With a proposed rate increase of 15% looming for magazine postage, and in spite of Herculean efforts by publishers to help their government partners become more efficient, it's time for stakeholders to fight back and demand a rate that's supported by real costs, not ingrained inefficiency.
Sometimes business costs increase because of market forces. When they do, prudent companies do the best they can to economize, streamline their operations and minimize the impact of these costs on their business and their customers.
But in this case the proposed steep hike by the Postal Service doesn't reflect changes in the marketplace. On the contrary, it is the product of a bureaucracy that has failed to implement hundreds of millions of dollars in cost savings identified by the Magazine Publishers of America and the Postal Service over the past two years.
THIRD HIKE SINCE `95
This will be the third rate increase imposed on magazine publishers by the Postal Service since 1995-a period in which publishers also have had to deal with instability in paper prices. The pending 15% increase the postal service is seeking is significantly more than inflation, more than what's justified by increased costs and far more than will be paid by senders of other classes of mail.
Why is this happening?
The simple answer is that the Postal Service has failed to turn itself from inefficient government bureaucracy into the efficient market competitor it claims it wants to be. In fact, the independent Postal Rate Commission itself is alarmed at the inefficient handling of periodicals by the Postal Service, noting that per-piece costs appear to have increased excessively from 1992 to 1999. In an order to the Postal Service on March 28, the commission demanded Postal Service officials testify about this "negative trend."
NEED FOR EFFICIENCY
Its own management admits that the Postal Service must become far more efficient to survive. "We have to bring our internal cost structure down and restrain prices," Postmaster General William J. Henderson told the audience at the Postal Forum in Nashville on March 20. "That is the only way we will survive as key segments of our letter mail volume migrate to electronic messaging."
The same postmaster general made a commitment to MPA officials last year to keep the rate increase to a single digit. And that's the promise we expect the Postal Service would keep. After all, MPA and the industry have worked feverishly for the past two years hand in hand with the Postal Service to identify new handling procedures and strategies that could dramatically reduce costs for the Postal Service.
A 42-page report issued jointly in March by the MPA, American Business Press and the Postal Service identified 15 broad, major recommendations on how the Postal Service could contain costs associated with handling periodicals. They range from basic and obvious issues-such as improving the accuracy of barcoded addressing and reducing bundle breakage and the manual handling that results-to management, transportation and facility siting issues.
MEASURES NOT IMPLEMENTED
Yet this same Postal Service management that is supposedly committed to a "Breakthrough Productivity" program has either refused or proven unable to implement these cost-saving measures we identified with them as unpaid consultants.
The Postal Service says magazines are the "anchor tenants of the postal mall." An efficient, competitive business would do everything it could to work with its best customers to become more efficient and find ways together to improve service and cut costs.
But the opposite approach seems to hold at the Postal Service, an approach much more in keeping with the bureaucratic government agency model the Postal Service insists it wants to shed.
Magazine publishers are justifiably unwilling to accept this unwarranted and unjustified rate increase as a cost of doing business without a fight. There is no doubt that increases of this magnitude are a significant bottom-line issue for publishers, and if the Postal Service succeeds in implementing them, they will have to be reflected in increased cost for readers and advertisers over the next few years.
WE CAN'T WAIT
We can't wait idly for the Postal Service to recognize its mistake and keep its promise of a single-digit rate hike. Whatever increase finally is imposed will become part of the postal rate base forever. The next increase the Postal Service seeks one or two years from now will be built on top of this one.
Everyone who will be hurt, publishers and advertisers alike, have a stake in working together to fight the increase and make the Postal Service keep its word. We must make sure costs are reasonable, before it costs all of us.
Ms. Link is president-CEO, Magazine Publishers of America, New York.