USPS Cuts Discounted Rates For Shipping Consolidators In Bid To Reduce Volume From UPS, DHL & More
The US Postal Service has announced it's ending discounts for shipping consolidators like UPS and DHL in effort to slow USPS losses - will consumers pay the price?
Consolidators account for about a quarter of total USPS parcel volume, moving ~2 billion packages through the Postal Service each year.
U.S. Postmaster General Louis DeJoy says this change, which is part of his Delivering For America plan, will boost postal revenues and efficiencies while encouraging shippers to use services offered directly by USPS such as Ground Advantage instead of consolidator services that use USPS for last mile delivery.
The Postal Service has been implementing a new strategic approach with respect to its contracts with package consolidator companies - ones that consolidate large volumes of packages for entry into various points of the USPS network.
These contracts no longer reflect operational and financial realities in today’s market, the Postal network, or USPS’ refreshed product offerings. As a result, while the Postal Service has and will enter into new agreements with package consolidator companies consistent with its current business strategy, the Postal Service will no longer offer discounted rates through Negotiated Service Agreements (NSAs) for packages entered by consolidators at Post Office Delivery Units.
“As we engage in the process of modernizing our network, we are also changing our product and pricing strategies to ensure that they are aligned with our operating model and goals,” said Postmaster General, Louis DeJoy.
“As one part of this new approach, we have decided that it is appropriate to make changes to how we utilize NSAs in the provision of our Parcel Select product. In that regard, to more effectively utilize our network and realize enhanced economies, we no longer intend to provide discounted rates through NSAs that incent parties to aggregate mail volume from multiple shippers and to bring such volume directly to our delivery units.”
DeJoy continued, “It’s challenging for us to justify entering into NSAs that incentivize bypassing our transportation and processing network, while leaving us responsible for managing the final mile, which is often the most resource-intensive part of the delivery process. To continue this practice is not consistent with our business strategy to create an efficient network and grow our own end-to-end ground package product (USPS Ground Advantage) for shipping customers."
"Reevaluating these business arrangements is the right thing to do for the Postal Service and the American people. And of course, we will make agreements with consolidators who are willing to negotiate deals based upon a more rational use of our network in a fashion that is mutually beneficial. On that front, we have already concluded a number of new contracts with consolidators that are consistent with our current business strategy, that have been approved by our regulator, and that are operating effectively.”
This change affects shipping consolidators that drop off large numbers of packages at about 10,000 locations across the country - that number will be cut down to about 500 large hubs that are equipped to handle the volume once the change goes into effect.
It will not affect large shippers like Amazon who negotiate deals directly with the Postal Service.
But it could mean higher costs for shippers who use popular consolidator services like DHL eCommerce, OSM Worldwide and UPS SurePost and Mail Innovations.
The writing has been on the wall for months with several carriers keeping more of the volume they had previously shuffled to USPS in their own delivery networks for final mile delivery - for example FedEx has recently rebranded their SmartPost service to Ground Economy as they have moved away from using USPS for those deliveries.
Dejoy says the USPS is fit to handle any volume that may come from increased usage of Ground Advantage, but many shippers and logistics experts are skeptical - especially with massive delays already occurring in various parts of the country and the impending peak holiday season shipping rush.
How will these changes impact your ecommerce business and holiday planning? Let us know in the comments below!
