Ups and Downs at the US Postal Service

We don’t think it will come as a surprise to anyone that the US Postal Service has again reported huge financial losses.  But there is some good news as well as some obvious bad news behind those numbers; and some interesting information to boot.

First the good news:

·         The USPS delivered 589 million more packages in FY 2017 than they did in the previous fiscal year

·         Those additional packages represented an 11.4% growth rate, not a bad growth rate for any business,  But remember the USPS is not just any business

·         And finally, the current FY loss of $2.7 Billion is down from the previous year’s loss of 5.6 billion.  And, that is a significant improvement

Now for the bad news:

·         The USPS delivered 5 billion fewer pieces of mail in FY 2017 than they delivered in the previous fiscal year.  This was a 3.6% decrease from the previous year.

·         The reason this is so critical is because according to Postmaster Megan Brennan, letter and mail shipping accounts for 70% of its yearly revenue

·         USPS also defaulted on more than $6.9 billion in payments to pre-fund future pension and health benefits for postal workers

So when you analyze the good news and stir in the bad news, you come away more confused than ever and here’s why.

Letter and mail shipping has been and will continue to be on a consistent decline.  So if that revenue source currently represents 70% of the annual USPS revenues, it would behoove them to find another revenue source that will make up for the continuing losses.  They need a positive cash flow solution to replace the declining letter and mail shipping metric and they need to find it and implement really quick. 

But wait, don’t they already have a thriving revenue source in delivering packages?  You bet they do.  Now they need to implement a full-court press to improve their bottom line revenue for delivering packages so that revenue source becomes 70% or perhaps 80% of their annual revenue.

Can it be done? Only time will tell.

Breaking: USPS New Pricing for 2018

All information property of the United States Postal Service and reprinted here as a courtesy to our readers. For more information please visit www.usps.com

DMM Advisory

Classification — keeping you informed about classification and mailing standards of the United States Postal Service

USPS™ Announces New Prices for 2018

The Postal Service™ filed notice with the Postal Regulatory Commission (PRC) today of price changes to take effect Jan. 21, 2018. The new prices, if approved, include a one-cent increase in the price of a First-Class Mail® Forever® stamp from 49 cents to 50 cents. Postcard stamps and metered letters would also have a one-cent increase.

The proposed prices would raise Mailing Services product prices approximately 1.9 percent, and most Shipping Services products will average a 3.9 percent price increase. While Mailing Services price increases are limited based on the Consumer Price Index (CPI), Shipping Services prices are adjusted strategically, according to market conditions and the need to maintain affordable services for customers.

The proposed Mailing Services price changes include:

Product Current Proposed
Letters (1 oz.) 49 cents 50 cents
Letters additional ounces 21 cents 21 cents
Letters (metered) 46 cents 47 cents
Outbound International Letters (1 oz.) $1.15 $1.15
Domestic Postcards 34 cents 35 cents

 

The proposed domestic Priority Mail Flat Rate® retail price changes are:

 

 Product Current Proposed
Small Flat Rate Box $7.15 $7.20
Medium Flat Rate Box $13.60 $13.65
Large Flat Rate Box $18.85 $18.90
APO/FPO Large Flat Rate Box $17.35 $17.40
Regular Flat Rate Envelope $6.65 $6.70
Legal Flat Rate Envelope $6.95 $7.00
Padded Flat Rate Envelope $7.20 $7.25

 

The PRC will review the prices before they are scheduled to take effect on Jan. 21, 2018. The complete Postal Service price filings with the new prices for all products can be found on the PRC site under the Daily Listings section athttps://www.prc.gov/dockets/daily. For the Mailing Services filing, see Oct. 6, 2017, Docket No. R2018-1. For the Shipping Services filing, see Oct. 6, 2017, Docket No. CP2018-8.

 

The Domestic Mail Manual (DMM®) and DMM Advisories are available on Postal Explorer®(pe.usps.com)

USPS’ Upcoming Price Change

Have no Fear, Your Packages Will Still be Delivered on the Weekend!

Recent reports that President Trump’s proposed budget changes would allow the US Postal Service to eliminate Saturday mail deliveries is sending shock waves into the Millennial community.  There is no question that eliminating Saturday delivery of basic mail services has been on the US Postal Services radar for quite some time now.  Let’s face it, who needs their bills and loads of junk mail delivered 6 days a week?  Isn’t 5 days more than enough?

The US Postal service continues to rack up huge debt year after year primarily as a result of having to prefund its retiree health benefits.  While these costs are a huge drag on the postal services operating costs, there is another side of their business we really don’t hear much about.  That side is the business of providing Last Mile Delivery Services to a growing number of parcel expeditors, aggregators, and consolidators including FedEx, UPS and of course Amazon.

The US Postal Service actually has a variety of options to allow these carriers, as well as individual shippers to induce their packages into the postal service’s network for final mile delivery.  USPS will actually tailor services to meet a customer’s unique business needs.  Under a USPS Negotiated Service Agreement, the postal customer and USPS sign a contractual agreement to provide specific delivery services with customized pricing incentives as well as incorporating other arrangements.  Each such Negotiated Service Agreement must however be reviewed and recommended by the Postal Regulatory Commission and approved by the USPS Board of Governors.  The main reason for this oversight is to ensure that these agreements do not have a “negative financial impact on the USPS”.  Now, isn’t that a novel approach to business!

What we find interesting is that if the US Postal Service took this same financial approach and applied it to ALL of its business segments, wouldn’t they finally become a profitable operating entity?

icc-breaking-news

Customer Demand Results in Added Supply

We are all well aware of the theories of supply and demand and its relationship to costs for businesses.  Well customer demand in the package delivery arena has now caused UPS to make a significant service enhancement to their operations by providing Saturday delivery for Ground packages to compete with both the USPS and UPS rival, FedEx Home Delivery.

Retail customers can now receive Ground packages on Saturday and not have to wait until Monday to receive them.  On the other side of the coin, retail shippers can ship packages on Saturday and expect Monday delivery to next day delivery zones.  Another interesting fact is that UPS expects to add 6000 new jobs once this massive change is totally implemented, and that’s great news for the overall economy.

Want more reasons as justification for UPS to make this change; UPS expects that residential deliveries will represent more than half of their delivery business by 2019.  Saturday operations will also allow UPS to flush it’s system over the weekend before the big Monday rush of packages, so overall it’s a good move for UPS.

Expect UPS Saturday Ground delivery to roll out this month in major US cities such as, New York, Chicago and Boston.  This operational change will give on-line shoppers another reason not to go to the mall.  So the only remaining question is, when will we see Sunday deliveries for FedEx and UPS?  We suspect it may not be that far away.

parcel auditing service how it works at ICC Logistics

The Three Biggest Mistakes Parcel Shippers Make!

Several key factors in today’s fast-paced business world are driving the explosive growth of online shopping.  These factors, such as millennials, (and others for that matter),desire to shop on line, rather than in physical stores; the growth of entrepreneurs starting new businesses to sell just about anything online; and manufacturers needing to sell at the wholesale as well as at the retail level.

The net result of these factors and others, is more and more companies are utilizing parcel carriers to deliver their products to the ultimate consumer.  With this growth comes a need and responsibility to clearly and thoroughly understand all of the rules, regulations, rates, shipping options and legal ramifications of dealing with the parcel industry as a whole.  Today, we’d like to explain what we believe are the Three Biggest Mistakes Parcel Shippers Make.

  1. Not Benchmarking Competing Carrier’s Rates and Services– The first mistake we believe parcel shipper’s make is not understanding all of the options available to them from the ever-growing list of parcel carrier service providers.  Time and time again we witness shippers who never step outside their comfort zone to interview, review and analyze various competing carrier services to benchmark whether they have a good deal or not.  The reality is, if a shipper does not continually benchmark their services and rates they are paying, by default, they accept the status quo and oftentimes that means paying much more for transportation services than they really need to.

Yes, we thoroughly understand that switching volumes of business from a long time preferred parcel carrier may come with some implementation pain.  However, if a parcel shipper does not test the competitive waters they may be boxing themselves into paying higher rates year after year.  Another key point to take into consideration is service level comparisons.  Oftentimes, regional parcel carriers can deliver products faster in certain lanes compared to some national carriers.  What about USPS as an alternative?  This is not your father’s Post Office any longer.

Some additional food for thought; do cable companies, home alarm companies, mobile phone service providers, and other service companies charge their longtime customers more for services than they charge their new customers?  You bet they do and unless a parcel shipper analyzes all of the options available to them on an on-going basis, they will probably pay more year after year as well.  If a parcel carrier feels they have a “lock” on a shippers business, (primarily because the shipper has never utilized a bid process to evaluate the benefits of competing carriers), what incentive would that carrier have to publish lower rates?  That’s correct, absolutely none.  The fact is the incumbent carrier may turn out to be the best choice for a particular shipper, but unless that shipper benchmarks services and rates of competing carriers, they will never ever really be sure.

  1. Read The Fine Print, and More– Most parcel carriers provide their shipper customers with a pricing agreement or contract which outlines the various services to be provided and the associated rates and charges they have agreed to assess for those services.  Warning to parcel shippers!  Don’t just sign the agreement without reading it thoroughly to make sure all of the terms and conditions are EXACTLY as you and the carrier agreed to.  Here are several questions we would ask every parcel shipper who has recently negotiated a new pricing agreement or re-negotiated a contract with a parcel carrier.
  • Did you agree to a Guaranteed Service Refund Waiver with your parcel carrier sales representative?  No, then why is it now in your contract?
  • What Dimensional Weight Divisor did you and the parcel carrier agree would be published?  Is that the Divisor that is now published in your new contract?
  • Do you understand that many parcel carriers make their contracts subject to provisions of a service guide that is not a physical part of the transportation contract you are signing?
  • Do you know the parcel carriers can change the provisions of those service guides at will and do not need to specifically notify each and every one of the customers when they do?
  • Parcel carriers typically provide differing pricing incentives for various service levels, are you sure all of the discounts and incentives have in fact been published exactly as you and the parcel carrier agreed to in your negotiation sessions

Why ask these questions?  Precisely because for some parcel shippers these exact issues have arisen and many of these companies never identified them until it was too late; so our advice to all parcel and freight shippers for that matter is; Caveat Emptor, let the buyer beware!

And, one final point, a very important point; we strongly recommend that each and every parcel carrier contract, or any transportation or logistics services contract for that matter, should be reviewed by a                 qualified Transportation Attorney, before any of those contracts are signed.

  1. Continually Audit Parcel Carrier Invoices– Once the contract has been signed, all parcel shippers should ensure they have a qualified third party audit firm auditing each and every invoice to make sure the rates being charged are the rates the shipper agreed to in its pricing agreement or contract.  The auditors will also be able to file for refunds for Guaranteed Late Delivered packages, as long as the shipper has not waived their right to file such claims.

Parcel Audit firms also provide on-line access to their client’s pertinent shipping data and can even report results based on specific Key Performance Indicators (KPI’s) their shipper customers agree to.  They also provide continuous and meaningful reports on a variety of different metrics so the parcel shipper always has their finger on the pulse of what’s going on with their parcel shipping expenses.  We’ve all heard the statement, “you can’t manage what you can’t measure” and unless your firm has the technical expertise to generate this critical shipping data in-house, outsourced parcel audit firms have all the reporting power a parcel shipper would ever need.

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2015 USPS Holiday Shipping Deadlines

The official mailing and shipping deadlines for domestic, international and military services can be viewed here: http://1.usa.gov/1hutsL5

2015 Holiday shipping deadlines usps

Source: USPS Website

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