Transcription of USPS Future Business Model
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USPS Future Business Model
usps Future Business ModelMarch 2, 2010 McKinsey & Company1|Contents Recent context Base case minimal management actions Addressing the challenge Short term requirementsMcKinsey & Company2| usps is experiencing unprecedented losses SOURCE: usps ; 109-435 (PAEA) profit/loss$ billionsPostal Act 2006 signed into lawNote: All years in this document refer to Fiscal Years ending on Sept 301 Includes one-time $4 billion deferral2 Per 2010 Integrated Financial Plan (January Year-to-Date results are favorable to Plan) pre-funding,$ billionsKey drivers Revenue declines due to: E-diversion of First-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 Cost savings, while substantial, have been less than revenue declines due to high fixed costs of the networkNo rate increase 2003-2006 Recent ContextMcKinsey & Company3|Losses have been driven by volume declines, RHB pre-funding requirements and limitations on cost deferralCost pre-funding of change in net income 2006 vs.
SOURCE: BCG; USPS Financial Forecasting Model BCG volume forecast Billions of pieces Change in volume 2009-2020 Portion of margin available to cover fixed costs, 2009-31 billion +4 billion (1.5%) per year <-1 billion 71% 21% Other (e.g., 8% packages, periodicals) Base Case: Volume Declines 150 Standard First Class 2009 2020 177
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