The White House released a plan to reform and reorganize the government last week, outlining several proposals that will transform public agencies directly impacting U.S. supply chains.
The two biggest takeaways for supply chains are the White House's plan to restructure and privatize the United States Postal Service (USPS), as well as restructure the Department of Transportation (DOT) in hopes of alleviating some of the backlog of infrastructure projects awaiting approval.
While it could be years before both departments are completely restructured, modernizing the USPS and DOT could have implications for logistics and last-mile delivery, as well as new technologies like autonomous vehicles (AVs) and drones in the freight industries.
How does the White House plan to change the USPS?
Here's a quick outline of what President Trump proposes, according to the released report:
- The White House wants the USPS to "align revenues and expenses" to cut down its more than $100 billion in "underfunded liabilities." This means the federal government wants to allow the USPS to raise its rates in order to get out of the red.
- The end goal of allowing the USPS to return to a "sustainable business model" and "make business decisions free of political interference" is to privatize the institution and completely free it from all federal control.
- Before privatization, the USPS must prove its profitability, which is why the White House will commission a "Task Force on the United States Postal System" that will examine USPS pricing, package delivery methods, "implications for USPS self-financing," how the USPS can meet its "universal service obligation" mission in a technology-driven era, what the USPS' role is in "rural areas, communities and small towns," and "the state of the USPS business model."
What the changes mean for logistics:
- Steve Bowen, CEO of Maine Pointe, a global supply chain and operations consulting firm, said privatizing the USPS could result in a new 3PL that would ramp up competition for last-mile delivery solutions and "create a competitive environment" with its customers, like FedEx and UPS.
- In the short run, rates will likely rise as the USPS is restructured to be more profitable, which could result in higher fees and squeezed profit margins for shippers and 3PLs using USPS for last-mile delivery, and higher freight costs for supply chains.
The cons of USPS privatization:
- "It will eliminate some jobs without a doubt, because they’re not going to keep operating all these post offices in inefficient places," Bowen said. "But I would say the benefits [of privatization] will far outweigh the negatives."
What changes lie in store for the DOT?
Potential changes to the DOT are a bit more complicated, but basically involve rearranging the DOT's duties so as to give the department more flexibility to focus on infrastructure projects. Here's the breakdown:
- The White House proposes nixing the DOT's responsibilities for air traffic control and the Saint Lawrence Seaway. Air traffic control — currently under the Federal Aviation Administration (FAA) — would transfer to a "non-profit entity." According to the report, air traffic control constitutes the "single largest operational budget item" for the DOT.
- Instead, the DOT would take control of "coastal and inland waterway navigational development," allowing the DOT to help fund more water-related infrastructure projects.
- The DOT would also take over surface transportation security programs from the Department of Homeland Security (DHS).
Here's what could happen to the DOT:
- Refocusing the DOT's priorities could help it slough through the backlog of infrastructure projects much more quickly, which is crucial as the freight industries are so desperate for them.
- Shifting surface transportation security to the DOT could allow it to better ensure the security and safety of surface transit, like potential cybersecurity issues with AVs, since the DOT is heading AV initiatives, rather than splitting transportation security and transportation management between two different agencies.
What the changes mean for air traffic control:
- Perry Flint, head of corporate communications for North America at the International Air Transport Association (IATA), told Supply Chain Dive that transferring air traffic control to a non-profit entity would allow it to "roll out new technology" and improve efficiency. Canada's air traffic control belongs to a non-profit entity, he said. "They’ve been able to achieve significant cost savings, they roll out new tech quite rapidly compared to the U.S., they now actually sell their technology to other air traffic control providers."
- According to Flint, there aren't any foreseeable negative effects to such a move, but he also said there "isn't a visible pathway" to getting Congress to approve it. "It’s actually kind of surprising the U.S. hasn’t been able to find incentives to move to that model," he said.
How likely are these changes?
Trump's plan is bold and radical, but Congress still hasn't passed a spending bill, and midterms are approaching quickly, so it's unlikely this reorganization plan will see movement anytime soon.
It definitely holds potential to streamline USPS logistics, raise USPS rates, accelerate much-needed infrastructure projects and improve air traffic control, but for now it's more an indefinite possibility than an actionable plan.