USPS tells Stifel it has capacity for peak season deliveries

The largest business-to-consumer delivery network handles around 11 million residential shipments a day, a number that could spike to 50 million during December.    The United States Postal Service is better positioned in terms of capacity than perception might suggest, according to the investment bank Stifel.
Stifel’s transportation and logistics research group met with USPS executives last week and came away “with a more positive outlook not only on the capacity left in the USPS system but of the organization’s financial picture (if it can clean up its pension issues),” Stifel said in a research note. “This is good for FedEx and UPS, because it means the fast-paced growth in their SmartPost and SurePost networks, respectively, should be able to continue at elevated rates for the foreseeable future (absent further in-house shifts from Amazon or other large e-tailers).”
   SmartPost and SurePost are USPS’ joint final delivery services with FedEx and UPS, respectively.
   Other highlights from Stifel’s visit:

• On an average day, USPS delivers around 11 million packages to residences, compared to less than 6 million by UPS Ground and less than 2 million by FedEx Ground, making it the largest business to consumer delivery network.
• During peak days in December, USPS expects to deliver more than 50 million packages, compared to 34 million for UPS and 23 million for FedEx (although some of this UPS and FedEx volume will actually be delivered by the USPS).
• Amazon, has built its own sorting network to basically do SmartPost and SurePost consolidations in-house and deliver direct to the local post office (eliminating the need for SmartPost or SurePost for these packages). Stifel believes Amazon will do more of its own shipping going forward.
• The USPS said that capacity is plentiful in its package network for last mile during the year, but Stifel is concerned that peak may become an issue at some point.
• One item of concern, according to Stifel, is USPS’s aging fleet: “This should be good for industry pricing, though, as rates will need to move higher to cover the increased equipment capex we expect over the next several years.”