The U.S. Postal Service gained more direct business from shippers while demand for consolidator-focused services dipped for the quarter ended Dec. 31. The results align with the agency's goal to better compete in the package delivery market.
The agency saw volume and revenue for its Ground Advantage shipping service surge by 16.1% and 27%, respectively, year over year, according to its quarterly report. The report said Ground Advantage's "acceptance in the marketplace and contribution to revenue growth and profitability are above expectations" despite heavy competition.
The Postal Service secured more than 1,000 customer contracts for Ground Advantage in the quarter, "with a couple thousand more in the sales pipeline," Postmaster General Louis DeJoy said in a Board of Governors meeting Thursday. The results come from an energized sales force that is landing contracts faster and drawing more shippers into the agency's network, he added.
The agency also posted a 3.1% year-over-year volume drop in its Parcel Services sub-category, which covers services used by package consolidators. Revenue fell 0.9% in the sub-category as well.
Consolidators are adjusting their strategies after price hikes by the Postal Service complicated their existing operating models.
"I also want to emphasize that our new strategic approach with respect to the package consolidators will continue to evolve as we correct for prior strategies that failed to reflect our operational and financial realities," DeJoy said.
The Postal Service's strategic shift is part of DeJoy's plan to overhaul the financially ailing agency to better compete with FedEx and UPS. Other components include shifting mail and processing operations to new facilities and consolidating dropoff and pickup activities at some post offices. The two initiatives aim to save up to $3.7 billion annually for the agency once fully implemented.
The turnaround effort has seen its share of struggles and sparked delivery reliability concerns from industry groups, lawmakers and its regulator, the Postal Regulatory Commission. But DeJoy continues to move forward with the plan, saying at the Board of Governors meeting that it's vital for the agency's financial health.
"Our future is bright," DeJoy said. "We are on the right path."
DeJoy criticized the Postal Regulatory Commission's recent advisory opinion, which said aspects of the plan risk service degradation for certain mail products and rural communities. The opinion also said the $3.7 billion in projected cost savings would "not significantly improve the financial health of the Postal Service."
The agency's annual savings target isn't a meager amount, DeJoy asserted, noting it's larger than those from recent cost-cutting plans rolled out by FedEx and UPS. He also touted the long-term benefits the Postal Service will realize once his plan is implemented.
"These service standards and operational changes will result in net positive results for mailers — especially as Americans receive the benefit of processing refinements that speed up mail and packages that they receive," DeJoy said.
