The U.S. Postal Service (USPS) has ended its rate discounts for key shipping partners delivering packages directly to USPS Destination Delivery Units (DDU), USPS’s final stop before reaching the consumer. What are the potential impacts on your shipping strategies, and how can you adapt to staying competitive? Let's break it down.
Understanding the Change in USPS DDU Discounts
Previously, Destination Delivery Unit (DDU) injection allowed parcel consolidators to access the lowest cost by dropping mailbags at USPS's final delivery unit, the post office. Upon arrival at the DDU, mailbags were opened and packages processed for delivery within the vicinity of the post office (typically within the area of one or two 5-digit ZIP Codes).
Under the USPS “Delivering for America” plan, DDU discounts are eliminated, forcing consolidators to inject parcels at higher cost earlier at upstream processing centers, known as Destination Sectional Center Facilities (DSCF) or - per new USPS terminology - Local Processing Centers (LPC). Moreover, the USPS has announced plans to establish processing centers between the previous DDU and DSCF levels, such as Sort & Delivery Centers (S&DC) or Delivery Hubs (DHUB), however, none of these will provide the same level of discounts as DDU.
What Does This Change Mean for Your Business?
The USPS Parcel Select service saw a price hike, with new published rates taking effect on July 14, 2024. On average, prices have risen by 25%, with a 43.4% increase specifically for deliveries at the Destination Delivery Unit (DDU) level.
DDU was the highest discounted rate structure parcel consolidators could access. With DDU discounts disappearing, shipping costs are expected to rise as consolidators may have to adjust their pricing to account for the higher injection cost to the USPS at earlier handoff.
Industry experts have raised concerns about possible delivery delays due to the shift in volume upstream. Where previously with DDU injection the USPS only had to arrange for local final mile delivery, now with DSCF (LPC) injection it will need to sort volumes by 5-digit zip code, arrange linehaul transportation to the DDU and then arrange final mile delivery. This could place additional strain on an already burdened Postal Service network. For e-commerce companies and other shippers, these changes could disrupt current logistics models that rely on USPS deliveries.
Reevaluating Logistics Strategies
To remain competitive, businesses need to reassess their shipping partners and explore alternatives in a post-DDU world. Diversifying carriers will help to control costs and enhance service. The ability to adapt a more flexible shipping model will be crucial in the changing parcel delivery landscape.
CIRRO E-Commerce is a small parcel shipping provider specializing in the e-commerce sector. They closely monitor market trends and adapt their services and pricing to ensure clients receive exceptional, tailored delivery solutions for both domestic and cross-border lightweight parcels. The company has recently introduced a new solution merging non-postal and postal deliveries in response to the impact of the USPS changes. This Hybrid Solution is built for cost-sensitive e-commerce parcels with optimized middle-mile and last-mile options. For more information, please visit www.cirroecommerce.com.
