The U.S. Postal Service has been hit hard by the COVID-19 pandemic, suffering a $4.5 billion net loss in its most recently reported quarter. After decades of operating without taxpayer subsidy, the public service received no rescue funding since the beginning of the COVID-19 crisis. To stay afloat, the USPS has been prohibiting overtime and cutting transportation costs.
Many small businesses and entrepreneurs rely on the USPS to make shipments. This is especially true of international entrepreneurs who may otherwise have to pay substantial shipping costs that are more expensive than the item being shipped. An end to the USPS could not only mean a significant loss to small businesses but also a shift toward larger carriers like FedEx.
Many small businesses and entrepreneurs rely on the USPS to make shipments. This is especially true of international entrepreneurs who may otherwise have to pay substantial shipping costs that are more expensive than the item being shipped. An end to the USPS could not only mean a significant loss to small businesses but also a shift toward larger carriers like FedEx.
Gradually shifting in-house
Larger carriers like FedEx and UPS use the postal service as a way to hand off their deliveries to make the final mile. In 2018 alone, there were 87 billion parcels shipped worldwide. However, in 2019, FedEx stopped using the postal service to make those local deliveries. Instead, it began insourcing 2 million packages daily using its SmartPost service.
COO Raj Subramanium said in March that the move to bring services in-house was an economic decision, but it was a major financial blow to the postal service because FedEx was as much a customer of the USPS as the USPS was of FedEx.
Potential price changes
President Donald Trump called on the USPS to increase its package rates to compete with privatized delivery services. However, the USPS is a public service and the agency's Board of Governors has been hesitant to increase rates for mail. While the USPS could come out ahead of its competition in terms of pricing, the shippers who use its services won't be happy about the new rates and may turn to other carriers like FedEx.
Don't accept your contract at face value
Should the U.S. Postal Service close its doors for good, large-scale delivery services like FedEx may take advantage of the new situation by increasing their prices or inserting carrier GSR waivers into their contracts. It's important that you never accept your contract without FedEx contract pricing optimization and negotiation support. Without FedEx contract pricing optimization, you're leaving your business open to the risk of being taken advantage of.
AFMS offers parcel contract auditing, benchmarking, and FedEx contract pricing optimization to ensure your business is always paying the right price for shipments. For more information about our parcel shipping contract negotiations support, contact AFMS today.