Federal Express and UPS are using the Postal Service more and more to move their own packages, so much that it’s straining the system. Critics wonder if the USPS is charging enough for services provided for FedEx and UPS. USPS delivers an average of 2.2 million packages every day for FedEx; which is around 30% of the package delivery service’s total US ground segment. UPS won’t say how much merchandise it gives the Postal Service, “but a regulatory filing indicates those types of lightweight shipments accounted for 40% –or about 37 million packages – of its (UPS) total increase in ground shipments in 2012,” according to the Wall Street Journal article.

The post office has concentrated on growing package delivery in light of the decline in First Class Mail. Parcel Select – a USPS service for businesses such as FedEx, UPS and Amazon.com Inc. – has increased about 500% since 2009. Parcel Select makes up about 35% of the USPS annual package-delivery business. In addition to delivering goods the “last mile” for FedEx and UPS, Amazon has teamed up with the Postal Service for Sunday delivery in numerous states. While some continue to wonder if USPS is making enough money off their services, PMG Donahoe says, “We make money on it. We wouldn’t do it if we didn’t make money on it.” Mail carriers are already delivering to every address, so adding packages to their route doesn’t cost much more. “Rates have increased 27% from an average of $1.35 in revenue per package in 2012,” according to USPS. What’s more, USPS plans to “more than double its package delivery business within a few years,” says PMG Donahoe.

Because the post office was originally intended to deliver letters rather than packages, its fleet of vehicles is aging and it isn’t as automated as the package couriers. The PMG plans to “invest $10 billion over the next four years for improvements, including buying new vehicles, retrofitting old ones and upgrading package-sorting equipment.” What’s unclear is where the money will come from. USPS is legally obligated to “pay its own way” and must find funds for such improvements in equipment.
Source: Laura Stevens, The Wall Street Journal