The year is not yet over, but already it has brought significant changes in the postal and shipping industry, and 2024 promises more of the same. While many of the changes are well-known and understood, there are other changes that happened this year or are still to come next year, and many may not be aware of them.
2023 Recap. At the time this article was written, although the USPS’s Fiscal Year 2023 was complete, the calendar year still had two months to go. That being said, let’s look back at the changes we’ve already seen in calendar year 2023. In all honesty, there are too many to mention in one article, so I will hit the highlights. And while many changes brought challenges, in some cases, they also brought opportunities.
One of the most significant changes for the Postal Service and the mailing industry in 2023 has been the start of the implementation of the USPS’s network redesign. The network changes are part of the USPS’s 10-year Delivering For America (DFA) strategic plan and when completed will consist of 60-65 Regional Processing & Distribution Centers (RPDCs), 190+/- Local Processing Centers (LPCs), and 400+ Sorting and Delivery Centers (S&DCs), and thousands of Delivery Units that will remain as they are today. The USPS is redesigning its network (and modernizing existing facilities) to reduce transportation costs, improve service and efficiency, and support growth of its parcel business. 2023 so far has seen implementation of the first RPDC in Richmond, VA, along with supporting LPCs for that geographic area. The S&DC implementation is on a separate track and is driven, in part, by the need for USPS to ready its Electric Vehicle infrastructure prior to deployment of its electric vehicle fleet. To date, the USPS has implemented 23 or so S&DCs.
Another transformation initiative underway by the USPS as part of its DFA focuses on transportation and logistics and has included changes such as reduction in outsourced transportation contracts, increase in USPS-operated transportation, new transportation contract management systems, a dynamic “freight auction” system for USPS to fill short-notice transportation needs from the competitive logistics marketplace, and many more changes designed to reduce the USPS’s transportation costs and improve efficiency. In 2023, the USPS has also eliminated outside contracts of seven Terminal Handling System (THS) facilities and six Surface Transfer Facilities (STCs), pulling back management of the facilities to USPS.
2023 also has brought the challenge of significant mail volume decline. At the time this article was written the final FY2023 volumes were not yet published by the USPS, but as of the end of Quarter 3 FY2023, total mail volume was down 8.6% compared to the same period for the previous year. First-Class Mail volume was down 6.1%, Marketing Mail volume was down 10.3%, Periodicals mail volume was down 12.5%. USPS Competitive Services (parcels) total volumes were also down 3.4%.
The USPS in 2023 implemented 2 price increases for its Market Dominant mail products: one in January and another in July. The USPS in July introduced new SCF pallet discounts for Marketing Mail, providing new discount opportunities for the industry. The USPS also announced a new growth incentive for 2024 as well as proposing the first Market Dominant Negotiated Service Agreement (NSA) in the last decade (still under consideration by the Postal Regulatory Commission).
Both the USPS and the mailing industry in 2023 have continued to face labor shortages. The USPS’s labor issues appear focused on carriers and specific geographic areas of the country. The USPS in 2023 implemented changes from a new rural route evaluation system, which resulted in significant wage reductions for many rural carriers.
With the peak shipping and mailing season only just underway at the time this article was written, it remains to be seen whether the USPS will manage it successfully as it did the 2022 peak season. Unlike some of its competitors, the USPS decided not to introduce a peak surcharge on parcels and also introduced a new ground product while consolidating/eliminating other parcel offerings. The USPS has said it is only hiring about 9-10,000 seasonal employees for the peak season, a significant reduction over recent years.
On the mail preparation side, the USPS in 2023 eliminated hard-copy Address Correction Service (ACS) notices, implemented CASS Cycle O, eliminated the use of sacks for some entry points and mailing types, implemented new preparation rules for shipments of hazardous materials, proposed elimination of Change Service Requested Option 1 service for ballot mail, and published a Flats Plan as required by the 2021 Postal Service Reform Act (PSRA). The USPS also delayed implementation of additional postal assessment for Category 14 undocumented piece errors in Seamless Acceptance mailings.
For USPS service performance, in addition to embarking on its network redesign, the Postal Service published a new public Service Performance Dashboard, which also was a requirement included in the 2021 Postal Service Reform Act (PSRA). The new dashboard is live and additional functionality is scheduled to be implemented. In other service performance related activity, the Postal Regulatory Commission (PRC) in 2023 held a proceeding to analyze the feasibility of returning USPS service standards to those in place in 2012 (an analysis required by the Consolidated Appropriations Act of 2022). The PRC gathered input from stakeholders but ultimately determined there was insufficient data for it to make any policy recommendation.
This year, the USPS awarded contracts for 9,250 battery electric vehicles and more than 14,000 charging stations to be deployed at postal facilities. Delivery of the electric vehicles is intended to begin in December of 2023.
The USPS also received the Public Service Award for its Election Mail program from the nonpartisan Election Verification Network. The award is given every year to a public official or governmental unit for protecting and promoting election integrity and verifiable elections.
On the legislative front, 2023 has not seen a great deal of postal activity after passage of the historic Postal Service Reform Act in 2021. The House held an oversight hearing on the USPS in May 2023, but no additional hearings have been held so far this year. While the Senate in fall 2023 confirmed the Presidential nominations of Robert Taub and Tom Day as PRC Commissioners, there has not yet been any confirmations for two positions on the USPS Board of Governors that will be vacant as of mid-December.
What’s Ahead for 2024?
As the mailing industry looks ahead to 2024, it should be prepared for even more changes from the USPS as it ramps up its network redesign implementation. The USPS has said that it plans to implement nine more RPDCs by the end of 2024 and 26 LPCs – handling a total of about 25% of all mail and packages volume. It also plans to implement about 50 more S&DCs (though some of those will be parcel transfer hubs) by the end of 2024. As these implementations roll out, mailers need to watch the Mail Direction File and Labeling List changes as well as USPS Industry Alerts to be prepared for the necessary changes in preparation and entry.
The USPS in 2024 will not only offer the same Promotions that it did in 2023, it also will offer a new Growth Incentive that will give mail owners who grow volume in calendar year 2024 compared to Fiscal Year 2023 a 30% discount credit of the average price paid per piece over 1 million pieces. The USPS is in the process of rolling out implementation guidelines with registration planned to begin in November and go through June 2024. The USPS hopes to see growth in First-Class Mail and Marketing Mail volumes as a result of the Growth Incentive.
Effective January 28, 2024, the USPS plans to eliminate the use of hard-copy postage statements. The USPS in October reported that about eight to nine percent of statements were still being submitted hard-copy versus mailers using electronic documentation. In other anticipated mail preparation and entry changes, the USPS sometime in 2024 likely will begin to assess additional postage for Category 14 Undocumented piece errors in Seamless Acceptance; the USPS will begin postage assessment for use of hard-copy ACS notice STIDs (which were eliminated in 2023); the USPS will continue to implement and increase its use of a new Mail Irregularity Reporting System; the USPS will continue its review of over 900 policy and procedure manuals – including the Domestic Mail Manual (DMM) – with changes implemented; the USPS in January of 2024 plans to allow bulk exchange of eDoc info; and more to come!
On USPS service performance measurement, the USPS, beginning in January, plans to hold webinars to educate mailers on how to access and investigate mail pieces not included in the USPS Service Performance Measurement system through their Mailer Scorecard. The USPS also will implement additional functionality enhancements to its public Service Performance dashboard.
In October of this year, the USPS filed for a January 2024 price increase of about two percent and has said it likely will also increase prices again in July 2024, forecasting about seven percent average increase for that change. The USPS may continue the creation of new workshare discounts, such as the SCF pallet discount it created in 2023, to support optimal mail prep and entry in the redesigned network. 2024 will also bring the industry one year closer to a 5-year review of the rate-making system, which the Postal Regulatory Commission (PRC) repeatedly has said it will perform in FY2026 (fall of calendar year 2025).
For 2024, the outlook for mail volume may be more optimistic. If the USPS’s growth incentive stimulates volume growth the way it is designed to, increases may be seen in First-Class Mail and Marketing Mail. In addition, a recent study released by The Winterberry Group forecasts that direct marketers’ spend on direct mail will at least hold steady if economic conditions continue to improve, and may grow as innovation in the channel continues.
Since 2024 marks a Presidential election year, volume increases in political mail are expected along with ballot mail. Although the USPS Board of Governors has formed an Election Mail Committee, which has been considering creating a Ballot Mail specific product/price, it is unlikely that would be implemented in time for the 2024 election cycle.
Since there have not yet been any nominations for the 2 vacancies that will occur on the USPS Board of Governors in mid-December 2023, it is possible that 2024 will see the first time the Board has been understaffed since 2022 when the Board was brought back up to full strength after more than a decade. For many years the USPS Board of Governors was entirely vacant except for the Postmaster General and Deputy Postmaster General.
The USPS will begin the rollout of its Next-Generation delivery vehicles in 2024 with the first anticipated rollout in June. By 2028, the USPS plans to purchase over 106,000 new delivery vehicles including at least 66,000 electric vehicles. The USPS in August 2022 received $3 billion from Congress in 2023 towards purchase of electric vehicles and building the necessary charging infrastructure.
The USPS in fall of 2024 will renegotiate contracts with one of its major employee unions — the American Postal Workers Union (APWU) and 2024 may also see negotiation or binding arbitration with the other of its largest employee unions — the National Association of Letter Carriers (NALC) — since those negotiations begin in 2023 but had not yet been completed at the time this article was written.
The USPS has said that in FY2024 it plans to update its Delivering for America (DFA) strategic plan, which could include revisions to financial projections and other elements of the plan based on its progress in the first three years.
Of course, these are just the highlights of what the mailing industry can expect to see in 2024. Stay close to your mailing industry association to keep tabs on other changes as they are announced!
This article originally appeared in the November/December, 2023 issue of Mailing Systems Technology.