There have been recent reports supported by leaked internal memos that  instructs letter carriers to leave mail behind if it would otherwise delay their routes.   Essentially hold the mail for the next day rather than ensuring a timely delivery.   Is cutting overtime hours at the expense of on time letter delivery the right move?

Supporter of the USPS generally view this mandate as short sited and point out that the negative impact on reliable mail delivery is not with the cost savings.  Most reformers, including the new Postmaster General, will likely argue that such cost cutting is necessary at a time when the USPS is  borrowing a additional billions from the Treasury Department.

Deep reductions in the USPS  most profitable mail (versus parcel) service is the biggest contributor over the last decade.    The pandemic drove first-class mail volume into further - unexpected decline - of 15 to 20 percent since April 2020.   Furthermore, advertising mail dropped even further (by as much as 50%)

Staggering Decline of Mail.  Staggering Growth of  Parcels

While mail volume declined, parcel volume since early in the pandemic has come close to doubling versus the same period last year.    The challenge of USPS parcel volume includes:

  • Lower profit margin in parcels versus mail
  • Increase competition from national parcel carriers 
  • Increase in low cost regional parcel carriers

USA-mail-USPS-carrier

US Postal Service or Parcel Post Business

Political conservatives generally feel the USPS needs to operate more like a business.    The rightly point out that the USPS competes directly with private carriers and continues to operate with huge financial losses.    USPS supporters argue that most of the losses are from legislative demands for pre-funding pension benefits.   Supporters point out the important  USPS role of universal delivery for all Americans regardless of locations or business size.

Politics of Mail Delivery

One of the last vestiges of mail as form of communication is  voting-by-mail.    The current administration does not support voting by mail for its purported lack of security and general overall dislike of the postal service.   Yet, political operatives on both sides generally agree to the importance of the ability to vote remotely.     

Politics of Medical Deliveries

Postal delivery of medicines and other critical supplies by the post office has been a positive role highlighted by USPS supporters.     There are areas where low cost universal coverage matters and this is one area that continues to highlighted during this pandemic.

Cash Flow

A major payment due this September of over $7 billion to the Treasury Department.   The reductions in overtime needed to deliver mail outlined above can be easily explained as a way to manage the continuing liquidity crisis at the USPS.   

Treating the USPS as a business is either just what it needs or exactly the reason it will fail.    Both sides are gearing for a fight.

 

USPS-May-financial-result-graphic-updated-2020

Proof of Parcel Profitability

The surge in volume and improved financial result seems to support the argument that the USPS does, in fact, make money on parcel delivery.  This runs counter to  largely  political position that the USPS postal service is subsidizing parcel shippers (namely Amazon/ Washington Post owner Jeff Bezos) by delivering parcels at a los..

Free Market Competitor VS Public Utility

The duopoly of FedEx and UPS complain about USPS, but enjoy a co-dependent ecosystem.

  • FedEx (SmartPost) and UPS (Surepost) are among USPS largest customers for their Parcel Select service.
  • FedEx is the largest provider of air transport for the USPS and manages domestic airlift for US Mail, and Priority Mail via the USPS Air Cargo Network (ACN)  contract.      

freight-all-cargo-aircraft-being-loaded

Improving Margins for Parcel Delivery

The USPS will also benefit from being able to self declare their rates from foreign post offices. Increasingly, international shippers are able to access the US via section 321 (type 11 and type 86) import clearance.  Contact our team to develop high volume parcel import programs to the USA.

International e-commerce merchants can benefit from shipping direct to the US via Global Direct Entry and duty free parcel import processes.  Shippers are increasingly shipping USPS pre-labeled parcels to the USA and using Express Consignment/ Part 128 clearance processes that are faster than postal clearance.

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Written by Timothy Byrnes