This article originally appeared in our July/August issue
Have you been considering adding USPS shipping services to your parcel carrier mix but are unsure what the savings might be? Perhaps you are unclear about the various service options, unsure if your shipping systems can process this change efficiently, or uncertain how a change may affect your client’s customer service experience?
Not Your Father’s Postal Service
Many companies continue to ship exclusively via UPS and FedEx. Some have reported feeling like a “rat in a wheel,” pushing all available volume to satisfy volume- or revenue-based incentives, or simply because it is how they have always done it. Perhaps you are not aware of the many improvements to package tracking, or that Priority Mail (PM) now has a defined delivery time with free insurance. Many shippers have dipped their toes in the water and use USPS services, via a manual process, for PO Boxes, APO, FPO, Alaska, Hawaii, Puerto Rico, and other US Territories, but have yet been willing to jump in by automating USPS as a choice for “best way” routing.
USPS dominates Residential Delivery
In 2016, USPS delivered 62% of all residential deliveries, according to an industry update from Stifel. While the USPS struggles to get Congressional reforms and relief from the poorly constructed 2006 Postal Accountability and Enhancement Act (PAEA), its market share continues to grow with the explosion of e-commerce shipping. With free Saturday pickup and delivery, shipper-friendly dimensional pricing, and no hidden surcharges, there are many opportunities where the USPS offers a better value over the national private carriers.
While there are several ways to add the USPS into your carrier mix, let’s focus on the most popular.
Reverse Logistics (Returns): The longest component in (C to B) reverse logistics is how long the return package spends riding in the trunk looking for a UPS/FedEx drop off location. Consumers like the convenience of a free home pickup offered by the Postal Service. Moreover, convenience is a critical piece of the customer experience. Consider the fact that the Postal Service has the country’s largest retail network. In fact, it’s larger than McDonald’s, Starbucks, and Walmart combined.
Outbound and Returns, Less Than a Pound: First Class Package Services (FCPS) is flat rate (no zones), ounce-based program that beats every option out there except for Parcel Select Lightweight (PSL). FCPS is a premium service with two- to four-day delivery to every address in the country. It does not require special packaging and, like First Class Mail, travels by air to the outer zones and is delivered six days a week at no additional charge. PSL packages are picked up by consolidators and inducted deep into the postal network for last mile delivery. Consolidators include UPS, FedEx, Newgistics, DHL, and OSM Worldwide. These services are a viable alternative when lower costs trump the need for faster speed.
Recommendation: Make sure you record these transactions as ounce-based FCPS or PSL, since many systems default to the more expensive PM or Parcel Select (PS) that use pricing that is based on one-pound increments, which is more expensive, especially for longer distances.
Outbound and Returns, Greater Than a Pound: Here is where the lines begin to blur, so it depends on which service you choose and how the price compares to your existing carrier negotiated rates. The only way to know is to do a study; start by accumulating a six-week data set that includes all accessorial charges and consolidate costs by tracking number for each service level, billed weight, and zone combination (lane). Compare these landed costs to USPS PM and PS by lane to identify savings opportunities.
Flat Rate Upside: Besides direct comparisons using the weight and zone, a more difficult comparison integrates dimensional charges and service options. Many shippers are still coming to grips with UPS and FedEx increases relating to package dimensions instituted over the last couple of years. The USPS has not changed its Dim policies, and these are more favorable (no dimensional rating under one cubic foot threshold, balloon rating for Zones 1-4, and 194 dimensional divisor for Zones 5-8). In addition, they offer Priority Mail Flat Rate, Priority Mail Regional Flat Rate, and Priority Mail Cubic options that can potentially provide upside to your weight/zone savings assessment.
Best Practices: List shopping cart shipping options by desired delivery date rather than specific shipping method, and capture the destination ZIP Code early in the process to offer service and pricing options based upon transit times. Use best way routing logic in the background to create delivery options. Make sure all accessorials charges, dimensional charges, minimum weight, and other charges are included. A similar process at time of shipping will open all best way opportunities to save money while satisfying the client’s expectations.
Make sure your shipping system captures dimensions, choose the smallest size packaging to protect contents, consider polybags to minimize dimensional impact, and configure routing rules to consider USPS PM Cubic.
International: There are many choices when it comes to international shipping. One of the biggest differentiators is how the carriers handle brokerage fees and the collection of duties (if any). The USPS acts as its own broker so brokerage is always included. However, if any duties are owed, the recipient must pay at time of delivery. This may have the undesired effect of the recipient refusing delivery, so plan accordingly. The USPS offers six different ways to ship International. One of the most competitive service offerings is the USPS First Class Package International Service (FCPIS), which is ounce-based up to 64 ounces (four pounds) and includes basic tracking to most countries.
There are many ways to add the USPS to your carrier mix. The timing is right, the USPS is a viable willing partner with competitive offerings, and is ready to deliver for you. Jump in, the water is fine!
Gordon Glazer, CMDSM, CMDSS, MDP, MDC is a Senior Consultant, USPS Specialist at Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Gordon is a postal industry veteran with over 30 years’ experience and is a sought-after speaker and industry thought leader. He welcomes your questions and comments, and can be reached at 858-879-2020 Ext 108 or firstname.lastname@example.org.