Documentos de Académico
Documentos de Profesional
Documentos de Cultura
March 2, 2010
Contents
Recent context
Recent Context
Net profit/loss
Key drivers
$ billions
No rate increase
2003-2006
3.9
-1.7
0.9
-0.7
-2.8
-3.8
-5.1
01
02
03
04
05
06
07
8.4
08
5.6
09
1.41
2010
5.5
Class Mail
Down-trading from
First-Class to Standard
Mail
Losses of advertising
mail due to the
recession
RHB pre-funding
requirement introduced by
the PAEA
-7.82
2000
E-diversion of First-
3.1
1.4
-0.2
Note: All years in this document refer to Fiscal Years ending on Sept 30
1 Includes one-time $4 billion deferral
2 Per 2010 Integrated Financial Plan (January Year-to-Date results are favorable to Plan)
SOURCE: USPS; P.L. 109-435 (PAEA)
Recent Context
15.8
-3.8
12.6
5.5
FY2006
Net income
Revenue
decline1
RHB prefunding
requirement
Cost savings
RHB deferral
FY2009
Net income
Savings driven by
Reduction of overtime
Extreme slow-down in hiring
Route consolidation
Volume reduction
1 Revenue declines calculating by applying 2009 prices against 2006-09 volume declines
SOURCE: USPS 2006 Annual Report; USPS 2010 Budget
Recent Context
Volume declines have been worse than expected when the current legal
and regulatory framework was established
PAEA implications1
Upside
forecast
230
220
210
200
Downside
forecast
190
180
170
Actual
at CPI by class
160
Significant pre-funding
0
2003 04
05
06
07
08
09 2010
requirements for
Retiree Health Benefits
(RHB)
Recent Context
The recession has exacerbated volume declines, but mail has reached an
inflection point, with e-diversion now driving long term decline
250
200
Real GDP
150
100
First-Class Mail
volume
50
0
1975
SOURCE: USPS
1980
1985
1990
1995
2000
2005
2009
McKinsey & Company | 5
Recent Context
Employer premiums
10.1
7.7
7.4
8.4
5.6
3.4
1.4
5.5
1.6
1.7
1.8
2.0
2.2
2006
20071
2008
20092
2010
Recent Context
917
900
850
800
711
750
700
0
2000
01
02
03
04
05
06
07
08
258
261
265
262
05
06
07
08
2009
227
231
234
243
251
2000
01
02
03
04
249
2009
Recent Context
The USPS has been responsive to declining volume, but recent work hour
reductions will become increasingly difficult to replicate
Millions of hours
Non-career
Overtime
1,423
102
146
1,258
90
67
-12%
12M
(7%)
Career
Career
1,175
1,101
74M
(45%)
79M
(48%)
Overtime
2007
2009
Contents
Recent context
Base Case
REVENUE TRENDS
Volume
Transactional
Price
Increases capped
by inflation class
Price elasticities are
in flux due to
growing alternatives
Declining
steadily
COST TRENDS
USO Obligation
Fixed cost
base
Workforce costs
RHB pre-funding
Rising but
capped
Rising
cost per
hour
Delivery points
Retail locations
Sortation facilities
Preferred prices for
some products (e.g.,
non-profit mail)
driven by law
Legacy costs beyond
USPS control
Wages subject to
collective bargaining
177
Change in
volume
2009-2020
Portion of margin
available to cover
fixed costs, 2009
160
150
120
71%
Standard
21%
80
+4 billion
40
2009
8%
USPS Revenue
$ Billions
$68.1 B
An
An additional
additional 27
27 Billion
Billion
pieces
are
forecast
pieces are forecast to
to be
be
lost
lost (15%
(15% of
of total).
total). Assumes
Assumes
no
no loss
loss due
due to
to elasticity
elasticity
$11.8
$69.3 B
$16.8
$3.8
2009
Revenue
Volume
decline
The
The loss
loss in
in First-Class
First-Class
will
will be
be even
even higher
higher (37%
(37%
of
total),
lowering
the
of total), lowering the
average
average price
price
2020 Revenue
Prices
Prices forecast
forecast to
to rise
rise
with
inflation
with inflation
1 Calculated by applying the 2009 First-Class/Standard mix to 2020 prices. Excludes mix shift in any other categories
SOURCE: BCG; Global Insights; USPS Financial Forecast Model
Delivery network
(~150 million delivery points2)
Transportation
(220,000 vehicles)
1 Includes CPUs
2 Includes approximately 20 million PO Boxes
SOURCE: USPS FY 2009 10-K
64
2009
Mail volume
reduction
1.5%
1.5% per
per year
year drop
drop in
in
volume
volume (27B
(27B fewer
fewer mail
mail
pieces)
pieces)
SOURCE: USPS
1,245
56
Reduction in
Increase in
delivery points PO locations
Increase
Increase by
by 0.8%
0.8%
per
per year
year (~12
(~12
million
million new
new
delivery
delivery points)
points)
Reduction
in overhead
2020
Reduction
Reduction of
of
~800
~800 POs
POs
(2%
(2% of
of base)
base)
2.0-4.0
Inflation
(CPI at
1.9%)
1.3-2.5
Wages
Workers Comp
Health benefits
PAEA scheduled
pre-funding
Additional prefunding
Premiums
Normal costs
7.7
3.4
1.4
5.5
8.2
5.5
8.6
5.6
9.0
9.5
9.9
Additional pre-funding
payment + normal cost
for current employees2
Percent
of total
revenue
10.5
5.8
7.4
7.7
8.0
7.1
2.6
2.7
2.7
2.6
5.6
5.7
5.7
4.2
4.7
4.5
4.8
5.0
5.3
2.0
2.2
2.7
3.0
3.4
3.8
2009
10
11
12
13
14
15
16
17
18
19
2020
5%
12%
12%
13%
14%
14%
15%
16%
11%
11%
11%
12%
1 Based on OPM estimates of future liability, including RHB pre-funding and annual premiums
2 Current retiree health premiums in 2017-2020 are paid directly out of the fund, resulting in no operating expense
SOURCE: OPM estimates; P.L. 109-435
Base Case
The combination of the trends will put extreme pressure on USPS given it
is a largely fixed-cost network business
Revenue and cost per piece
$
2009-2020
growth
0.70
Cost
per piece
0.65
0.60
~ 4% per
year
0.55
0.50
Revenue
per piece
0.45
~ 2% per
year
0.40
0.35
0.30
2000
2005
2010
2015
2020
Base Case
The Base Case leads to a loss of $33 billion and cumulative losses of
$238 billion by 2020
$ Billions
Revenue and cost
Actual Forecast
96
94
92
90
88
86
84
82
80
78
76
74
72
70
68
66
Cumulative losses
238
0
-2
-3
205
-4
-6
+2.2%
p.a.1
RHB reset
-8
175
-10
Statutory
Statutory debt
debt
ceiling
ceiling of
of $15
$15 B
B
will
will be
be reached
reached
in
Oct
2010
in Oct 2010
-12
-14
-16
-18
Revenue
+0.5%
p.a.1
149
125
99
-20
-22
77
-24
58
-26
42
-28
27
-30
-32
-33
17
4 7 7
15
-34
0
07 08 09 10 11 12 13 14 15 16 17 18 20 20
07 08 09 10 11 12 13 14 15 16 17 18 19 20
07 08 09 10 11 12 13 14 15 16 17 18 19 20
Base Case
The financial outlook for the Postal Service is highly dependent on trends
in the general economy
Potential upside
Flattening of e-diversion
Contents
Recent context
Description
Actions Within
Postal Service
Control
improve productivity
May be challenging to achieve
Fundamental
Change
Nonlegislative
Legislative
support/approval needed
Most options require PRC approval, collective
bargaining, or political support
USPS can pursue actions within its control to reduce the FY2020 gap
Net income
$ Billions
Actual
Forecast
5
Breakeven
$115B cumulative
gap remains
-5
-10
-15
-20
-25
-30
-35
2005
2009
2020
USPS will continue to take aggressive action to drive revenue and control
costs
~$2B
Productivity improvements
~$10B
~$0.5B
Purchasing savings
~$0.5B
~$5B
Total
~$18B
~$123B
McKinsey & Company | 23
1 The Actions within Postal Service control case includes product and
service initiatives above the baseline to grow volume
Postal Service product and service initiatives
Key actions
Mail services
Package
services
Retail
services
demand through:
Increasing Small Business direct mail
First Class/Standard mail promotions
SOURCE: USPS
~ $2 billion
Processing
plant
operations
Increasing
world-class
productivity
Delivery
Customer
service
Admin
USPS already
processes
91% of mail
through
automation,
the best in the
world. Further
improvements
will be highly
challenging
Total 2020
~ $10 billion
income impact
McKinsey & Company | 25
Workforce
flexibility
Procurement
~ $0.5 billion
~ $0.5 billion
The Actions within Postal Service control case leads to a loss of $15
Billion and cumulative losses of $115 Billion by 2020
$ Billions
Revenue and cost
Actual Forecast
85
RHB reset
0
-2
-4
Actions within
management
control
-6
80
Cumulative losses
-8
-10
Cost +1.5%
p.a.1
75
-15
-16
-18
-20
100
88
76
Statutory
Statutory debt
debt
ceiling
of
$15
ceiling of $15 B
B
still
still reached
reached in
in
Oct
Oct 2010
2010
-12
-14
115
Cumulative
Cumulative losses
losses
are
are reduced
reduced to
to
$115B
from
$115B from
$238B
$238B
66
53
42
-22
70
-24
Revenue +1.2%
p.a.1
Base Case
33
25
-26
18
-28
14
-30
65
-32
-33
15
7 7
-34
0
07 08 09 10 11 12 13 14 15 16 17 18 19 20
07 08 09 10 11 12 13 14 15 16 17 18 19 20
07 08 09 10 11 12 13 14 15 16 17 18 19 20
Fundamental Change
Actual Forecast
5
Breakeven
-5
($15B)
FY2020
-10
-15
-20
-25
($33B)
FY2020
-30
-35
2005
2009
2020
McKinsey & Company | 28
Fundamental Change
stakeholders and is
challenging to implement
Many options require PRC
approval
All labor changes subject to
collective bargaining
Actions requiring
Legislative
Examples
legislative change
Includes changes to the base
legislation as well as issues
that have historically been
attached as annual riders (e.g.
additional restrictions on
closing Post Offices)
Fundamental Change
Non-legislative
R1
R2
Hybrid mail
Advertising
product
Products
and services
flexibility
R3
Pricing
Exigent price
increase
P1
Cover costs
of unprofitable
products
P2
Price cap
modification
Service levels
Changes to
Service standards
Delivery location
S1
S2
S3
Workforce
Changes to:
W1
Benefits
requirements
W2
Delivery
frequency
Workforce
flexibility
Legislative
Public policy
considerations
RHB
G1
USO subsidies
G2
Streamlined
oversight
G3
P3
S4
Access
Existing
USPS ideas
Foreign post
examples
from
Accenture
Other ideas
from
McKinsey
Non-legislative
Legislative
R1
Hybrid Mail
Products
Advertising
R2
products
Products and
R3 Services
Flexibility
Non-legislative
Legislative
P1
Exigent rate
increase
P2 Cover costs
Price cap
P3
modification
Non-legislative
Legislative
S1
S2
S3
Service
standards
Delivery
location
Delivery
frequency
S4 Access
Change service levels from 1-3 day to 2-5 days for FirstClass Mail enabling simplified and standardized mail
flows with minimal impact on consumers/businesses
Non-legislative
Legislative
W1
W2
Workforce
flexibility
Benefits
requirements
Implement initiatives to
Improve workforce flexibility and leverage natural shift
in employee mix due to 5% annual attrition rate
Align workforce costs with overall market trends
Non-legislative
Legislative
G1 RHB
Defer payments
Shift to a pay as you go system comparable to other
federal agencies and private sector companies
G2 USO subsidies
G3
Streamlined
oversight
Contents
Recent context
In the short run, USPS will violate its statutory financing requirements
in October 2010
Only a limited subset of options will take effect quickly enough to address
the short term financing requirement