Subscribe to our free, weekly email newsletter!


USPS seeks to make Commercial First Class Mail Parcels a competitive product

By Jeff Berman, Group News Editor
February 28, 2011

Taking steps to gain more share in a challenging market, the United States Postal Service recently announced that it has asked the Postal Regulatory Commission (PRC) to reclassify Commercial First-Class Mail Parcels as a competitive product.

USPS officials said that this is a formal request to move Commercial First-Class Mail Parcels from the market-dominant product list and add “Lightweight Commercial Parcels” to the competitive product list.

This filing is akin to one made by the USPS last August, when it petitioned the PRC to move its Standard Mail parcels from its market-dominant product list to its competitive products list. This measure would have enabled fulfillment parcels to become a lightweight subcategory of Parcel Select, a package delivery service geared towards large shippers. It was part of the USPS’s exigent price case to raise rates filed on July 6, which the PRC rejected in late September on the grounds that the USPS “failed to justify rate increases in excess of its statutory CPI (consumer price index) price cap.”

If the PRC signs off on the USPS proposal, effective April 17 qualifying customers will receive Commercial Base Pricing for parcels weighing 13 ounces or less and can receive Commercial Plus Pricing for parcels weighing less than one pound. Commercial Base and Commercial Plus offerings are specifically geared towards shippers.

“This product serves a highly competitive marketplace, with many participants offering similar products,” said Gary Reblin, vice president, Domestic Products, in a statement. “By moving to a competitive product classification, we have greater flexibility to make this offering more attractive to commercial shippers.”

Commercial First-Class Mail Parcels are a competitive product from the point of view that it is part of the parcel business and because these parcels weigh less than one pound does not mean it should stay on the monopoly—or market dominant—side, according to Satish Jindel, president of SJ Consulting.

And making it a competitive product would allow the USPS to focus on what it does best and assist them in coming up with pricing for customers who tender small parcels to them in the USPS network in which they are most efficient in, said Jindel.

“It may be considered a competitive product, but it mainly will be a complimentary product for UPS and FedEx….allowing them to handle long-haul shipments from Los Angeles to Boston, for example, and then leverage the USPS to move shipments from Boston to surrounding areas in the Massachusetts area,” said Jindel.

According to SJ Consulting Data, USPS First Class Mail Parcels represented 574.6 million shipments in 2010, with $1.134 billion in revenue.

Doug Caldwell, president of ParcelResearch, said that moving First Class Parcels to the Competitive category “makes perfect sense,” because First Class parcels are widely used by the shipping community, as 1-13 oz packages (typically merchandise, blank checks, CD’s & DVD’s etc) with an extremely attractive price point are an extremely popular offering—with the USPS moving more than 2 million pieces per day.

Despite whatever verdict the PRC hands down on this proposal, Jerry Hempstead, principal of Hempstead Consulting, pointed out that for parcels weighing less than one pound, the USPS is a monopoly, explaining that the minimum charge for UPS and FedEx for the closest similar offerings are the Zone 2, 1 pound rate, as neither UPS or FedEx bills in ounces.

“Because parcels under a pound (standard parcels as compared to parcels over a pound which is express mail, priority mail and parcel post) are currently part of the ‘monopoly’ or ‘market dominant’ products, the USPS is restrained on how it prices those parcels and the rules of engagement in the preparation, tender, and discounting of that service type,” said Hempstead. “Market Dominant products have a CPI cap on how much rates can increase in a class. Now because these parcels are in with other types of mail currently like flats the USPS is taking the rates up considerably on standard parcels that have workshare discounts although the ‘class’ is only going up by the cap. Unfortunately, for many large shippers they will see rates increase as much as 34 percent starting April 17.”

The USPS announced earlier this month it lost $329 million in the fiscal first quarter, following an $8.5 billion loss in fiscal year 2010.

For more articles on the USPS, please click here.

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

During this webcast our presenters will apply the findings of the 23rd Annual Trends & Issues in Transportation and Logistics Study to the world of shipper-carrier decision making. They'll examine the primary aspects that will influence the future direction for shipper-carrier decision-making.

For February, the month for which most recent data is available, the SCI dropped to -1.0 from January’s 2.6, with FTR explaining that the short term positive impact from one-time adjustments for rapidly dropping diesel prices and the suspension of the 2013 motor carriers hours-of-service expires later this year.

Seasonally-adjusted (SA) for-hire truck tonnage in March was up 1.1 percent on the heels of a revised 2.8 percent (from 3.1 percent) February decline, with the SA index at 133.5 (2000=100). This is off 0.3 percent from the all-time high for the SA of 135.8 from January 2015 and is up 5 percent annually.

Intermodal volume was up 8.1 percent annually at 280,016 containers and trailers. This outpaced the week ending April 11 at 270,463 and the week ending April 4 at 271,127. AAR said this tally marks the second highest weekly output it has ever recorded as well as the first time container and trailer traffic was higher than carloads for a one-week period.

Ocean cargo carrier service reliability across the three core East-West trades hit a five-month peak in March with an aggregate on-time performance of 64 percent, according to Carrier Performance Insight, the online schedule reliability tool provided by Drewry Supply Chain Advisors.

Article Topics

News · USPS · Parcel · Parcel Shipping · PRC · All topics

Comments

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