Dive Brief:

• The Postal Service is gearing up for another busy peak season by leasing additional sortation space, adding new sorting machines, hiring more delivery and plant staff, renting assets and adding surcharges, the agency said in a series of announcements.
• USPS installed 39 of the 112 new package sorting machines it plans to have ready by peak, including in the Denver, Seattle, Philadelphia and Houston markets. The Postal Service said it's also investing in "short-term rentals of processing and logistics assets" to meet demand.
• The agency plans to institute peak season surcharges starting Oct. 3 to offset additional costs from handling the additional volume, subject to Postal Regulatory Commission review, according to a Tuesday news release. The price hikes, which range from $0.25 to $5 depending on package size and distance traveled, apply to several commercial and retail shipping services and will end Dec. 26.

Dive Insight:

The Postal Service said last week it is currently seeing major parcel carriers insource deliveries they would have once handed off to the agency. FedEx, for example, is now keeping volume originally destined for the Postal Service to improve delivery density in its Ground network.

Despite this insourcing, package volumes at USPS remain higher than pre-pandemic levels and are expected to stay that way. So the agency is "transitioning from an outdated network and operational posture that was ill equipped to handle the effects of the pandemic on the mix of mail and packages we process," Postmaster General Louis DeJoy said in a statement Friday.

The holidays are expected to be a challenging test for the investments and operational changes made by USPS.

DeJoy expressed confidence in the agency's preparations for peak season in Friday's Board of Governors meeting. He said USPS is adding facilities and equipment "at a magnitude not endeavored here in a long time and at a pace that rivals any high-performing commercial enterprise."

UPS and FedEx are also gearing up for peak with network investments — and surcharges — of their own. But if there still isn't enough room in their networks, that could lead to further pressure on the Postal Service.

Daily package delivery demand is projected to outpace capacity by 5 million pieces during peak, UPS CEO Carol Tomé said during the company's Q2 earnings call, and shippers who haven't already secured carrier capacity are set to face a bumpy holiday season.

The agency saw its on-time delivery rate dip for a week during the 2020 peak season after FedEx and UPS placed restrictions on major shippers, bringing it additional volume, according to ShipMatrix data cited in news reports.