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NewsParcel

It’s getting heavy at USPS, and that may not be good

 A toolbox in a package delivered by USPS. (Photo: SJ Consulting)
A toolbox in a package delivered by USPS. (Photo: SJ Consulting)

According to transportation consultant Satish Jindel, the ideal parcel handled by the US Postal Service need only have two characteristics: Weigh less than 5 pounds and fit through the opening of a standard clothes hanger.

Many of today’s postal packages meet that criteria. But an increasing, though, undetermined, number do not. They are bulkier and heavier, in some cases up to 70 pounds and possessing outsized dimensions. They come from many shippers, notably amazon.com, Inc., (NASDAQ:AMZN) the e-tailing giant that uses USPS to deliver about 62 percent of its traffic. 

For USPS, whose infrastructure is not designed to efficiently move heavier, high-cube items, a relatively small number of such packages—even those that may weigh just 20 pounds—can disrupt its operational performance and impact its cost structure. It requires a sizable investment in cubic measuring equipment and a thorough understanding of cubing principles, the latter of which USPS doesn’t have, according to Jindel. It also makes delivery life difficult for letter carriers already required by federal law to serve every address. 

“It doesn’t take many” oversized items to throw off USPS’ delivery network, Jindel said in a phone interview.

The change in mix is a closely guarded secret. Mark S. Schoeman, president of The Colography Group Inc., a consultancy familiar with postal data, confirmed that USPS is handling more larger items. However, Schoeman declined to comment further due to confidentiality issues. 

In a perfect world, every parcel would fit in a mailbox. Failing that, USPS needs to play the cards it’s been dealt. How it plays the hand is no small matter. Parcel revenue and volumes have been consistent growers to the point where parcel revenue may eclipse first-class mail revenue in the not-so-distant future. Parcel and shipping revenue rose 10.1 percent in the most recent fiscal year ending Sept. 30. USPS handles approximately 30 percent of all US e-commerce deliveries.

At the same time, though, parcel delivery is labor-intensive and requires more space aboard vehicles. USPS’ core first-class mail segment, which is far more profitable because dozens of letters can fit in a space occupied by a single package, is in irreversible decline due to the migration to digital communications. 

USPS also has to contend with threats to its last-mile parcel delivery product, known as “Parcel Select,” as big users like Amazon, UPS Inc. (NYSE:UPS) and FedEx Corp., (NYSE:FDX) expand their last-mile networks to handle shipments they normally tender to the postal network for delivery to the residence. The product has been extremely successful because it enables users to penetrate the residential e-commerce delivery market without their own equipment, and to do it at what is widely considered to be a bargain price. Perhaps not surprisingly, USPS has raised its 2019 Parcel Select rates by nearly 10 percent.

Jindel believes that USPS needs to, a pro lay out specifically what types of parcels it will, and will not, accept. Parcels deemed too big and asymmetrical should be refused, he said. USPS could do this because the so-called universal service obligation does not apply to the parcel segment which USPS does not hold a delivery monopoly on. Shipments in the 20 to 50-pound range would then be diverted to private carriers, Jindel said. Shippers would benefit from good service, carriers would appreciate the extra business, and USPS would get a better handle on its costs and focus parcel deliveries on what it does best: Sticking it in the mailbox, he added.

To that end, one of the more salient points to emerge from the recently released White House report on postal reform is the call for the US to redefine the meaning of the universal service mandate, which requires USPS to serve every address in return for holding a monopoly on mail shipments. Unlike other countries that have precise definitions for what constitutes a required service that is government-protected, the US government’s definition is relatively vague, the report found. As a result, there has been a perception that most, if not all, postal services are universal, the report suggested.

The authors advised Congress to clearly state what postal delivery services are essential and should thus enjoy monopoly status, and what services are subject to competitive forces and should not have any pricing caps or restrictions. Currently, the Postal Regulatory Commission, an independent agency, has to approve any postal rate changes. USPS did not comment on the White House report other than to say that it was under study, and it did not comment on the outlook for changes in its delivery mix.

The infusion of larger shipments into the e-commerce ecosystem is a nascent but meaningful trend. Deliveries of heavy goods ordered online is now a $8.94 billion a year market, growing 10.5 percent from 2017 to 2018 following 9.4 percent growth from 2016 to 2017, according to SJ Consulting, Jindel’s firm. Growth in the segment has compounded by 9 percent a year since 2012, according to the firm’s data. The growth trajectory is likely to continue as retailers open up more of their inventories to online ordering.

One provider, XPO Logistics, Inc., (NYSE:XPO),specializes in handling online orders of heavy goods—those typically weighing more than 150 pounds—and stays away from parcels. FedEx and UPS, accustomed to processing small packages, are increasingly handling heavier and outsized shipments that aren’t conveyable and are more difficult to physically manage. Neither carrier covets the traffic and have laden such deliveries with high rates and onerous surcharges in an effort to discourage it.

USPS, for its part, took a step in November to acknowledge the expanded role of larger packages when it adjusted its pricing formula to expose more packages to the higher prices that come with rating a shipment by its dimensions instead of its actual weight. A common practice in the parcel industry, “dimensional” pricing is designed to compensate carriers for the disproportionate amount of trailer space bulky items occupy in a trailer, thus leaving less room for other packages. In recent years, FedEx and UPS have adjusted their formulas that have resulted in more shipments being priced on their dimensions. The moves have led to material rate increases for shippers while generating millions of dollars in additional revenue for the carriers.

USPS has also deployed more than 20,000 extended-capacity delivery vans that have replaced its aging minivan fleet. The new vehicles have a shelving design that makes it easier for letter carriers to arrange mail and parcels for easy access, according to USPS information. Meanwhile, the agency is working to replace its fleet of 163,000 longer-life vehicles, some of which were built more than 30 years ago, with newer-generation trucks that are safer, more environmentally friendly, and capable of handling more parcel traffic coming from e-commerce orders. The contract award process is still ongoing.

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.

One Comment

  1. As a Rural carrier the past 30 years I can attest to the validity of this article. Not only are we handling a daily volume of parcels that was once seen only the week before Christmas, but they are much larger and heavier. Many of these parcels are last mile drop offs from UPS and Fedex, especially if the roads to the addresses are narrow, dirt and long.
    Our LLVs will barely handle the volume and yet to maneuver in and out of 800 boxes a day I don’t want a much larger vehicle…it is a situation the Post Office will have to address in the near future. There is no such thing as free shipping, sooner or later consumers will have to pay the price of convenient delivery of their shopping whims.

  2. It’s getting ridiculous. I’m a rural carrier sub and have been working at breakneck speed for 12 hours a day, six days a week, with no lunch or breaks to get these packages out. They are bigger than ever this year and we have to make several trips back to the post office because not many of them fit in vehicles. Many of the huge Amazon boxes only have a tiny item in them. It’s such a waste of our space. Going back to the post office in a rural area takes a lot of time. We may be 20 miles away, then have to drive back and reload. Every day UPS and Fed-Ex show up at our office and drop off huge pallets of parcels for us to deliver for them. They have the big trucks, not us, so why are we delivering their stuff?! Saturdays are the worst. Most of the regulars have off so all of us subs have to do the whole mail route, then come back and go deliver 100 parcels that don’t fit in mailboxes. I really don’t like creeping up on someone’s front porch in the dark at 8pm on a Saturday. USPS needs to get a grip on this parcel issue. The vehicles aren’t big enough. The mailboxes aren’t big enough either. If USPS required larger mailboxes it would save a ton of man hours going to front porches especially where I work where the driveways are 1/4 mile long. This Christmas volume ruins 2+ months of my life every year. I barely see my wife and kids before I have to go to bed to be ready for the next day. If they don’t soon make some changes they will lose this carrier.

  3. I’m a city carrier for 32 years, done next summer, and agree this issue is getting out of hand. My theory is the USPS is so desperate that it’s giving away the service at incredibly low rates, and like everywhere the PO executives and the PRC are probably getting generous stipends from these mailers. I don’t think it’s just packages either. I believe bulk mailers are benefiting from this as well. I pick up about 30-40 packages as well, so add that in to the menagerie. I also think the public is getting a little to lazy as well. to save a dollar here or there on a 30lb bag of dog food, cat littler, cases of diapers, toilet paper and paper towels. I guess they’re way to busy to go the store themselves. Hopefully their local grocery doesn’t shut down so their on line suppliers can jack up the prices on them, oops. Finally, most managers in the PO don’t give a damn how many packages you have, how heavy they are, how many you pick up, as long as long as they can keep hours down so their bonuses aren’t in jeopardy. They do let their "close" friend carriers slide by while berating the CCA’s into more and more work in less time. News Flash, these newer hires are not standing for it. They’re quitting at an alarming rate. The BS they put up with is not worth it. I hope the public is ready for a severe down turn in service when attrition is going to leave the PO executives sitting at their desks wondering why there no carriers anymore. There’s so much more to say, but why bother, it’s greed that runs this country and the USPS is no different

  4. Look, I feel for you postmen and women, I really do. However, in this day and age, first class mail is in decline. There are legislatures right now in Congress who want to see USPS file for bankruptcy so that it can be taken private. This is a huge threat to small rural communities. The life line right now for the post office is parcels, take those away and the USPS and its employees would be in a world of hurt. Trust me.
    So I say, things are changing at the USPS and the American public needs you carriers to be flexible otherwise, there could be many layoffs and PO closures.
    This is a fact. The competition out there is real and would love nothing more than to expand their footprint.

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