The U.S. Postal Service is making changes to its shipping practices by ending discounts that shipping consolidators like UPS and DHL use to deliver packages. This move is aimed at helping the Postal Service slow down losses and increase revenues but could potentially result in higher costs for consumers. These consolidators handle about 2 billion packages annually, which is about a quarter of the Postal Service’s total parcel volume. Postmaster General Louis DeJoy stated that the change is necessary for financial sustainability and to encourage shippers to use Postal Service services like Ground Advantage.
DeJoy emphasized that the change is long overdue as the Postal Service faces losses and evolving shipping habits due to a significant drop in first-class mail volume. The renegotiation of agreements with consolidators will be done gradually as contracts expire over the next year. The goal is to create agreements that are mutually beneficial and rational for both the Postal Service and the consolidators. This move is part of the Postal Service’s broader efforts to increase its own package shipments through Ground Advantage and to optimize the efficiency of its network.
The changes will impact shipping consolidators that drop off packages at numerous locations across the country. The number of drop-off locations will be reduced to about 500 large hubs capable of handling the volume efficiently. This restructuring is part of DeJoy’s plan to address budget shortfalls and enhance efficiency over a 10-year period. While the changes will not affect large shippers like Amazon, they could result in higher shipping costs for products shipped by consolidators who previously benefited from using the Postal Service’s final delivery network.
The higher costs of accessing the Postal Service’s network might pose challenges for consolidators unless they can find alternative delivery solutions at a comparable price. Shipping and logistics expert Satish Jindel pointed out that the future looks uncertain for consolidators, as the landscape of the shipping industry evolves. Some consolidators have already started to adapt to the changes, with Pitney Bowes filing for bankruptcy protection for its e-commerce division and FedEx transitioning away from using the postal network for deliveries.
Overall, the Postal Service’s decision to end discounts for shipping consolidators is part of a strategic effort to enhance financial sustainability, streamline operations, and increase revenues. While this move may lead to higher costs for consumers and consolidators initially, it aims to position the Postal Service as a more competitive player in the shipping industry. The changes will impact how packages are delivered across the country and could potentially reshape the dynamics of the shipping and logistics sector in the coming years.
