The U.S. Postal Service (USPS) is discovering one of the downsides of the multi-year growth in its parcel business.
USPS reported today that shipping and package volume in its fiscal second quarter, which ended March 31, rose 5 percent to 1.4 billion pieces. Operating revenue climbed 9 percent to $5.15 billion, equal to about 30 percent of the post office's total quarterly operating revenue of $17.5 billion. At the same time, however, USPS incurred a $364 million increase in compensation expenses, due in part to additional man-hours needed to support the package business, which is more labor-intensive than its core business of first-class mail processing.
USPS also reported a $155 million increase in transportation costs in the quarter as it, like other truck users, felt the pinch of rising freight costs and higher diesel fuel prices. The first calendar quarter of 2018 saw one of the sharpest escalations in freight rates in years.
First-class mail is USPS' most profitable service line because of the quasi-governmental agency's efficiencies in letter processing and deliveries. However, mail revenue and volumes continue to decline because of a secular conversion to digital formats. First-class mail volume fell by 2.1 billion pieces over the same period in fiscal 2017. USPS' parcel business, despite its rapid growth, will never achieve margins comparable to first-class or marketing mail because of the higher costs associated with parcel shipping and handling.
All told, USPS reported a quarterly net loss of $1.3 billion, compared to a net loss of $562 million in the year-earlier quarter. The so-called controllable loss, or the deficit not out of USPS' control, was $656 million, compared to "controllable" income of $12 million for the same quarter last year. USPS is required by law to pre-fund the cost of all future retiree health benefits, which is a multi-billion-dollar annual obligation.
In response to a question on how it can get ahead of rising parcel costs as the segment continues to grow, Postmaster General and CEO Megan J. Brennan said USPS will look at dynamic routing options for parcel traffic, creating more "high-density" delivery routes, and gaining more flexibility in staffing to support the parcel business. Brennan sidestepped a query on whether USPS has the latitude to raise parcel rates to offset increased costs, saying it relies on input from a range of voices inside and outside USPS to determine the rates that the marketplace will tolerate.
An industry executive who has worked with USPS said the agency wouldn't have much room to raise parcel prices unless it "improves the value" of its offerings. The executive, who asked not to be identified, did not get into detail. In April 2017, Christian Wetherbee, an analyst for the bank Citigroup Inc., said USPS would need to hike parcel rates by 50 percent to break even on the rising cost of its offerings.
Last month, President Trump created a task force headed by Treasury Secretary Steven T. Mnuchin to examine all aspects of USPS' operations. The president's executive order came amid a number of Twitter posts by the president charging that USPS has significantly undercharged Seattle-based e-tailer Amazon.com Inc., its largest parcel user, to the point where USPS loses $1.50 on each parcel it ships for Amazon. That claim is widely believed to be untrue. Bezos, who personally owns The Washington Post, has been in Trump's crosshairs over The Post's coverage of the administration.
USPS has long chafed at the pricing restrictions imposed on its so-called market-dominant products by the Postal Regulatory Commission, which by law must approve all rate changes for products such as first-class mail. Brennan said today that she would like to see all price caps eliminated, arguing that USPS faces competitive alternatives to "every product we offer." The Regulatory Commission is in the midst of its first review of the ratemaking process since it was mandated by Congress in 2006 when passed postal-reform legislation.
Brennan said she would not support eliminating the USPS' monopoly on first-class mail, known as the "Private Express Statutes," in exchange for legislative relief on price caps. The monopoly on first-class letters provides USPS with the revenue needed to meet its statutory obligation to serve every U.S. address, she said.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Two European companies are among the most recent firms to put autonomous last-mile delivery to the test with a project in Bern, Switzerland, that debuted this month.
Swiss transportation and logistics company Planzer has teamed up with fellow Swiss firm Loxo, which develops autonomous driving software solutions, for a two-year pilot project in which a Loxo-equipped, Planzer parcel delivery van will handle last-mile logistics in Bern’s city center.
The project coincides with Swiss regulations on autonomous driving that are expected to take effect next spring.
Referred to as “Planzer–Dynamic Micro-Hub w LOXO,” the project aims to address both sustainability issues and traffic congestion in urban areas.
The delivery vehicle, a Volkswagen ID. Buzz battery-electric minivan, will feature Loxo’s Level 4 Digital Driver navigation software, a highly automated solution that allows driverless operation. The van was retrofitted to include space for two swap boxes for parcel storage.
During the two-year pilot phase, Loxo’s Digital Driver will navigate a commercial vehicle several times a day from Planzer’s railway center to various logistics points in Bern's city center. There, the parcels will be reloaded onto small electric vehicles and delivered to end customers by Planzer’s parcel delivery staff.
Following the completion of the pilot phase, Planzer and Loxo will build on the program for rollout in other Swiss cities, the companies said.
The partners said the project addresses the increasing requirements of urban supply chains and aims to ensure the “scalability of their disruptive solution.” With largely emission-free delivery, it contributes to greater levels of sustainability for the city as a living space, they also said.
“The uniqueness of this project lies in the fact that it will have a direct impact on society,” Planzer’s CEO and Chairman Nils Planzer said in a statement announcing the project. “We didn't just want to integrate automated technology into existing systems, we wanted to develop a completely new concept and a new business model.”
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.