USPS: the Servant of FedEx and UPS / by kevin murray

The United States Postal Service (USPS) has not turned a profit since 2006, has flat revenues, and has seen its overall mail volume plummet over the last decade. Additionally, the USPS has legacy costs that pretty much preclude the USPS from being a service that is sustainable without taxpayer funded aid now and far into the foreseeable future.  Since the closing of the previous century the price for 1st class postage has risen nearly 50%, and there isn't any reason not to expect similar increases to come.

 

The USPS is a government monopoly to which they are the only agency legally allowed to deliver 1st class mail, amongst other mail products to the mail boxes throughout the United States.  However, as everyone knows, there are other companies, such as Federal Express (FedEx) and United Parcel Service (UPS) that deliver all sorts of packages, of all different sizes and delivery priorities throughout the United States to people's doors and garages throughout the day.  These businesses are for-profit, and while there isn't any guarantee that UPS or FedEx will make a profit in a given year, they consistently do so.

 

Most people might find surprising that although FedEx and UPS compete against each other, they don't really compete with the USPS. For instance, the USPS has packages such as express mail, priority mail, and 1st class mail, which are flown by FedEx to their destination point.  In fact, FedEx is USPS's go to company for the rapid and efficient delivery of mail packages that are sent via USPS, as demonstrated by the fact that in 2011 FedEx received nearly $1.5 billion in revenues from the USPS, which made them far and away the biggest supplier of all to the USPS. 

 

So while FedEx and UPS garner revenue from handling the mail needs of the USPS, it also works the other way, in which the USPS handles the delivery of packages from these companies, in the so-called "final mile" for FedEx and USPS for the delivery of packages and other mail-related items to customers.  While on the one hand, this almost sounds like a win-win situation, because the USPS is obligated to make home delivery of mail, Monday through Saturday, there is one fundamental fly in the ointment, and that is the fact that UPS and FedEx must answer to their Board of Directors as well as to their stockholders, and subsequently we can be assured that they know their costs backwards and forwards, whereas the USPS, is well, a government monopoly, that wants to keep their employees busy.

 

The USPS parcel select service which handles the final mile for FedEx, UPS, and Amazon, has according to marketwatch.com: "surged nearly 500% to about 1.29 billion packages in 2013 from about 223 million in 2009."  This signifies the importance of this final mile to FedEx, UPS, and Amazon, but in the absence of real transparency, in the absence of an actual cost analysis, in the absence of a realistic estimate of what this service would cost these publicly held corporations for doing the same thing, we are left at a lost as to whether it is good for USPS or not.  All things being equal, the answer is probably not.