Introduction
The paper is intended to develop a strategic management accounting report about the United States Postal Service (USPS) to analyse its current position and performance in the market in comparison with its competitors in terms of cost, financials, business strategies and actions. Strategic management accounting is the process of analysing the accounting data for the strategic business decision making (Kaplan & Atkinson, 2015; CIMA, n.d.; Jack, 2009).
United Stated Postal Service (USPS) is the federal agency of United Stated to serve the postal services to the nation. It is one of the largest employers in the country and provides the services of mailing and shipping across the country and internationally (USPS, 2016). It is an independent agency that has been authorised by the United States Constitutions (United States Postal Service, 2005).
Background
Although United States Postal Service is well known and the federal service providers, however, from the last many years, it has been facing the dramatic challenges and issues in terms of customers’ complaints. The horrible stories have been published that explained that the USPS has failed to provide the satisfactory services to the customers across the country. The numbers of complaints emerged for late delivery of the posts. United States Postal Service is a federal agency. However, it was begun with the idea to run the agency using the private sector business model i.e. to reduce the cost and charge the adequate and reasonable prices of the services from the customers (Fortune, 2012).
The management took various measurements, and the meetings were also done to understand the reasons for the problems in the services and post deliveries. The management of the company decided to take the business running and surviving and develop the business strategies of improving the operations and services while increasing the cost. However, the agency has now defaulted of billions of dollars and failed to make the payments that it was owned by the treasury department of U.S. to pay the retirees for their health benefits (Fortune, 2012).. It means that the agency has failed to run as the business company and to generate enough money from its operations to pay for its payrolls.
USPS has been involved in cutting the cost of the business operations since it has developed. However, in cutting the cost, the company has failed to deliver the reasonable service to the customers and even to generate the funds for its payrolls and operations. The major problems behind these challenges are as follows:
Confusion in the Business Model
The first major problem with the United Stated Postal Service is the uncertainty and misunderstanding of the business model. It was aimed to run the mail service as the business corporation. However, when the company increased its cost to improve the services, no plan was made to increases the prices. However, being the private business company, the cost reduction is important, though, in the case of an increase in the cost, the prices also rise. Cost Cutting is very important for the business organisations (Rothberg, 2012).
USPS began to hire more labours while shifting the focus from cost reduction to improve in the service. The hiring of the workers was resulted in the high cost to the business though some improvements were made in the service efficiency. Rather than developing the proper view of the business, USPS has been involved in providing the postal services across the nation. However, being a business corporation, it was needed to design the business, planning for keeping the focus on the profitable business operations and reducing the unprofitable operational activities that directly impact the business cost. It was completely confused and considered that the business could not be sustainable until the prices would be high or the service would be sacrificed (Fortune, 2012).
Unplanned Business Strategies
USPS has no well defined and well planned business strategies, as the accountant was failed to contribute successfully in the strategy planning and decision making. The management of the company did not develop the strategies based on the changes and process used for mailing in the market. United States Postal Service has complex transportation system as well it has various post offices across the country that has resulted in the complexity in the day to day operations (Fortune, 2012).
United States Postal Service, rather than planning for the business strategies to improve the operations, considered the quick decisions to increase the cost by hiring more staff and labour to improve the delivery time and service of the post. However, on the other side, the postal services operations around the world have changed from complexity to simplicity and reduction in the waste operational activities. The companies are now using advanced technologies to run the operations of many locations from one place (Fortune, 2012).
USPS on increasing the operational cost did not plan to lift up the prices and charges to the customers. It was reported earlier that almost 85% of the budget of the company went in the payrolls. However, the company again hired more staff to improve the services (Fortune, 2012); it means that its payroll cost would be increased to the greater extent. It has already proved as the company has defaulted $5.5 million to treasury department for payrolls.
No Benchmarking
Being a business company, benchmarking is very important for USPS to look at the operations, activities, prices, cost, strategies and staffing techniques of the competitors in the market. Its major competitor (Hoovers, 2015), United Parcel is the best service provider in the United Stated as compared to United Stated Postal Service. United Parcel takes next day delivery time for the same distant post for that USPS takes three days for delivery. The service delivery and consistency in the service helped United Parcel to attract half of the market of United States. Rather than getting the strategies and plans based on the assessment of the competitor, United Stated Postal Service had invested $950 million in reducing the delivery time by increasing auxiliary and bulk mail centres (Fortune, 2012).
Serve the Nation
Though United States Postal Service was developed as a business company, however, being a federal agency, it has a constant pressure from the government to serve the nation. The Congress imposed that USPS must serve the whole nation and bind them together. For this purpose, it has opened the postal offices and centres at various locations, where even not really required (Fortune, 2012).
Alternatives
As United States Postal Service (USPS) has been developed to run as the business company, therefore, rather than simply investing to improve the services, it is needed to develop a proper strategic plan, strategies for making decisions for the business process and operations. To improve the efficiency of the business, the company has to change its business model at first.
The business model is one of the best approaches to develop and deliver double digit income and return. Cost reduction, fast service delivery and flexibility, these are the basic aspects of the best business model. Many of the greater organisations in the world are successful because of the business models such as Zara, a fast fashion retailer (Schlossberg, 2015). Therefore, USPS, at first, is needed to change its business model.
USPS has developed a customer-focused business model; however, delivering the service quality to the customers, it is also needed to improve the cost-benefits of the company and to earn noteworthy income. The company is failed to pay for the payrolls and health benefits of the retirees; it means that it has not generated the sufficient income. Therefore, the balance in the cost cutting and the service quality is very important to run the business smoothly, profitable and sustainable.
Proposed Solutions
Complete Privatisation
The process of post services has changed around the world. Recently, Royal Mail, the postal company in the UK has privatised fully. The government of UK believed that the complete privatisation was very important to secure the long term future of Royal Mail (Denton, 2015). According to the field experts and scholars, the privatisation improved the business process, increase the efficiency and improve the use of public resources (Okten & Arin, 2001). Royal Mail has reported the number of improvements in its operations and business process such as technological advancements, increase in international services, improvements in shipping and mailings, etc. (Royal Mail, 2015).
Therefore, United States Postal Service must be privatised so that the investors and shareholders will provide enough funds and services, further; the cost will be reduced to increase the business efficiency. The private owners will focus on alternative solutions such as information technology to improve the service quality rather than increasing the cost by hiring more employees.
Open Business Model
Based on the privatisation, the company is needed to develop an open business model to encourage creativity and innovation within the organisation (Chesbrouhg, 2007). The business model of USPS has to identify the resources, cost, customer relationship, service quality, and revenue streaming, earnings and income and value proposition. Providing the on time delivery service to the customers, it is very important to generate the returns and significant earnings (Ovans, 2015).
Cost benefit analysis
Before making decisions about investments, United States Postal Service is needed to build up cost benefits assessment. The process can be understood with the help of the model below:
Before taking actions, the management has to forecast the cost of that action in comparison with the benefits generated from that action. It will help the company to identify the additional and extra cost that is not producing any benefit for the business (Kidane, 2012).
Activity Based Costing
Rather than utilising the available funds and resources to deliver the customer service, United States Postal Service is required to adopt Activity Based Costing (ABC) to improve the cost process. The cost of USPS went very high as now it is defaulted of billions. ABC is one of the best tools of management accounting to drive the cost strategically (Wegmann, 2010). Therefore, it has to use activity based costing. The diagram below shows the process of costing in ABC (Compton, 1996):
(Compton, 1996)
Based on the model, USPS has to drive the company based on the requirements and needs of the customers and developing the resources internally according to those needs. The demand of the total resources of the company among the customers must be analysed and the unnecessary resources have to drop down to develop the balance in the cash flows and balance sheet of the company (Teare, 1990).
Conclusion
List of References
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