Postal Power

May 01, 2001 9:30 PM  By

The total freight is often as much as 40% lower than UPS ground

Despite an impressive performance in recent years, few direct-to-customer shippers view the U.S. Postal Service as a viable primary carrier. However, significant changes in Postal Service options, prices, and service levels have allowed direct-to-customer shippers to take advantage of certain USPS services to lower shipping costs and improve delivery times over traditional UPS ground service.

Then, just as the USPS’s Priority Mail service was becoming recognized as a great, low-cost alternative to UPS for packages up to 5 lbs., this year’s USPS rate increases effectively eliminated the price advantage for packages over 3 lbs.

Priority Mail can still make sense, however. In fact, it may be inappropriate to compare Priority Mail only to other ground services. Perhaps its real competition is expedited service such as second-day or even next-day options.

The last mile

It may come as something of a surprise to hear that the USPS frequently recommends that shippers not ship directly through the Postal Service. In fact, the USPS encourages the use of qualified third-party firms to handle line haul and direct induction into appropriate destinations such as bulk mail centers (BMC) or even local post offices (destination delivery units, or DDU).

Though the USPS is great at delivering the “last mile” from the post office to the customer’s door, it is less efficient at handling and transporting a package through the system prior to that final step. To combat this problem, the new Parcel Select program offers some major discounts. By having specialized, third-party mail handlers perform all interim transportation and sorting, the Postal Service can do what it does best and bypass the costliest activities.

Sort it out

Few shippers, if any, can do the extensive sorting required to qualify for meaningful presort discounts. That’s where third-party consolidators and expediters come in. These service providers have the volume, resources, and lower cost infrastructure to sort shipments down to BMC and even DDU levels, thereby enabling maximum USPS discounting. Even after combining the costs of postage, line-haul transportation, and service provider fees, the total freight is much lower than comparable UPS ground service — often as much as 40% lower.

Transit times are equally attractive. In most cases, clients report that packages are delivered to the Postal Service delivery unit the same day or the day after the expeditor receives it. The Postal Service delivers one or two days after that. Total shipping time, including line haul from the shipper to the expeditor, is usually at least one to two days faster than UPS times.

The USPS will provide a list of qualified third-party service providers. Expediters include firms such as Global Logistics, APX, and PFI. Most of these specialize in a specific regional area. For example, PFI concentrates on Southern California, Global on the Southeast. APX appears to have the best ability to cover the entire country. Consolidators include Parcel/Direct, Donnelly/CTC, and PCA. Your postal account rep can provide you with a list of partners and explain their respective services.

Consolidators and expediters both perform similar functions of mixing your outbound packages with those of other companies, sorting them down to the BMC or DDU level, and transporting them directly to a postal hub. The key difference among them is primarily a question of timing and who handles the “first mile” transportation from your dock to the service provider.

Consolidators typically pick up a shipment from your dock, combine and sort it with parcels from other shippers, and then truck it directly into the USPS destination facilities.

Expediters usually expect clients to deliver packages to the expediters’ sortation centers. Unlike consolidators, expediters allow shippers to ship a trailer whenever appropriate, rather than waiting for a full load to build. This generally gets the packages to the expediter’s processing centers a day or two faster than a consolidator could manage it.

Expediters and consolidators typically charge clients by adding a handling charge for each package shipped — from $0.75 to $2.00 for a relatively light average carton. Consolidators tend to be a little less expensive, while expediters seem to provide faster delivery by a day or two.

The extra mile

Among other advantages the USPS offers, here are a few points to consider:

  • Free boxes: The Postal Service cannot discount its published rates for any customer (other than presort discounts). It can, however, provide cash savings by such means as providing free boxes.

  • 54 more delivery days: The USPS delivers packages at least six days per week, plus two Sundays in peak holiday season. This is a 14% increase in delivery days over all other carriers, for no extra charge.

  • Merchandise returns: The Postal Service’s answer to Call Tags, these are far cheaper and infinitely more convenient for the customer. Customers can obtain a preformatted label or print their own from the Internet, then leave a package at their door, in any mailbox or post office, or with any carrier.

Perhaps the most attractive and refreshing aspect of the USPS is how interested they are in the DTC business, and how willing they are to work with it. UPS has clearly become much less user-friendly over the last few years. Regulations are increasingly complicated, and there are more and more add-on charges. Residential shipments seem little more than a reluctant obligation. UPS still performs nearly flawlessly, but its general level of cooperation and enthusiasm just isn’t what it used to be.

In contrast, the USPS seems to be actively courting the DTC industry. A specialized “Mail Order Retail Segment” of the national accounts group has 36 senior national account managers on the team. The group actually works with companies of all sizes. Its sole responsibility is to work closely with shippers to learn their business. Members of this group will do a study of any shipper’s package profile and recommend appropriate services.

While I personally see some exciting opportunities, I’m not recommending that you ship everything through the Postal Service. As higher freight costs and more complicated pricing structures raise the stakes, it becomes clear that the only savvy strategy is to have several carriers in place and know when and how to take advantage of each service. This requires effort, education, and focus, but anyone using a single carrier based simply on convenience and reputation is missing the boat.

Bill Kuipers is a principal of Spaide, Kuipers & Company. The firm provides operations management and IT solutions for the direct marketing industry, with offices in New Jersey and Philadelphia. Kuipers can be reached at (973) 838-3551, or kuipers@spaidekuipers.com.