The US Postal Service announced yesterday that they posted a loss of $2.8 billion dollars in the fiscal year ended September 30.

The main culprits according to the USPS was slowing mail volume and costs associated with pre-funding retiree health benefits.

This continues a general pattern that despite efforts of the Postmaster General and others to cut costs and streamline the agency that as a stand alone entity the USPS can’t survive using a flawed business model.

Mail volume has been slowing for several years now and has accelerated as internet usage has increased.  How many of us now receive our bank, credit card, brokerage and other statements via e-mail instead of by regular postal or snail mail?  To add to that how many of us pay our bills online for the convenience and to save the hassle of finding a stamp?  Charities now receive millions of dollars in contributions online which helps their cash flow, but cuts mail volume for the postal service.

The younger generation has grown up on e-mail and prefers to use e-mail, text messaging and e-cards rather than mail a letter or a card.  That has resulted in a nation of youth that also doesn’t know how to compose a letter ( a different subject altogether) and once again nothing for the postal service to deliver.

And what about the current economic crisis we are in?  The wave of bankruptcies and mergers is already having an effect on mail volume as financial firms that once flooded the mail with refinancing and credit card offers have either gone out of business or cut back because the credit crunch has dried up lending opportunities.

Most businesses manage to adapt to change.  If they don’t they go out of business.  The USPS has been taking baby steps to address their problems, but their biggest one is still the one they would rather avoid.  I am speaking about labor costs.  Just like our very troubled auto industry the postal service is being weighed down by high labor costs for both current employees and retirees.  Yes that have somehow managed to reduce overall work hours but that is not enough.

As automation has swept through virtually every industry on earth the postal service is still very wedded to labor intensive activities.  But it isn’t for a lack of effort.  While they have managed to automate some tasks, the powerful labor union the represents the workers has rebuffed efforts to truly streamline the agency and allow them to reduce the overhead associated with sorting and delivering the mail.

Postal customers need to share some of the blame here as well.  We are very spoiled by six day-a-week mail delivery, cheap postage rates and literally thousands of post offices that serve a small customer base all for the sake of convenience.  Retailers close unprofitable locations, the postal service just subsidizes them as there is very little incentive to close them.

Well I hate to tell you this but times have changed.  We are in a fast paced technologically centered world now and mail services and delivery are inefficient and costly bureaucracies that need to be torn apart and restructured to meet the challenges of what lies ahead.

The postal service is an anachronism in today’s world and will die a slow and painful death unless swift action is taken to overhaul it immediately.