Today, I read several articles about the USPS’s plan to increase Parcel Select® rates by 25% starting July 14th. This change, filed with the Postal Regulatory Commission, is expected to raise USPS revenue by 1.5% but reduce Parcel Select volume by 2% next year.
The main goal of this rate hike is to encourage workshare consolidators, such as Pitney Bowes, DHL eCommerce, and OSM Worldwide, to inject their volume further upstream in the USPS network. This is expected to improve the utilization of USPS Ground Advantage service facilities.1
Importantly, this change is not anticipated to impact USPS’s relationships with Amazon and UPS.2
However, consolidators facing reduced margins might seek alternative last-mile providers.3
Background on the Consolidator Model
Typically, a USPS package travels through several nodes before reaching its final destination: from the local post office to the Origin Sectional Center Facility (SCF), then to the Origin Network Distribution Center (NDC), Destination NDC, Destination SCF, and finally the Destination Delivery Unit (DDU).
To improve efficiency, USPS partners with companies like Pitney Bowes, DHL eCommerce, and OSM Worldwide in “workshare” programs. These partners consolidate, sort, and deliver packages directly to the DDU, receiving discounts for this service. Now, USPS aims to reduce the reliance on last-mile injections, preferring to move more volume through its own network to enhance utilization.
- Max Garland, USPS delivery unit proposal sparks service, cost concerns for shipping partners. ↩︎
- Nate Skiver, The USPS wants to end Parcel Select DDU discounts. ↩︎
- Jonathan Hessney, USPS proposes new Parcel Select rates, starting at $4.50 per piece at the DDU. ↩︎
About the Author
Jagath Narayan is the CEO and co-founder of Ordoro, the #1 ecommerce platform for retailers growing from 10 to 10,000 orders/day. Follow him on LinkedIn to learn more about entrepreneurship and ecommerce.
