandated” costs from the Government. The USPS has been paying ‘stamp tax’ to the Government for some time.

    Also, like any Federal bureaucracy, there are many layers too many of managers and administrators, whose only job is to keep making work for other managers and administrators to justify their job.

    If you’ve got people working 12 hour days, 6 days a week, then they’re pulling down Penalty Overtime premium, which is 2x their standard pay. And I’m sorry, but I haven’t yet met an employee whose worth double time…so there’s wasted money.

    The contracts with the Postal Unions require all full-time employees in offices with more than 200 man-years of workforce, which doesn’t allow capturing downtime with flexible employees. They also require 90% full-time employees, when it would be much more cost effective to have a higher percentage of flexible employees.

    The Postal Service has a great deal of problems which cause it to hemmorage money, and the most serious ones are mandated by Congress which have absolutely nothing to do with moving the mail…

  • common sense

    Let’s see if we can figure this one out- “Herman Weber” claims there’s plenty of mail, and “distributions centers are calling overtime in record amounts”. I doubt it, and I’m sure Herman doesn’t have any numbers to back up his claims, but let’s humor him for a second. Because then he turns around and says “The “losing money” bull crap stems from the cheap asses who do not want to offer a good contract or any kind of cash incentives.” Incentives?? If business is booming as you claim, and there aren’t enough people to do the work as you claim, why would the USPS want to offer you an incentive to leave? Are you sure you thought this one through Herman?

  • dstack

    why not look at revenue taken in verus expenses of the building. If you are not generating enough business to pay the bills (water, electric, gas, phone, rent, lease, etc) that is a losing office. If you can’t keep the doors open, shut them. Labor is the cost of doing business, that cost will there no matter how many routes are in an office or any office.

  • Sheila

    I’m paying penalty overtime because I’m running short handed. I’m supposed to have 2 clerks, but the 2nd position is in withholding. I have 2 injured carriers not working at all. We WOULD be making money if we weren’t mandated to make those future retirees health care premiums (which NO ONE else has to) and if they’d give back what the OIG found we overpaid. (which probably won’t happen because it would take money out of your congressmen and senators pensions too). If you’re in an office without carriers and you’re unable to make a deposit everyday (minimum $100), I’d be worried if I were you. Also, stations and branches can be closed without changing the laws because they’re not considered post offices. I closed a finance station last year that averaged about 25 transactions per day, and was averaging a deposit twice a week. It had less than 50 rented boxes the previous year. It staffed only 1 clerk, full time. It was 1 mile from the main office which had an APC. It was a good decision to close it instead of paying $15,000/yr rent, utilities, wages to that clerk position, wages to his replacement for AL and SL, cost of controlling stamp stock, counts, and no work to fill his day. I was a Data Collection Technician for a couple years, and you’d be surprised the data they have collected. ODIS/RPW isn’t the only test they conduct, and it goes deeper than 3 digit. I did TRACS tests for tiny little offices, and IOCS on what people were doing. There’s other tests they do too, so I’m sure you’re not getting the big picture. Stats programs provide the documentation needed for rate cases since we were mandated not to make a profit for so many years. Our plants are using ot because our clerks and mailhandlers are having the “blue flu” because of massive excessing. Many in our district were given this choice: 1)move a couple states away 2)transfer to carrier 3) resign. Our plants are using almost all 204B’s because it can’t get good supervisors on those lousy hours and NS days. It’s a bad situation all the way around.

  • Howie

    The one article had the right idea you do not need all those people in the Districts. Probably 15 years ago 90% of the people working for the postal service touched the mail everyday now it may only be 35%. Lets let the managers in there own offices be managers or postmasters and not puppets with there strings being pullled fron district employees. Lets go back to basics as it was years ago.

  • Name withheld

    I am in the maintenance part of the PO and I see so much waste of money its laughable.
    I see people trying to justify their job and not even worried how it effects the PO.
    I personaly know of many instances where we spend $500 or $600 dollars 3 to 4 times a year to have a contractor work on a piece of equipment when he says he can put a new piece in for $600 and never have to come back.
    But they refuse to purchase the new stufdf because it might effect their bonus.
    I submitted an E idea that had the potential to save the PO $1,000.000.00 a MONTH and 4 years later I get an email saying “sorry your idea was canceled because your manager no longer works for the PO” ya no kidding he retired years earlier because you took so dam long with it.
    Sorry I care about my job but its obvious the PO dont care about saving any money their all just in it to justify their job thats it.

  • jim jackson

    I believe the ruination of the postal service has been the creation of the FMLA act. In my little office of 15 people, half are on FMLA and there have been times when all of them have been off which creates staffing problems and causes the rest of us to do overtime, causes delay in the delivery of mail, and creates long lines at the window when there is only one clerk to serve the customers. Most of them laugh it off when they come back and say that they will take advantage of the program as long as they can get away with it.

  • David

    Get rid of Saturday delivery already. Why are they dragging their feet on this? It is a no brainer. There has been a hiring freeze for a long time anyway , so no one will lose their job. They can always have
    early outs. This is a joke. They are making getting rid of Saturday like it is a big decision , while money is being lost . What about the savings to the environment? Another benefit.

  • common sense

    David- the fact that you want Saturday off doesn’t make it a “no-brainer”. (Then again, I guess it depends on your definition of “no-brainer”).