Consultant Insight: USPS assures skeptical market that it’s ready for the holiday season

The U.S. Postal Service (USPS) may be on the road to right-sizing its financials as it reported a 5.3% operating revenue increase to $77 billion for the fiscal year ending Sept. 30. USPS also reported a $4.9 billion loss, which was less than the $9.2 billion loss it saw during the prior fiscal year. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] Shipping and Packages revenue increased 12.2% to $3.5 billion year over year while volume growth increased by 3.5% to 253 million pieces. Meanwhile, First Class Mail revenue declined 2.1% YoY to $23.3 billion with volumes declining by 3.7% to 50.7 billion pieces. While First Class Mail remains the largest revenue and volume generator for the USPS, its plan, moving forward, is focused on packages. "Despite the magnitude of our financial challenges, we are making encouraging progress in correcting the long-term imbalance in postal revenues and expenses, and we expect to see continued improvement as we fully implement the Delivering for America plan,” Postmaster General and CEO Louis DeJoy said in USPS’ Nov. 10 earnings report . Since announcing Delivering for America, USPS’ turn-around plan, earlier this year, the Postal Service has made investments in its operations and increased its pricing for many of its products. In August, for example, USPS announced it had accelerated its investment in and procurement of 138 package processing sorters in preparation of the holiday season, with plans to purchase additional processing machines over the next 18 months as package volume grows. “Due to the decline in mail volume, we will relocate or remove unnecessary letter and flat sorting equipment as appropriate to make space for much needed package processing,” according to an April release. Meanwhile, pricing has increased on several products. “In deciding to raise our prices, we determined that after 14 years of an extremely defective pricing model, one that has cost the organization in excess of $35 billion dollars, we must use all the pricing authority provided us by our regulator,” DeJoy said. As it adjusts its operations and pricing, the USPS is facing a market that is rapidly evolving with new entrants in the last-mile delivery space and shippers that have not forgotten USPS’ lengthy delivery delays in 2020. How quickly the USPS can adjust its network to address packages and its ability to successfully be both a competitor and a partner to last-mile providers like UPS, FedEx and Amazon remains to be seen. The USPS also needs to reassure both small and big shippers that they are important customers and that USPS can be a trusted last-mile delivery partner. What better way to assure a skeptical market that the USPS has improved than by putting their service to the test this holiday season? “Last year, for a variety of reasons, we were overwhelmed and were not able to meet the demands of the nation,” DeJoy said in a statement. But now, “we are ready. So, send us your packages and mail, and we’ll deliver timely.” USPS’ holiday peak season preparations include the addition of 92 new package sorting machines, which will be able to process an additional 4.5 million packages a day, as well as the addition of 40,000 seasonal employees, according to a USA Today article . The preparations are to help the USPS meet or exceed a 95% on-time service performance for all mail and shipping products. On-time performance for USPS ranged from 94.7% for the week of Dec. 20 to Dec. 26 last year to a low of 87.5% the week of Dec. 6 to Dec. 12, according to data from Shipmatrix, a consulting firm specializing in parcel and freight transportation spending analysis. However, the on-time performance metrics could be deceiving, according to a Washington Post investigation last year that found postal workers and supervisors routinely falsified scans of packages and mail to boost performance statistics. Ready or not, the USPS is set to deliver in what will be one of its most important holiday seasons in terms of volumes and revenue. A peek toward 2022 will see more changes for the USPS as it continues to invest in its operations, raise prices and introduce a new service, Plus One, that will take on competitors in the same-delivery space. Stay tuned.

Consultant Insight: USPS assures skeptical market that it’s ready for the holiday season

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