Subscribe to our free, weekly email newsletter!

Parcel shipping: USPS rolls out proposed price changes


The U.S. Postal Service is seeking permission to raise the price of a postage stamp to 46 cents, a 2 cent increase that, if approved, will take effect in January. Prices for other mailings, such as periodicals, advertising and packages, also would be increased.

By Jeff Berman, Group News Editor
July 07, 2010

Faced with the possibility of a projected $7 billion shortfall for Fiscal Year 2011, the United States Postal Service (USPS) said yesterday it is proposing price increases to get on the right track to better financial footing.

In a filing with the Postal Regulatory Commission, the USPS is proposing four-to-six percent price increases for various products, including its 18 Market Dominant products. These changes, if approved by the PRC, would take effect on January 2, 2011. The PRC’s decision is due in early October.

The USPS said these prices changes would generate $2.3 billion for the last three quarters of Fiscal Year 2011 and an estimated $3 billion for the full 12 months of Fiscal Year 2012.

Due largely to an ongoing diversion to electronic alternatives, including e-mailing business documents and online purchasing orders, as well as other electronic mailing processes, the USPS has been under difficult circumstances for more than three years. It has seen mail volume drop by more than 25.6 billion pieces—or 12.7 percent—in the last fiscal year, with total volume currently at 177 billion pieces. And the USPS also is working to restructure retiree health benefits for as many as 800,000 retirees, even though it only has an active work force of 596,000 career employees. Left uncorrected, that bill will reach $4 billion next year.

“We are doing this because the Postal Service faces a serious risk of insolvency,” said Stephen M. Kearney, senior vice president, Customer Relations, during a media conference call.

“We are facing this problem because of a massive drop in mail volume and the fact that the bulk of our costs are fixed by laws, contracts, or regulations. Our operating flexibility is severely limited right now. Our network is expanding by a million delivery points every year, and we are subject to a lot of legal requirements that limit our ability to reduce service commensurate with the decline in demand.”

This proposed price increase is part of a plan rolled out by the USPS in March that addressed key areas that would make it a more financially viable entity, including:

  • establishing a more flexible work force to respond to changing demand patterns. More than 300,000 of its 596,000 career employees are expected to retire in the coming decade.
  • adjusting delivery days to better reflect current mail volumes. This likely would mean the end of Saturday home delivery, although most of its 32,741 post offices would remain open that day;
  • modernize customer access by providing greater access to services through grocery stores, drug stores and office supply outlets;
  • establishing a more flexible work force to respond to changing demand patterns. More than 300,000 of its 596,000 career employees are expected to retire in the coming decade;
  • ensuring that pricing of its market dominant mailing products are based on demand for each product and its costs, rather than capping prices for every class of mail at the rate of inflation, as is the current requirement;
  • permitting the USPS to evaluate to introduce more products to meet changing customer needs.

Also part of this plan was to enact what the USPS called a “modest” rate increase in 2011. USPS officials have said its price cap of 0.6 percent, which is based on the Consumer Price Index is insufficient to cover its extraordinary losses. Under the Postal Act of 2006, prices are capped at the rate of inflation, although it allows for increases beyond the Consumer Price Index. And to get those increases, the USPS must prove “exceptional or extraordinary circumstances” in order for the PRC to consider prices above the rate of inflation.

Among the proposed USPS rate changes are:

  • raising First Class Stamps to 46 cents, with a new Forever Stamp available in October;
  • an 8 percent increase for Periodicals;
  • a 5.6 percent increase for Standard Mail;
  • 6.7 percent increase for Package Services;
  • a 5.2 percent increase for Special Services;
  • a recommended increase for catalogs of 5.1 percent; and
  • Standard Mail parcels increasing by about 23 percent.

“Our overall approach to this price change was a moderate increase,” said Maura Robinson, USPS vice president, Pricing, on the conference call. “For products that are not covering their costs, we are taking steps towards improving profitability…like Periodicals and Package Services.

In her comments on the proposed 23 percent increase for Standard Mail Parcels (13 ounces or less), Robinson said it is for lightweight parcels and geared towards improving profitability for what is currently an underperforming product. With parcels operating in a competitive market and classified in a regulatory structure, Robinson said the USPS is proposing that Standard Mail Parcels be reclassified as competitive probably by October to reflect the fact that customers use these parcels for different purposes, as well as to establish the Postal Service as a profitable provider of parcel services in the marketplace.

“This increase [for Standard Mail parcels] is huge,” said Jerry Hempstead, principal of Orlando-based Hempstead Consulting. “It is unconscionable, and the USPS is saying it has to raise it that much for the product to become profitable. For shippers, this is a huge, unexpected, and unplanned for in your budget increase.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Seasonally-adjusted (SA) for-hire truck tonnage in October at 135.7 (2000=100) was up 1.9 percent compared to September’s 133.1, and the ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment was 139.8 in October, which was 0.9 percent ahead of September.

The average price per gallon of diesel gasoline fell 3.7 cents to $2.445 per gallon, according to data issued today by the Department of Energy’s Energy Information Administration (EIA). This marks the lowest weekly price for diesel since June 1, 2009, when it was at $2.352 per gallon.

In its report, entitled “Grey is the new Black,” JLL takes a close look at supply chain-related trends that can influence retailers’ approaches to Black Friday.

This year, it's all about the digital supply network. In this virtual conference, we will define the challenges currently facing supply chain organizations and offer solutions designed to transform linear operations into dynamic, automated networks that offer seamless communication, visibility, and the ability to respond and optimize processes at any given time.

In his opening comments assessing the economy at last week’s RailTrends conference hosted by Progressive Railroading magazine and independent railroad analyst Tony Hatch, FTR Senior analyst Larry Gross said the economy continues to slog ahead at a relatively tepid pace, coupled with some volatility in terms of overall GDP growth. And amid that slogging, Gross said there is currently an economic hand-off occurring between the industrial sector and the consumer sector.

Article Topics

News · All topics


Post a comment
Commenting is not available in this channel entry.

© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA