Postal service

Will same-day and next-day package deliveries get the Postal Service over the hump?

The possible future of the US Postal Service is being tested in Texas.

In mid-September, the Postal Service launched a pilot program to offer same-day package deliveries between multiple locations in the state. The program, USPS Connect, started in Dallas and Houston and has since expanded to dozens of locations across Texas.

Postmaster General Louis DeJoy told a meeting of the Board of Postal Governors on Wednesday that the agency will soon begin filing applications for rate and service approvals in a bid to roll out the program nationwide. next year.

The program will support local and regional deliveries, with regional deliveries to be made the next day, the Postal Service said. Businesses choosing same-day local deliveries must bring their packages, with prepaid labels, to a designated shipping dock between 5 a.m. and 7 a.m. For regional next day deliveries, packages can be brought to a postal facility between 7am and 30 minutes before the dock. closed for the day. Return service will also be available, as will package pickups for next day deliveries in select locations, depending on the postal service.

Regional service users can make appointments to reduce their drop-off wait times at the docks, the Postal Service said.

The service will be priced at levels that were previously only available to high-volume postal customers. Deliveries will be made six days a week, although Sunday deliveries may be made to select locations for customers choosing the local delivery option, the Postal Service said.

Businesses must register before using any of the services, the agency said.

The program ran out of details such as local distances that would qualify for same-day deliveries. Postal service officials were not immediately available for comment.

The pilot is part of the Postal Service’s effort to stay relevant in a world of package delivery radically transformed by e-commerce, omnichannel fulfillment and distribution, and consumer desires for fast, free deliveries. The Postal Service has recognized that its future lies in parcel services as first-class mail and marketing mail volumes continue to be eroded by the migration to digital communication and transaction alternatives.

However, the Postal Service faces a major challenge on the package front as two of its three largest customers, FedEx Corp. (NYSE: FDX) and Amazon.com Inc., (NASDAQ: AMZN) either resumed all postal delivery activity internally, as was the case with FedEx, or significantly reduced their relationship with the agency in favor of diverting more deliveries to an internal network, as is the case with Amazon. Of the three, only UPS Inc. (NYSE: UPS) maintains what could be considered a stable delivery alliance with the Postal Service.

The Postal Service, like FedEx, UPS, and Amazon, competes for the rapidly growing e-commerce segment of small and medium-sized businesses. The Postal Service, which is often the cheapest provider, is pushing for a more reliable delivery service to improve its value proposition. The agency’s ultimate goal is to achieve or exceed 95% on-time delivery performance for all products, regardless of distance.

DeJoy said Wednesday that the agency’s First Class Parcel Service (FCPS) delivery schedules will align with the new schedules for First Class Mail that began Oct. 1. About 30% of mail and parcels sent over longer distances will be delivered. within five days, instead of two to three. Postal officials said the plan would help it achieve better on-time delivery commitments while reducing costs.

Earlier this year, the Postal Service announced a 10-year initiative to bring the agency, which has racked up billions of dollars in losses in recent years, to operating profitability by the end of the period. , and avoid a projected $160 billion in losses by 2030. Under the plan, called Delivering for America, the Postal Service will spend $40 billion to update its infrastructure and technology. This includes a multi-billion dollar contract for Oshkosh Truck Corp. (NYSE: OSK) to build up to 165,000 parcel-friendly delivery vehicles to replace the outdated, boxy versions currently in use. Oshkosh is expected to start vehicle production in 2023.

Parcel’s growing dominance in the future of the Postal Service was evident in its fiscal year 2021 results, which were disclosed Wednesday. Shipping and parcels segment revenue grew to more than $32 billion from $28.5 billion in fiscal 2020, while volumes increased to 7.57 billion parcels from 7.32 billion. The shipping and parcels segment was the only one of the six segments to show year-over-year volume increases. The Postal Service’s fiscal year ends Sept. 30, which means fiscal year 2021 results included unprecedented spikes in pandemic-ridden holiday 2020 parcel volumes and in the first nine months of 2021, when traffic remained historically high.

In total, the Postal Service posted an adjusted loss of $6.9 billion for fiscal 2021 on revenue of just over $77 billion. Revenue increased by nearly $4 billion, driven by the parcels segment and marketing mail, which benefited from an easy comparison to very low volumes in calendar year 2020 and an increase in political mailings in the first fiscal quarter preceding the 2020 presidential election.