USPS is losing US government contracts for shipping letters and goods to lower-priced offersfrom UPS and FedEx and needs to improve its pricing flexibility and express delivery products if it
is to win business, according to a report by the USPS Office of the Inspector General (OIG).While UPS and FedEx have been official suppliers of the government since 2001, the US postaloperator started participating only in 2009 because it didn’t have the appropriate sales force ormarket strategy to target the federal sector, OIG explained. But USPS has apparently made littleimpact over the last three years.
The General Services Administration (GSA) awarded contracts worth $336.9 million in 2012 butUSPS only won a minimal 1.4% share with $4.8 million worth of contracts. In contrast, FedEx claimedthe biggest share with contracts worth $190 million (56%) and UPS picked up contracts worth $139million (41%). In total, the two USPS competitors scooped nearly 98% of the federal agencies’annual revenues.
“Although its competitors have consistently captured more than 98% of shipping revenue fromfederal agencies through GSA contracts, the Postal Service has opportunities to increase its shareof this market. However, to realise these opportunities, the Postal Service must overcomechallenges that keep it from growing revenue in this area. By overcoming these challenges andenhancing customer intelligence, we estimate the Postal Service could grow an additional $17.4million of revenue annually during FYs 2013 and 2014,” the OIG stated.
As the two major challenges, OIG identified USPS’ pricing inflexibility and the lack of expressproducts guaranteeing delivery within 2-3 days. In addition, the postal operator is facingdifficulties due to its late entry into this marketplace, the size and structure of its federalsector sales force and the payment methods it accepts. Furthermore, the US Department of Defenseprovides preferential treatment to those shippers with their own aircraft.
Meanwhile, the APWU union has been notified that USPS will accelerate the previously announcedpost office closures with the consolidation of 18 facilities taking place this year instead of in2014. “The 18 facilities were originally among 89 sites that management identified forconsolidation next year, in Phase 2 of a modified consolidation plan that was announced in May2012,” APWU said.
As the reason for the change, USPS named its intention to speed up its cost-saving cuts afterthe outgoing US Congress failed to agree on urgently-needed postal reform.
“Management’s consolidation goals remain the same: to reduce the mail processing network byhalf,” APWU Executive Vice President Greg Bell said. “This most recent announcement underscores theurgency of congressional action to resolve the Postal Service’s congressionally-manufacturedfinancial crisis. In the meantime, the APWU will continue to demand that the USPS adhere to ourCollective Bargaining Agreement and keep dislocation of employees to a minimum.”
In June 2012, the APWU filed a complaint with the Postal Regulatory Commission (PRC) seeking toprevent the consolidation plan. PRC rejected the complaint.
