The U.S. Postal Service wants changes to its agreements with key shipping partners to happen sooner rather than later.
The agency is pushing consolidators like Pitney Bowes, OSM Worldwide and DHL eCommerce to strike a deal that would scrap valuable discounts tied to where they inject volume into its network. These types of companies handle and send customers’ parcels to Postal Service facilities for final-mile delivery.
The move could raise delivery prices and spark delays for shippers that rely on these companies, experts told Supply Chain Dive. If Postmaster General and CEO Louis DeJoy has his way, the agency will reach agreements with consolidators by this month, according to a March 27 letter sent to consolidators.
DeJoy wants discussions to advance in an expedited fashion and end with an executed written agreement within 45 days, he said in the letter obtained by Supply Chain Dive.
Industry observers say any changes that result from the discussions would take time to approve and implement, helping consolidators adjust their own networks and business models for whatever comes next. However, if a transition takes place before this year's peak holiday shipping season, delivery reliability would be a concern, Package Shippers Association CEO Jim Cochrane told Supply Chain Dive.
"I wouldn't want to mess with peak period," Cochrane said.
The Postal Service is open to being flexible on the planned changes during a transition period for consolidators, DeJoy said. If and when they take place, the agency's leader said the changes would align with the overhaul the Postal Service is making under its "Delivering for America" plan. The plan's goal involves revamping the financially struggling agency's network to deliver packages and mail in a more cost-effective manner.
Specifically, the agency is looking to amend service agreements with consolidators for Parcel Select, its low-cost ground delivery product. It wants to modify Parcel Select contracts to end discounts for volume dropped off at the agency's delivery units, the last stop in its network before parcels reach their final address.
This would incentivize consolidators to instead inject their customers' volume at upstream locations in the Postal Service network. The agency wants to reach a deal featuring "appropriate" rates for volume entered at its sectional center facilities or sorting and delivery centers, DeJoy said.
The Postmaster General added that the Postal Service intends to stop offering ounce-based rates for Parcel Select packages under one pound. Instead, it would require all of those packages to be priced at the same rate.
DeJoy continued by saying the agency looks forward to talks on a transition plan that will be mutually beneficial while staying consistent with its transformation plan.
When asked about the proposed changes, a Postal Service spokesperson told Supply Chain Dive that the agency doesn't comment on contracts or agreements it has with any of its customers.
