The U.S. Postal Service is ending rate discounts for key shipping partners dropping off packages at the agency's delivery units, finalizing a push that started months ago.
The agency "has and will enter into new agreements with package consolidator companies" which align with its strategy under the "Delivering for America" transformation plan, according to a news release Wednesday. Consolidators like DHL eCommerce and OSM Worldwide use the Postal Service for final-mile delivery of their customers' parcels.
The change means new contracts, or NSAs, won't include discounts for volume brought to the Postal Service's delivery units, the last stop in its network before the end address. The goal is to maximize the use of USPS’ network assets by incentivizing consolidators using the Postal Service’s Parcel Select offering to bring more volume to its facilities earlier in the shipping process.
"It's challenging for us to justify entering into NSAs that incentivize bypassing our transportation and processing network, while leaving us responsible for managing the final mile, which is often the most resource-intensive part of the delivery process," Postmaster General and CEO Louis DeJoy said in the release. "To continue this practice is not consistent with our business strategy to create an efficient network and grow our own end-to-end ground package product (USPS Ground Advantage) for shipping customers."
Consolidators already have experience bringing volume to Postal Service facilities upstream of delivery units, but historically delivery unit injection has provided these companies with larger discounts and more control over their customers' shipments.
Experts and industry groups have expressed concerns that delivery delays could increase under the plan, as a sudden shift in volume upstream could further strain an already struggling Postal Service network. The agency is carefully assessing its ability to handle increased activity at impacted facilities and discussing volume projections with customers, according to a June 12 filing with the Postal Regulatory Commission.
Despite the uncertainty, the Postal Service has already secured "a number of new contracts with consolidators that are consistent with our current business strategy, that have been approved by our regulator, and that are operating effectively," DeJoy said in the release. The Postal Service has 30 contracts with high-volume shippers that cover the majority of Parcel Select deliveries, according to the Postal Regulatory Commission filing.
