The financially ailing Postal Service wants to draw more commercial shippers into its network to generate more revenue and counteract declining mail volumes.
Shippers with USPS are slated to receive a lot of attention in the next steps of the agency’s 10-year transformation plan under Postmaster General Louis DeJoy.
Priorities for year three of the plan include growing revenue through new shipping services and accelerating local delivery speeds with new facilities, according to the agency's two-year progress report released in April.
It's a big undertaking, considering the agency didn't achieve the plan's 2023 break-even prediction and how long its focus has been on handling mail rather than packages. But DeJoy has expressed confidence that the transformation will enable the Postal Service to more effectively compete against private delivery providers like FedEx and UPS in areas including price.
"I believe we can become the preferred delivery provider in the nation, reclaiming volume we have lost over the years and capturing a significant portion of the future growth in the marketplace," DeJoy said in a keynote address at the National Postal Forum earlier this week in Charlotte, North Carolina.
New, streamlined services
The Postal Service expects to see $24 billion in net package revenue growth under its Delivering for America strategy, and its best opportunity to take share from FedEx and UPS could come from a plan to consolidate existing services into one offering.
The agency aims to streamline three package shipping options — USPS Retail Ground, Parcel Select Ground and First-Class Package Service — into a new product, USPS Ground Advantage. It's set to launch the service on July 9, pending review from the Postal Regulatory Commission.
The Postal Service said in a news release that the service provides a more affordable way to ship packages up to 70 pounds in two-to-five business days. The agency is proposing for USPS Ground Advantage prices to be 1.4% lower relative to current Parcel Select Ground and First-Class Package Service pricing.
Ground Advantage could pose "a significant challenge" to FedEx and UPS even though the two delivery giants have more customized and flexible shipping services, Joshua Galbraith, business development manager at ShipMatrix, said in a LinkedIn post.
"It is likely that with the introduction of the USPS Ground Advantage service, FedEx and UPS may need to reconsider their pricing strategies to compete with the significant price advantage of USPS," Galbraith said.
Beyond Ground Advantage, the Postal Service expects further package revenue growth will be driven largely by USPS Connect, a wide-ranging offering that includes same-day and next-day delivery. The program, launched in 2022, has a suite of services including Connect Regional and Connect Local.
Connect Regional provides next-day regional delivery by having shippers dropping off packages at facilities close to the final destination. The service has brought in $1.1 billion in revenue by offering direct network access to medium and large-sized shippers, per the Postal Service's most recent progress report.
Connect Local, on the other hand, offers same-day and next-day delivery for local businesses within their communities. The service, which is now available nationwide, has shippers bring packages or envelopes to a designated local postal facility for speedy delivery. More than 27,000 customers have registered for the program, the report said, despite a tepid reception in initial tests of its document-focused shipping service.
"The potential of the new suite of services will be maximized when we complete the realignment of our network," the report said.
Facility consolidation aims to speed up deliveries
To keep up with growth in its package delivery services, the Postal Service is overhauling its network for speed and efficiency. The agency has targeted key markets where it can consolidate delivery units — the final facility parcels go through before delivery — into fewer and more centrally located Sorting and Delivery Centers.
"Historically, [delivery units] were opened to meet growing demand, which ultimately created clusters of facilities close to each other, especially in busy metro areas," the agency's report said, adding that it led to operational inefficiencies.
The Postal Service opened its first Sorting and Delivery Center in Athens, Georgia, last fall before launching five additional centers in Florida, New York, Texas and Massachusetts in February, according to the report.
The agency is preparing for further growth of this network, as it has evaluated more than 100 potential new locations nationwide. DeJoy told Supply Chain Dive in 2022 that vacant postal facilities are a prime target to set up new Sorting and Delivery Centers.
Local communities across the U.S. have griped about Postal Service delivery delays in recent months, even despite year-over-year improvements in on-time mail performance overall. The agency says the end result of its buildout will be faster processing and delivery speeds between local retailers and their customers, as the centers will be able to quickly reach 200,000 customers in a local market.
“We must now execute rapidly on our plans to deploy our network," DeJoy said at the National Postal Forum. "This is the only way to achieve the service and cost improvements necessary for us to fulfill our mission to rescue this organization.”
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