USPS Seeks Advice on Creating a Dynamic Routing Technology

Feb 18, 2013 12:09 PM  By

In an attempt to close the gap between private-sector rivals FedEx and UPS, The U.S. Postal Service is seeking advice on how to create a new, high-technology system for routing mail and packages, according to an article on Reuters.com.

The financially struggling USPS said it wants a “dynamic routing” strategy that can help it offer new products that could boost revenue such as same-day delivery and pickups at retail locations, according to the Reuters article.

The U.S. agency has been struggling for years to regain financial footing as it grapples with massive payments for future retiree health benefits along with American’s reliance on online communications brings down mail volume. It nearly lost $16 billion in its last fiscal year.

Ken Wood of LJM Freight Auditing & Consulting said a new high-technology system for routing mail and packages has to happen because there needs to be a third competitor with UPS and FedEx.

“It’s UPS and FedEx, they raise their rates together and their increases almost mirror each other and are almost identical,” said Wood. “The only organization to be able to play in this market is the Postal Service.”

Wood said the USPS’s parcel shipping business has increased 15 to 18% a year mostly going to residents, and that UPS and FedEx charge exorbitant fees.

“If you are not in a major city you are given a deliver area surcharge,” said Wood.

The USPS posted last month a “request for information” on a U.S. government website seeking advice from private companies or individuals for a dynamic routing system for delivering individual packages outside its day-to-day routes. It’s not offering compensation for information at this point.

Earlier this month, The Postal Service announced they would be implementing a five-day delivery excluding Saturdays which would go into effect on Aug. 5.

Under this plan, catalogs and other forms of mail will no longer be delivered on Saturdays. Packages however, will still be delivered on Saturdays.

USPS said in a statement that once the plan is fully implemented, it will generate a cost savings of about $2 billion annually.

Catalog mailers and others in direct-to-customer said they think the savings will be passed on to them in the form of fewer future rate increases.

Jerry Hempstead of Hempstead Consulting said the USPS is in the best position to handle ecommerce returns because customers send packages back via their local post office and because they have the lowest cost and most efficient network with a terminal.

“The USPS is trying to figure out how to best play in the delivery space for these handful of players,” said Hempstead. “The internet has allowed for the rapid increase of parcels shipped primarily to residents,”

USPS mail has dropped by about 25% over the last decade as more Americans communicate through email. The National Retail Federation projects sales could go up by up to 12% this year, which translates into an increased need for package delivery services, according to an article in Reuters.

In a USPS press release, Postmaster General Patrick R. Donahoe told a Senate Committee on Wednesday that the Postal Service’s financial problems are more urgent than ever and will continue to get worse unless Congress takes action to reform its business model.

Donahoe testified before the Senate Homeland Security and Governmental Affairs Committee, stating the Postal Service will continued to take aggressive steps to increase revenue and reduce operating expenses but needs legislative changes from Congress to help return the Postal Service to long-term financial stability, according to the release.

One of the legislative provisions USPS is seeking includes provisions relating to avoiding restrictions on the announced move to a six-day package, five-day mail delivery schedule.