USPS: You Have Arrived!
Published on May 23, 2012 in Articles
The USPS has been the focal point of many discussions about its destiny. I find this very intriguing… even if some of the discussions border on ludicrous. I recently read that the USPS should get out of the parcel business. This is one of the most ridiculous statements that I have heard in the last decade. If anything, the USPS should direct more resources in growing this segment of the business. Here are some thoughts on this:
The USPS has been working very diligently to reduce its cost relative to shrinking volumes. However, this process has been hampered with bureaucracy, political interventions, and an unfair pre-paid federal employee pension plan. The USPS has reduced its work force by over 150,000 employees in the past 10 years. In 2006, mail volumes peaked at over 200 billion pieces and fell to 165 billion pieces in 2011. We need to let the USPS management team manage their business to get to the appropriate scale and balance… this means managing to current (and projected) mail volumes and developing new and innovative idea’s in growing the parcel business.
UPS and Fed Ex handle over 14 million parcel shipments each day. Most of this business is in the B2B segment. However, the B2C market is their fastest growing segment. The E-commerce business is projected to be over $200 billion in the US in 2012 and represents about nine percent of all retail sales. Kurt Kuehn, UPS CFO, reported that UPS saw a 4.3% uptick in daily parcel volume, which was primarily driven by online shipping.
The USPS delivers to every address in America on a daily basis…nobody in the parcel business can make that statement! Its core competency is making residential deliveries. It has also partnered with companies like Smartpost (FedEx), Surepost (UPS), Globalmail (DHL), and Streamlite that offer a hybrid service to high-volume shippers. They operate a work share program by inserting parcels downstream in the USPS network. They get to utilize the USPS’ strength in delivering the final mile. So when I hear that someone is saying that the USPS should get out of the parcel business… I think they should have their head examined.
Once the elections are over in November, the USPS can get back to fine tuning its network and developing a plan to sustain long-term growth in the parcel business. The Priority Mail Flat Rate program and Regional Pricing plans have been wildly successful. They have been aggressive in advertising their new products and services. The opportunity for new parcel services is endless with the USPS.
One Final Thought
Hats off to the USPS; you are doing a great job of creating parity in the parcel business. The Duopoly (FedEx/UPS) is finally being challenged. This has created a more competitive parcel market in the US!