Why Is USPS Dumping Its Contractors?
The US Postal Service is regaining its ground as the foundation of US e-commerce after spending a few decades in the wilderness. It is cleverly attempting to recoup profits that it has lost to corporate entities and is aiming to regain parcel transportation as its main prospect.
Given how many businesses and interest groups depend on the Postal Service and are unwilling to change, the organization will be required to strengthen its conviction.
According to the most recent research report from Spherical Insights & Consulting, the global market size for last-mile delivery for e-commerce was estimated at USD 56.25 billion in 2021 and is projected to reach USD 136.12 billion by 2030, rising at a CAGR of 8.13% between 2021 and 2030.
A Shift in Postal Services Core Competency: From Letters to Parcels
With this newfound realization, the US Postal Service is regaining its footing as the bedrock of US e-commerce after spending a few decades in the wilderness. It is cleverly attempting to recoup revenue that it has lost to private enterprises and is looking to establish package transportation as its main prospect. However, the company has yet to fully tap into the potential of its specialized network, which has 30,000 retail locations and delivers to all 163 million US addresses at least six days a week.
After being on a major setback for years, as the Postal Service restructures its network from delivering letters to handling parcels, DeJoy has made the decision to bypass the intermediaries and deal directly with the clients in the postal service business. It will take time and money to accomplish this; the agency has set aside $40 billion over ten years to consolidate and update sorting facilities and replace its fleet of delivery vehicles, which now comprises vehicles with an average age of 28 years.
Collateral Damage to the Sudden Shift
FedEx is directly impacted by the Postal Service's decision to limit the amount of mail and parcels being transported by plane instead of using trucks as a more reliable means. The company has a contract that expires in September 2024 to provide air transportation for mail, including international service.
FedEx's Express unit's largest client is the Postal Service. The company stated in its July annual report that the decline in postal quantity has already impacted business operations. The company claimed that the Postal Service's decision to terminate or not renew the contract "would significantly harm their profitability."
In addition, the Postal Service has been sued by UPS, which claims that the organization sets its package pricing too low because it allocates too many of its costs to other activities like letter delivery and plans to purchase gas-powered vehicles.
As the postal service proclaims business from consolidators such as DHL, which provides an online shopping service while lacking last-mile delivery vehicles and seeks support from the postal delivery service, it is likely to be invigorated and file complaints against this new initiative.
The Postal Service will be able to trace shipments more precisely and provide better service if improvements in technology and sorting equipment are implemented. A sizable, qualified sales team needs to be developed. The 10-year plan was unveiled in March 2021, and accomplishments like ending the reseller program and hitting delivery service goals have already begun to materialize.
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