Consultant’s Insight: FedEx still No. 1 on USPS’ top suppliers list

The U.S. Postal Service spent $10.1 billion in transportation services during fiscal 2022 — $1 billion more than its previous fiscal year, attributing the spike to increased fuel expenses and rising inflationary costs. USPS spent $18.5 billion on outside suppliers for the year, which ended Sept. 30, 2022, an increase of $1.5 billion over fiscal 2021. [caption id="attachment_76185" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] Transportation expenses increased 6.5% with highway (ground) expenses up 1 2.8%, air up 1.7% and international down 22.4%. However, its costs to shift certain services from air to ground transportation might also be contributing to the additional costs. Postmaster General Louis DeJoy in 2021 unveiled a strategic plan, Delivering for America , to upgrade USPS’ services and reduce costs. The plan included “modifying” first-class delivery services by shifting transportation “from unreliable air transportation to more reliable ground transportation.” Despite the Postal Regulatory Commission questioning the evidence of DeJoy's statement regarding “unreliable air transportation,” the shift to ground delivery services was evident in the latest ranking of USPS top suppliers, compiled by David P. Hendel of the law firm Culhane Meadows . FedEx held on to the top spot in Hendel’s ranking but saw its revenue from the USPS fall $236 million to $1.9 billion. USPS is FedEx Express’ largest customer. As noted in its annual report last year, FedEx Express provides airport-to-airport transportation of USPS First Class Mail, Priority Mail Express and Priority Mail within the U.S. “The USPS is currently implementing strategic changes to its operations to reduce its reliance on the air networks of FedEx Express and other transportation providers, which negatively impacted our results of operations in 2022,” according to FedEx’s annual report. FedEx’s contract with USPS expires Sept. 24, 2024. In a separate agreement, FedEx Express provides transportation and delivery for USPS’ international delivery service, Global Express Guaranteed. Meanwhile, United Parcel Service (UPS) saw its rank increase to the fourth-largest supplier, up from sixth in last year's ranking. UPS provides air services as well as ground services. USPS’ current relationship with UPS seems closer than its relationship with FedEx. In 2020, UPS announced that USPS would deliver on Sundays for specific U.S. locations on behalf of UPS. While UPS has brought more SurePost hybrid packages in house, it still uses USPS for many of these deliveries. In comparison, FedEx brought in most, if not all, of its hybrid service, SmartPost, in 2020 and renamed the service Ground Economy. Other airlines affected American , United and Delta Airlines also noted year-over-year declines. American slipped to 54th from 35th in the ranking as its contribution declined by 27.2%. United fell to 14th from ninth with its contribution falling 8.3%, and Delta fell to 36th from 27th as its contribution declined 9.8%. But not all airlines declined in the latest ranking. Kalitta Air climbed a notch to 12th from 13th, while Amerijet International jumped to 16th from 28th. Meanwhile, Atlas Air entered the ranking, debuting at 97th, as did Amazon at 78th. It is uncertain if all of Amazon’s USPS revenue is due to air services.

Consultant’s Insight: FedEx still No. 1 on USPS’ top suppliers list

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