The U.S. Postal Service and DHL eCommerce have reached a multi-year contract agreement with an expected value of "well over $10 billion," extending their partnership of over 25 years, according to a news release Thursday.
Through the deal, DHL eCommerce will continue to hand off parcels it picks up, sorts and transports exclusively to the Postal Service for last-mile delivery to the end customer, the release said.
The new contract is different compared to previous USPS-DHL eCommerce agreements due to its duration, which benefits DHL eCommerce's ability to extend longer-term deals with its own customers, according to Scott Ashbaugh, CEO of DHL eCommerce Americas, during a media webinar event Thursday. The exact length of the deal was not disclosed.
"Really for the first time, we've got a multi-year agreement, and that allows us more predictability and gives confidence to our clients that over the long term they're in a good place with us with our solution," Ashbaugh said.
Postmaster General and CEO David Steiner said during the webinar that the deal showcases how the agency can leverage its expansive last-mile delivery network to fuel growth and add value for its customers. He said since DHL eCommerce would rather not spend extensively to build out a last-mile network in the U.S., the deal is "a total win-win."
While DHL eCommerce could build or acquire its own last-mile capabilities — or contract with another provider — the company opted to maintain its work with the Postal Service due to the agency's robust reach and effectiveness, Ashbaugh said.
"They are already at every American's doorstep six days a week, and at the end of the day, there is no more efficient model," he said of the USPS.
The majority of DHL eCommerce's volume enters the USPS network at local processing centers, with additional parcels going to sorting and delivery centers, according to Ashbaugh. Consolidators like DHL eCommerce have tweaked their Postal Service injection models in recent years in response to wider agency changes.
DHL eCommerce's priorities this year include putting the USPS contract into action and growing aggressively, per Ashbaugh. The deal will help the company capitalize on e-commerce demand trends and expand within the U.S. market over the next several years, the release added. DHL eCommerce offers domestic and international delivery services for high-volume business customers and has 19 fully automated hubs.
The $10 billion figure is expected to be the USPS-DHL eCommerce deal's minimum amount, according to Steiner. The arrangement marks another delivery deal the Postal Service has solidified with a major customer as it looks to improve its financial outlook. This year, the agency began delivering some UPS Ground Saver packages again after a roughly yearlong split. The Postal Service also reached a new delivery agreement with Amazon after a bumpy negotiations process.
Steiner said the USPS wants to be able to provide partners like DHL eCommerce with "whatever service they feel their customer needs," be it same-day, next-day or multi-day services.
"Today's announcement is not just about one contract," Steiner said. "It's an example of the kind of Postal Service we're building: More collaborative, more capable, and better positioned for long-term success."
