Postal Service’s Pricing Methodology Upheld by Appeals Court

May 25, 2018

“The U.S. Court of Appeals for the District of Columbia Circuit on May 22 upheld The U.S. Postal Service’s method to set prices for competitive services. The ruling comes in the wake of President Donald Trump’s assertion that USPS doesn’t charge Amazon.com enough to deliver its packages.” – Postal Times

Postal Service’s Pricing Methodology Upheld by Appeals Court

Please contact us to schedule for a consultation, an in depth assessment, report, or custom research project on the court’s action, including the current White House Executive Order establishing a Task Force to conduct a thorough evaluation of the operations and finances of the USPS,

(i)    the expansion and pricing of the package delivery market and the USPS’s role in competitive markets;;

(ii)   the decline in mail volume and its implications for USPS self-financing and the USPS monopoly over letter delivery and mailboxes;

(iii)  the definition of the “universal service obligation” in light of changes in technology, e‑commerce, marketing practices, and customer needs;

(iv)   the USPS role in the U.S. economy and in rural areas, communities, and small towns; and

(v)    the state of the USPS business model, workforce, operations, costs, and pricing.

And develop recommendations for administrative and legislative reforms to the United States postal system.

 

 

How Amazon will beat UPS and FedEx at shipping – or Not

How Amazon will beat UPS, FedEx at shipping: Driverless trucks – https://www.bizjournals.com/seattle/news/2018/02/23/how-amazon-will-beat-ups-fedex-at-shipping.html?ana=e_me_set1&s=newsletter&ed=2018-02-26&u=l8ZrcdM1tBcwfbYcoSNXmQ00417653&t=1519672590&j=80196851

“Shipping with Amazon” (SWA) actually puts “SmartPost and to a lesser extent SurePost in Amazon’s cross hairs, and opens up a major USPS opportunity, if (and a Big IF) Amazon and the Postal Service can engineer a major alliance involving a.) USPS retail and mail processing and distribution hub footprints, b.) Investment in a USPS fleet leasing agreement and c.) USPS can negotiate a a unique third-level flexible labor agreement with the two key labor associations, NALC and APWU.

Granted, there are multiple moving parts that need to come together in a non-legacy environment, but the alternatives are not encouraging. The USPS is facing accelerating decline in FCM volumes and revenues, it has not re-engineered its operating model quickly enough away from letters and flats to parcels, nor sufficiently leveraged its key assets and thrown off the yoke of the PAEA pre-funding mandates’, and labor agreements, although the NALC, from past observations seems more open to such asymmetrical concepts, and puts pressure on the APWU to take the forward step.

UPS and FedEx are constrained and locked in by their size and operating models and both have unique exposure to Amazon.

Amazon on the other hand faces the double edge sword of accelerating eCommerce growth success; i.e., business is great, but it can’t expand fast enough to meet volume demand and customer expectation (“Demand Driven Delivery”, “D3”) which it created, and its rising shipping costs – even with its moves into taking control of and streamlining its end to end supply chain and delivery networks are still above historical industry norms for B2C marketplace – 14 to 17%.  The relative weight of fulfillment and shipping costs on Amazon’s bottom line has increased over the past decade. Last year, the two cost factors amounted to 26.4 percent of the company’s net sales, up from 16.6 percent in 20071.

  1. https://www.statista.com/chart/12893/amazon-fulfillment-and-shipping-costs/

U S Postal Service Rate Increase

The Postal Service just filed its annual price adjustment for competitive products with the Postal Regulatory Commission (PRC).

Pursuant to 39 C.F.R. § 3015.2, the United States Postal Service hereby gives notice of changes in rates of general applicability for competitive products. In accordance with Rule 3015.2(b), this Notice provides the Governors’ Decisions establishing the changes, including a statement of explanation and justification, and certifications of the vote. Governors’ Decision No. 16-10 establishes price changes for First-Class Package Service – Retail, and Governors’ Decision No. 16-8 establishes price changes for all other competitive products.

The rates will take effect January 21, 2018.

A link to the filing – https://www.prc.gov/dockets/document/102017

 

New NALC-USPS contract is ratified

The active membership of the National Association of Letter Carriers has overwhelmingly ratified the proposed 2016-2019 National Agreement with the United States Postal Service. By a margin exceeding 16 to 1, eligible members voted to accept the tentative agreement that was announced on May 12. The vote to ratify was 78,935 to accept the agreement versus 4,732 to reject it, as reported by NALC’s Ballot Committee chaired by Joseph DeRossi of Jamaica, NY Branch 562.

NALC will officially notify USPS of the August 7 ratification date.

Information on back pay and the implementation of the new contract will be released as soon as possible.

The new contract covers a 40-month term from May 16, 2016, to Sept. 20, 2019.

Postal Regulatory Commission financial analysis of the US postal Service.

In FY 2016, the Postal Service generated its third consecutive year of Operating Income despite an increase in operating expenses and the expiration of the exigent surcharge in April 2016. Revenue from the Market Dominant and the Competitive products rate increases, the exigent price surcharge during the earlier half of the fiscal year, and the continuing growth in Competitive products volume contributed to a net operating income of $0.6 billion.1 This is $0.6 billion less than the net operating income of $1.2 billion recorded in FY 2015. When all adjustments are included, the net operating income of $0.6 billion becomes a total net loss of $5.6 billion, a deterioration of $0.5 billion compared to FY 2015.  The increase in the total net loss is largely driven by a $1.5 billion increase in overall compensation and benefits costs and an increase in non-cash workers’ compensation expense of $0.9 billion caused by a decrease in the discount rate. 

Read the full report. FY 2016 Financial Analysis Report