What USPS’s Rate Increase Means to Commercial Shippers

usps-delivery-truck-300Every time the USPS announces rate changes all the stakeholders come out of the woodwork, with many of them bemoaning the increases and how it will impact their operation.  Relax! All told, this rate change will have minimal impact to most, favorable impact to some and not so favorable, but tolerable changes for others.

The USPS Board of Governors submitted a comprehensive explanation and detail to the Postal Regulatory Commission on Nov 13, 2013, in accordance with the provisions of the Postal Accountability and Enhancement Act (PAEA) of 2006.  As you may recall, it was this act that separated the Market Dominant (now called Mailing Services) from the Competitive Products (now called Shipping Services).  Mailing Services price increases are tied to the CPI and in extraordinary circumstances they can file for an “Exigent” rate increase.  They have done both for Mailing Services and are still under review.

These changes for Shipping Services only have to be in compliance with rules regarding things like attributable cost coverage and should sail through the process with no hiccups in time for the January 26, 2014 implementation date.  Complete proposal can be found here: http://www.prc.gov/docs/88/88270/Notice%20CP2014-5%20FINAL.pdf

One of the positive outcomes of this annual process is that it provides stimulus for shippers to evaluate their processes and take action on the many strategies to lower their costs on small parcel logistics.

Here are 5 Tips to reduce parcel expenses:

  1. Modal Optimization: Restructuring business rules to route packages by cost of transit and service times.
  2. Reduce air space when possible to take advantage of Flat Rate, Regional Flat Rate and Cubic Priority Mail offerings.  “If it fits, it ships”
  3. Work with a parcel consolidator program that have special NSA pricing that:
  • allow you to participate in Cubic pricing tiers.
  • provides an extra $50 in free insurance.   “CPP” and “NSA” customers receive $100 per package while Base customers get $50.
  • has no annual commitment. – avoids the worry of paying the difference, a very real concern!
  • allow you to ship 14, 15 and 16 ounces  packages at the “Plus” tier  for First Class Package Services.  Without “Plus” pricing, packages over 13 ounces must go at the more expensive Priority Mail rate.

4. Enable the customer to make a shipping cost decision based upon time of transit, not specific Carrier Service mode.  Use a carrier management system to determine the lowest cost based upon dimensions and weight/zone that includes your negotiated rates with ancillary costs considered.
5. Consider working with a 3rd party logistic expert organization to help you both modally optimize and negotiate best in class carrier contracts, while right sizing  the “Earned Discount (Portfolio) Incentive Tiers” to reflect the modally moved volume to lower cost carriers.

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