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Strategic Planning within the USPS

ASP Annual Conference

“Strategy is Global: Global Challenges, Global Solutions”

May 2015

Keith Ross Butler

Strategic Initiatives Program Manager

USPS Office of Strategic Planning

®

The United States Postal Service has a strong and seasoned strategic planning and

execution process, which has a long history within the organization.

This session will focus on the USPS strategic planning process, challenges facing the

organization, and trends that highlight the future of the USPS.

Participants will learn about the following:

A. Key elements of USPS strategic planning

B. Legislative mandates and long-term liabilities affecting the organization

C. Portfolio management and strategic initiatives

D. Emerging trends facing the USPS

ASP Conference – May, 2015 2

Introduction

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Key Elements of USPS Strategic

Planning


® Mission & Vision

Mission:

The mission of the Postal Service is to provide a

reliable, efficient, trusted and affordable universal

delivery service* that connects people and helps

businesses grow.

*While not explicitly defined, the Universal Service Obligation (USO) is broadly outlined in statute to include: geographic scope, range of products, access to services and facilities, delivery frequency, affordable and uniform pricing, service quality, and mail security.


Vision:

The Postal Service is dedicated to improving its

services, products and capabilities to adapt to the

changing needs of customers in the digital age.

®


Strategy Defined

®

Strategy is about making choices to best meet our

customer’s current and future needs…


Strategic Choices

Source: Playing to Win: How Strategy Really Works, A.G. Lafley & Roger

Martin, HBR Press, 2013

®

Purpose: Operate a world-class enterprise strategy office that enables USPS leadership to

achieve business outcomes. We accomplish this by providing key insights and analysis,

coordinating the implementation of the highest priority strategic initiatives, and maintaining the

confidence of key stakeholders in postal strategies.

Chief Financial Officer Joe Corbett

Office of Strategic Planning Emil Dzuray, Director

Strategic Business Planning Office

Preston Finley, Manager

Strategic Management Office

J O Smith, Manager

Organizational Structure

Strategic Insights & Analysis Executive strategy, planning & ideation workshops

Executive Business Insights forums

Insight & analysis whitepapers

Corporate insights

management system

Strategic Portfolio Management

Support initiative teams with:

Planning and Chartering

Roadmap Development and Program Planning

Risk Assessment

DRIVE Status Reporting

Stakeholder Engagement

Corporate Strategy & Performance Reporting

Five Year Strategic

Plan Annual Report to Congress

Comprehensive Statement of Operations

Annual Performance Plan

Primary Functions and Services

14 in-house staff members comprised of Strategic Project Managers, Strategic Planning Specialists and Strategic Program Managers

Manage Enterprise Project Management Office which employs 60-100 contractors who support corporate Project Management Offices (PMOs) for strategic initiatives

Office of Strategic Planning

®

USPS Four Key Strategies (2012-15) • Strengthen our Business-to-Consumer Channel

by keeping costs low and service levels high for mail senders and

promoting high quality experiences for receivers.

• Improve our Customer’s Experience

at all touch points in ways that matter most to customers – both

senders and receivers -- and in person and online.

• Compete for the Package Business

by building a world class package platform that offers affordable,

simple, fast, visible and secure package delivery services.

• Become a Leaner, Faster, and Smarter Organization

by removing excess capacity, improving efficiencies, achieving 100%

customer, product and employee visibility, building competitive

workforce, and strengthen financial liquidity and risk management

The four focus areas align all strategic initiatives with ƒcorporate and unit performance goals (NPA), as well as staff pay for performance goals (PES).


Focus Areas

®

Leverage market-leading

physical assets

Incorporate evolving

logistics solutions

Develop a structure that

fosters agility and

innovation

Boost the demand for mail

and packages

Expand and simplify

induction points

Integrate emerging digital,

big data, and consumer

trends to grow

Expand delivery solutions

Capitalize on the

expansion of

E-commerce and

technology

Optimize route flexibility

and productivity

First Mile Physical Network Last Mile

Leverage USPS’s brand,

trust, and reputation to

drive profit

Provide digitally-enabled

security, authentication,

tools, and insights to a

broad range of customers

Digital

Technology People

Cross-functional enablers that strengthen the Platforms

Finance Legal Communications Operations Marketing

Enterprise

Foundation

World-Class

Customer Experience Brand World-Class

Reliability and Visibility Culture of Delivery

Requirements for growth and innovation

Security Simplicity

4 Innovation Platforms Key to Future Success

Strategic Capabilities


®

Legislative Mandates &

Long-Term Liabilities


®


PAEA

• In 2003, the President’s Commission on the Postal Service made

several recommendations in their published report.

• In 2006, legislation was proposed within Congress which was later

passed as the Postal Accountability and Enhancement Act (PAEA).

• This law separated USPS products into two categories:

– Market Dominant (ex: First Class Mail, Standard Mail, Periodicals)

– Market Competitive (ex: Priority Mail, Express Mail)

• The law also required the USPS to pre-fund retiree health benefits.

This prefunding required the service to pay $75Billion from 2007 to

2017.

• The financial impacts of PAEA and the 2008 economic recession

severely damaged the financial viability of the USPS and its business

model.

®

The USPS has made major strides to improve its finances. However, legislative and

regulatory action is needed to address outstanding financial difficulties.

$56.7B or

roughly 80% of

total liabilities


Long-Term Liabilities

®

Portfolio Management &

Strategic Initiatives


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DRIVE Portfolio Governance Structure

SMO track/report portfolio

status/issues/portfolio risks

to ELT using

standard tool/process

ILs track/report program

status/issues/initiative

risks to SMO/ELT using

standard tool/process

Project Managers

track/report task

status/project risks using

Detailed Project

Management Plans

Standard Processes

Portfolio Management


®

Report name Information reported Screenshot

• Portfolio KPI performance variance • Financial and non-financial impacts • Actuals v. plan-to-date and v. plan

• All milestones and KPIs status and target dates and performance

• Log of risks, issues, comments and corrective actions

• List of cross portfolio interdependencies

SMO produces 4 standardized reports:

Portfolio Performance Chart

Initiative Roadmaps

• Initiative milestone variance • Initiative impact variance • Initiative risk status • Initiative update status

Portfolio Summary Dashboard

Initiative & Roadmap

Performance Dashboards

• Key milestone variance • KPI status and variance • Risks status • Key issue and corrective action status • Status of interdependencies

Portfolio Reporting


®

2008

economic

recession

As a result of growing challenges to its business model, the USPS faced four years

of dramatic financial decline.

Major Challenges to the USPS

Steadily

declining

mail volume

Economic

recession

Rising

labor costs

Large fixed

cost base

$64

$66

$68

$70

$72

$74

$76

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

($) Billions

*Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities

**As stated in the 2010 USPS Action Plan

Fiscal Year End

Without fundamental change, cumulative

losses were projected to reach $238 billion

by the end of FY2020.**

So how did the USPS turn things around?

RHB

prefunding

mandate

USPS Financial Situation: FY2007- FY2011

Revenue Controllable Cost*


The Financial Crisis

®

$64

$66

$68

$70

$72

$74

$76

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

USPS management realized that legislative reform would require time, and took

decisive action to ensure the organization’s solvency.


Key Management Decisions

Restructured

Headquarters

Prioritized

payments vs.

capital spending

Generated

revenue from

sales & Last

Mile services

Created

strategic

management

framework

Sought

legislative &

regulatory

relief

Fiscal Year End

($) Billions USPS Financial Situation: FY2007- FY2011



Emergency Initiatives

®

$64

$66

$68

$70

$72

$74

$76

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

To address shrinking volume, the USPS created efficiencies by rationalizing the

network and improving the use of data to inform management decisions.

FY2015 Q1



Adjusted hours for

9,700+ Post Offices

via POStPlan

Renegotiated

agreements with

Unions & suppliers

Introduced

Intelligent Mail

Barcode

Consolidated 143

Mail Processing

Facilities

USPS Financial Situation: FY2012- Present ($) Billions

Fiscal Year End



Cost Reduction Initiatives

®

$64

$66

$68

$70

$72

$74

$76

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

While the USPS cut costs, management also focused on growing the package

business and engaging customers in innovative ways.



Improved customer

interactions outside

retail locations

(e.g., online/mobile)

Enhanced Every

Door Direct Mail

(EDDM) product

Piloted

innovative

products &

services

Enhanced

product visibility

and scanning


Fiscal Year End

FY2015 Q1



Innovation Platforms

®

$64

$66

$68

$70

$72

$74

$76

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Key management decisions have stabilized the USPS and created confidence in the

organization’s future.


Key Accomplishments

Fiscal Year End

Regained

revenue growth

in FY2013

Grew package

market share

Expanded

innovative

products and

partnerships

Reduced

network and

labor costs

Returned to a

controllable

income profit


FY2015 Q1



Impact of Decisions

®

Building on these achievements, the USPS is committed to remaining the world’s

premier mail and package delivery business.

Speed the pace

of innovation Invest in the future

Engage and empower

employees

Support product

growth through

network efficiencies

USPS Future Priorities

$64

$66

$68

$70

$72

$74

$76

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

**Projected financials

FY2015 Q1


Fiscal Year End

USPS Financial Situation & 5 Year Outlook ($) Billions


**Projections based on 2013 USPS Five Year Plan

How do we achieve financial stability?


Sustainable Future

®

WE ASSESSED 23 EMERGING TRENDS IN THREE MAJOR

CATEGORIES…

…LET’S EXPLORE THEM

Emerging Trends Facing the USPS


®

“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” - Wayne Gretzky

OSP endeavors to figure out where the Postal Service’s ‘puck’ will be in the future


®

Social Trends

Technology Trends

Industry Trends

Social trends capture the patterns of human interaction,

movement, and preference

Technology trends include the application of scientific knowledge

and engineering in the digital age

Industry trends are new developments shaping how businesses

are organized and how transactions take place


®

8 Social Trends


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8 Technology Trends


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7 Industry Trends


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What strategies will position the USPS to thrive in

any Future Scenario?

Capability 1 Capability 2 Capability n






Build out capabilities that exist in all scenarios, identify triggers for outlying

scenarios, and be nimble!

Scenario Planning

®

The United States Postal Service has created momentum for future success,

despite its financial challenges.

The Postal Service is recovering from a crisis caused by the economic recession of

2008 and the prefunding requirements in the Postal Accountability and Enhancement

Act (PAEA) of 2006.

USPS management improved the Postal Service’s finances by cutting costs and

pursuing a growth strategy for the future.

The Postal Service reported revenue growth of $800M and $1.1B controllable

income in the first quarter of FY2015.

Legislative and regulatory action is essential for the USPS to become financially

sustainable and cover its $46B in unfunded liabilities.

The United States Postal Service needs legislative and regulatory relief

to achieve long-term sustainability.


Conclusion

®

Q&A


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