Logistics News: USPS market test could add a new player for LTL-like services
Jeff Berman, Group News Editor -- Logistics Management, 5/1/2009
WASHINGTON —
WASHINGTON—In a filing submitted to the Postal Regulatory Commission, the United States Postal Service (USPS) said it will kick off a market test this month to provide service that will resemble a less-than-truckload (LTL) network.
The USPS said it will leverage its national transportation network that serves its processing facilities, a system comprised of approximately 440 sectional center facilities and more than 40 bulk mailing centers. USPS does not have an asset-based transportation network, as it contracts out its over-the-road trucking business; however, when the service gets underway, the USPS plans to leverage excess capacity on its trucks moving to and from these facilities—due to a significant decline in its mail volumes—by selling that capacity on a “space-available” basis.
It added that delivery unit loads will be on pallets, with exceptions on a case-by-case basis; and delivery times will range from one to four days, depending on origin and destination. According to the filing, the LTL-like market test will not exceed 24 months, with total revenues not anticipated to exceed $10 million.
The filing also noted that the USPS “would accordingly be unable to set prices substantially above costs, raise prices significantly, decrease quality, or decrease output without risk of losing business to other firms in the LTL shipping market.”
An industry source told Logistics Management that this plan makes sense on various levels, considering the USPS has plenty of excess capacity on the roads at the moment with a network that is already delivering mail on a daily basis. And he added that if viewed as an LTL player, the USPS has a bigger LTL footprint—or network—due to its existing mail routes.
“There is no place the USPS does not go,” explained the source.
However, the catch for shippers is that they will need to determine how to get freight to and from the USPS sectional center facility or bulk mailing center. This presents an opportunity for third-party integrators to take an active role in delivering and picking up freight and then collect and deliver it to a consignee.
While this initiative occurs when the LTL market is replete with excess capacity, the source explained that this could be a good thing for shippers as it will offer up more service options. He added that shippers that are able to coordinate with a third-party for freight pickup and delivery in and out of USPS locations should be able to get competitive pricing.
At a time when shippers have a close eye on expenses, cost management is not something that can be easily overlooked by shippers, noted Satish Jindel, president of Pittsburgh-based SJ Consulting.
“This is a time where shippers are saying cost is paramount and they will compromise on service if there is noticeable cost savings,” said Jindel. “And that is what the USPS service is going to be by shippers moving freight from an existing network to the USPS.”
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