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The U.S. Postal Services and the Logistics Industry

Boxes With Four WheelsDevelopments in the logistics industry are having profound impacts on the U.S. Postal Service. E-commerce growth has led to new entrants in the delivery and logistics markets (i.e. Amazon, Uber, 7-11, etc.) Add to this the development of new business models and strategies from existing players. This growth is causing uncertainty, risks, and opportunities for the USPS.

In the current package delivery environment, the Postal Service is a leader in last-mile delivery. Part of the reason for the Postal Service’s success in this area is because it visits nearly every address 6 days per week. Therefore, the Postal Service enjoys significant economies of scale and scope. No competitor can currently deliver small, low-revenue packages as cost-effectively as the Postal Service can. Millions of individuals and businesses rely on the Postal Service for such deliveries.

However, the major trends in the logistics industry point to a future with intense competition in last-mile delivery. For example, many new entrants focus on local delivery in densely populated urban areas and could provide large shippers with alternatives to traditional delivery operators. Moreover, current large customers like Amazon are expanding their own delivery fleets, including cargo, long-haul, and last-mile delivery.

Perhaps a rising tide will lift all boats, and the Postal Service will continue to play its critical role in the industry as the only truly nationwide provider of low-cost last-mile delivery. But if these trends continue and the Postal Service does face increased last mile competition, it calls into question what might be the best approach for the Postal Service to follow. One approach could be for the Postal Service to continue on its current path, primarily strengthening its last mile and making incremental improvements. However, doing so may be a necessary but insufficient strategy to deal with the massively anticipated increase in e-commerce package volumes and increased competition.

Another approach could involve accepting the possibility that the Postal Service may not be able to depend on economies of scale and scope in dense urban areas in the future. Those areas may end up being served most often by today’s emerging competitors while the Postal Service could find itself as a package delivery provider primarily in less dense, more expensive locations. In such a scenario where delivery becomes a commodity, the market will demand providers who offer much more than just reliable last mile delivery. However, the Postal Service could still take critical steps to add value in the face of increased competition.

To the extent possible under its existing legal authority, the Postal Service could explore options for diversifying its offerings in logistics services. For example, the excess space available in many postal facilities across the country could be rented out to logistic companies as warehouse space. Further, the Postal Service could look into partnering with innovative but asset-light new entrants that might need services like first-mile pickup and intercity delivery to make up for gaps in their own resources, networks, and competencies. While full end-to-end logistics services might currently be beyond the Postal Service’s legal authority, other posts and delivery companies around the world have demonstrated they have the inherent skills and that offering targeted, value‑added logistics services can be a significant opportunity for growth in this era of declining mail volumes.

There is no doubt that things are changing very quickly and the future logistics landscape will be very different from today. However, it is still unknown what role the Postal Service will play. It is up to the Postal Service and its stakeholders to stay ahead of the trends in this growing and quickly evolving logistics industry and to ensure that it can continue to serve the needs of citizens and businesses by providing appropriate logistics services including low-cost last-mile delivery across the nation.

See: The Evolving Logistics Landscape and the U.S. Postal Service