True Blue | Why Your Parcel Carrier Mix Should Include the USPS
Learn what changes the United States Postal Service has implemented with their Merchant Rate Card
Right before peak, the last thing you would have thought might happen, happened. At nearly the same time FedEx and UPS announced their rate increases, the United States Postal Service (USPS) announced rate decreases. Known as Merchant Rate Card, it's the best rates USPS has ever offered.
Surprised? Well, the USPS seems to be full of surprises recently. Last year when all the carriers faced crushing volumes, USPS performed better than anyone expected. It seems to all be part of the plan for USPS.
Turns out it is, indeed, part of the ten-year plan the USPS released on March 21, 2021. Titled "Delivering for America," the plan includes goals for performance and results. Interestingly enough, the rumor mill says that some of the operational changes put in place improved performance so much that they had to slow down the deferred services. While we will need to keep an eye on that, the highlight here is the rate changes. The merchant rate card is an across-the-board discount of the traditional Commercial Plus Pricing (CPP). The discount varies from 7% to 28% depending on weight and zone, but that's a pretty good start. On top of that, they are waiving most surcharges. No one saw it coming.
And this is the problem - we should have seen it coming. One of the expected goals for the "Delivering for America" plan is that it will “Align pricing to reflect market dynamics.” Interesting. UPS and FedEx both negotiate customer by customer based on volume, location, package attributes, seasonality, how much they like you, and if one of their executives is on the board of your company. The USPS has a legislative board that governs it, and that board has to approve any non-standard contracts. What are they up to? How can they accomplish more dynamic market pricing? It's all in the plan and they plan to accomplish more dynamic pricing through the "Judicious implementation of new and existing pricing authorities". So basically, what they have now is the ability to adjust pricing more like UPS and FedEx. I would expect that this opening move is a sign of a more competitive and dynamic USPS.
Quickly following the October 19, 2022 changes, the USPS announced a slew of New Competitive Prices for 2023. Some of the Highlights:
- No price increase for Parcel Select Ground which, coupled with recently improved service standard to 2-5 days from 2-8 days, offers a reliable and economical option for shippers
- No price increase for USPS Connect Local, which gives businesses of all sizes the ability to reach local customers at affordable rates
- Reduced pricing for some Retail Priority Mail Flat-Rate products below the temporary price currently in place
- Priority Mail Commercial rate to increase by 3.6 percent, well below the rate of inflation
To be frank for a moment, at ProShip we proudly serve some of the largest enterprise customers in the world - the vast majority of our customer base is Fortune 1000. While they use a very diverse collection of carriers across the globe, USPS is strangely underrepresented given the vastly larger volumes of packages that move with UPS and FedEx. Today’s USPS is making all the right moves - they have a plan, and they are executing it well. I expect that with a more aggressive business plan as well as more market-based pricing flexibility, we will be seeing much more of the USPS in the mix of enterprise carriers.
Learn more about why you should employ a broad carrier mix: Single-Carrier Parcel Shipping Strategies are Dead. Here's Why.
Delivering for America: Our Vision and Ten-Year Plan to Achieve Financial Sustainability and Service Excellence. (USPS)
United States Postal Service Unveils 10-Year Plan to Achieve Financial Sustainability and Service Excellence. (USPS)