May 17, 2020

USPS could default on life raft loans in October

Supply Chain Digital
United States Postal Service
usps
US
Freddie Pierce
2 min
As debt continues to mount, is there any way to fix the United States Postal Service?
I ran across an interesting piece in Bloomberg this week that talked about the mounting concerns surrounding the United States Postal Service. The piec...

I ran across an interesting piece in Bloomberg this week that talked about the mounting concerns surrounding the United States Postal Service.

The piece begins in a rather sarcastic fashion, naming three “remarkable facts” about the USPS, including:

1.) Its workers have no-layoff contracts

2.) No post office can be closed solely because it loses money

3.) As revealed by Bloomberg Businessweek, the postal service is so dependent on low-profit junk mail for revenue that it has its marketing officer lobby to banks to not switch to electronic statements

Those are pretty substantial facts that are more than likely contributing to the postal services’ downfall. Last year, the USPS lost $8 billion, and was kept alive by a $15 billion loan from the Treasury. With problems continuing to arise in 2011, the USPS is in danger of defaulting on those loans in October.

There are many inherent problems with the USPS, beginning with total mail volume. Thanks to homegrown delivery stars UPS and FedEx and the movement to paperless, online services, total mail volume has fallen 20 percent between 2006 and 2010.

According to Bloomberg, the biggest drop has been in first-class mail, the USPS’ most profitable type.

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Postmaster General Patrick Donahoe has floated the idea of closing nearly 4,000 of the nearly 32,000 USPS branches around the country, but that plan would only save an estimated $200 million.

As Bloomberg notes, however, closing branches “doesn’t get to the root of the fiscal problem.” Thanks to increasing salaries and a cushy benefits program, 80 percent of the USPS budget is spent on employee compensation. Compare that cost to workers for UPS (61 percent) and FedEx (43 percent) and its clear-cut why the USPS is in so much trouble.

Bills have been sponsored by politicians calling for measures such as branch closures, an end to Saturday service and an increase in employees pay toward health care and life insurance.

Something has got to be done regarding the USPS, as the government-run entity is clearly outdated and needs an overhaul. What the changes will be at this point are anybody’s guess, but Postal Services budget cuts appear to be on the horizon.

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Jun 19, 2021

Driver shortages: Why the industry needs to be worried

Logistics
SCALA
supplychain
Brexit
Rob Wright, Executive Director...
4 min
Logistics professionals need urgent solutions to a shortage in drivers caused by a perfect storm of Brexit, COVID-19 and compounding economic factors

While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks. 

A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so. 

What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.

"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"


That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.

But where has this skills shortage stemmed from? 

Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.

COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.

It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing. 

So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done? 

Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change. 

Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.

Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line. 

On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains. 

Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months. 
 

Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector

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