{"id":1885,"date":"2017-03-07T03:58:58","date_gmt":"2017-03-07T03:58:58","guid":{"rendered":"https:\/\/apwu73.com\/?p=1885"},"modified":"2017-03-07T06:07:02","modified_gmt":"2017-03-07T06:07:02","slug":"how-reforms-could-turn-u-s-postal-service-into-threat-for-ups-and-fedex","status":"publish","type":"post","link":"https:\/\/apwu73.com\/?p=1885","title":{"rendered":"How Reforms Could Turn U.S. Postal Service Into Threat for UPS and FedEx"},"content":{"rendered":"
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The chronically beleaguered U.S. Postal Service may be headed for a refresh, courtesy of major reforms<\/span><\/a> proposed in Congress.<\/p>\n

But UPS and FedEx might not like the\u00a0reformed\u00a0agency that\u00a0will\u00a0ultimately\u00a0emerge\u00a0from the process.<\/p>\n

A Morgan Stanley report this month suggests that a streamlined, flexible USPS could pose a threat to the two private logistics behemoths, particularly in e-commerce delivery services.<\/p>\n

\u201cThis is clearly a time of fast-moving, secular developments in the logistics\/last mile parcel delivery space, but all signs point to increased \u2014 not reduced \u2014 competition,\u201d\u00a0according to the report.<\/p>\n

At the moment, however, USPS is spectacularly unhealthy.<\/p>\n

Last\u00a0year, the agency posted a $5.6-billion net loss, despite having moved 154 billion pieces of mail and collected $71.4 billion in revenue.<\/p>\n

Those figures are \u201cgrim,\u201d analysts wrote. But the 2017 outlook is \u201cparticularly dire,\u201d they said.<\/p>\n

If current trends hold and USPS continues to fund pension and healthcare requirements, the agency will end up with less than $3 billion in operating cash by mid-October. That\u2019s enough to run the system for just\u00a010\u00a0days.<\/p>\n

\u201cThere is no question that the USPS is a financially unviable entity as it stands and the good\/bad news is that this needs to be comprehensively addressed imminently to prevent a crisis,\u201d analysts wrote.<\/p>\n

Congress seems poised to step in. The Republican majority in both houses bodes well for a postal reform bill, HR 756, proposed in January by Rep. Jason\u00a0Chaffetz, R-Utah.<\/p>\n

The legislation targets USPS\u2019\u00a0substantial healthcare liabilities and seeks to improve its operational flexibility and potentially raise postage prices. It would also partially restore an exigent surcharge that allowed the agency to collect $4.6 billion in rate surcharges before the provision was rolled back in April.<\/p>\n

USPS management expects the bill to help shave $26 billion off the agency\u2019s costs while optimizing its revenue potential. All four major postal employee unions support the legislation.<\/p>\n

\u201cI\u2019m willing to invest political capital\u00a0\u2013\u00a0we have a number of stakeholders who are here as we are looking to truly save the Postal Service as we know it,\u201d\u00a0said Rep. Mark Meadows, R-N.C.,\u00a0at a\u00a0February hearing by the\u00a0House Committee on Oversight and Government Reform.<\/p>\n

Meadows chairs the committee\u2019s subcommittee on government operations.\u00a0Chaffetz, the bill\u2019s sponsor, chairs the overarching committee.<\/p>\n

The reforms are a bit of a gamble,\u00a0because USPS faces many headwinds. Its high-margin first-class mail business is sliding, while its low-margin package business is on the upswing, putting more pressure on its solvency. Its fleet of delivery vehicles is outdated.<\/p>\n

But with some help, Morgan Stanley analysts believe a sleeker USPS could put UPS and FedEx on the defensive.<\/p>\n

\u201cWe believe a healthier, nimbler USPS with incremental pricing on its non-package mail business and higher capex that drives better service could actually become a stronger force to be reckoned with in the e-commerce space, especially in rural areas where an in-house logistics network at an e-commerce giant might not reach,\u201d analysts wrote.<\/p>\n

In the past, UPS and FedEx have pushed for postal reform in the hopes that a stronger agency would\u00a0raise\u00a0costs\u00a0for its services, thus elevating prices across the industry.<\/p>\n

Morgan Stanley analysts argue that this may not be the case.<\/p>\n

USPS is operationally profitable. Its first-class mail revenue is declining\u00a0more slowly\u00a0year-over-year than forecasts projected. It has made $14 billion in cost reductions since 2008. In September, it awarded contracts to six suppliers to build\u00a0prototypes of next-generation USPS delivery vehicles<\/span><\/a>\u00a0to potentially add to its fleet.<\/p>\n

The agency\u2019s net income certainly isn\u2019t impressive, but it demonstrates that the core operations aren\u2019t necessarily in disarray. The primary financial culprit is retiree healthcare benefit\u00a0spending\u00a0\u2014 if Congress can clean that up, USPS wouldn\u2019t need to institute price hikes, Morgan Stanley analysts wrote.<\/p>\n

And even if the agency decides to charge more for its services, it likely won\u2019t target e-commerce parcel delivery, analysts wrote.<\/p>\n

USPS considers packages to fall into a business category it dubs\u00a0competitive products.\u00a0That sector isn\u2019t subject to a government-imposed price cap that affects USPS\u2019\u00a0\u201cmarket dominant products\u201d category.<\/p>\n

The argument, according to Morgan Stanley, is that if USPS wanted to raise parcel delivery prices, it would have done so already because Congress doesn\u2019t restrict such increases. If anything, a reformed USPS would lower prices for package services while boosting stamp prices.<\/p>\n

\u201cThat should be easier and have a much more positive impact, and we think stamp prices are too low, not package prices,\u201d said David G. Ross, an analyst with\u00a0Stifel\u00a0Financial Corp.<\/p>\n

Besides, Morgan Stanley analysts wrote, it\u2019s not like USPS would hike package prices to a level that would justify UPS and FedEx following suit.<\/p>\n

Currently, USPS\u2019\u00a0competitive products are priced at $4 a unit, compared\u00a0with\u00a0$8 at UPS and FedEx Ground, Morgan Stanley found. So a 50 percent increase at USPS would still put the price 25 percent below the private competitors\u2019.<\/p>\n

Currently, UPS<\/span><\/a> and FedEx can command a premium over USPS for package pricing\u00a0because of\u00a0superior technology and service, Ross said. But customers accustomed to cheap delivery could revolt if prices rise more, according to Morgan Stanley.<\/p>\n

Such a move\u00a0might\u00a0actually benefit e-commerce behemoths such as Amazon and Walmart, who could rely more on in-house logistics and cheaper last-mile services. And smaller bricks-and-mortar retailers could adopt an omnichannel strategy, shipping from stores using local delivery and abandoning FedEx and UPS.<\/p>\n

Congressional legislation could \u201cinfuse greater innovation\u201d into the Postal Service even as it works to \u201cprovide greater product and pricing flexibility,\u201d\u00a0said\u00a0Brian J. Wagner, president of the National Association of Postal Supervisors,\u00a0in a February letter to\u00a0Chaffetz.<\/p>\n

Still, Ross is skeptical that such government efforts will significantly shake up the industry pecking order. USPS leads the business-to-consumer delivery market by a wide margin, often partnering with FedEx\u00a0SmartPost\u00a0and UPS\u00a0SurePost. Meanwhile, FedEx and UPS hold the advantage in sortation and last-mile delivery, he said.<\/p>\n

FedEx and UPS also invest billions of dollars annually into new, expanded and automated facilities that can accommodate growing demand for e-commerce delivery, Ross said. The companies also pour funds into improvements to their delivery services, networks and customer service.<\/p>\n

\u201cThis massive investment just continues to widen the gap over what the USPS can provide,\u201d he said. \u201cReform at the USPS will be focused more on the financials than on the operations, so we don\u2019t expect the competitive landscape to change much,\u201d he said.<\/p>\n

Source: A Reformed USPS Could Pose a Threat to UPS and FedEx Once Healthy | Trucks.com<\/span><\/u><\/a><\/em><\/p>\n<\/div>\n<\/div><\/div><\/div><\/div><\/div>","protected":false},"excerpt":{"rendered":"

The chronically beleaguered U.S. Postal Service may be headed for a refresh, courtesy of major reforms proposed in Congress.But UPS and FedEx might not like the\u00a0reformed\u00a0agency that\u00a0will\u00a0ultimately\u00a0emerge\u00a0from the process.A Morgan Stanley report this month suggests that a streamlined, flexible USPS could pose a threat to the two private logistics behemoths, particularly in e-commerce delivery services.\u201cThis is clearly a time of fast-moving, secular developments in the logistics\/last mile parcel delivery space, but all signs point to […]<\/p>\n","protected":false},"author":14,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_editorskit_title_hidden":false,"_editorskit_reading_time":0,"_editorskit_is_block_options_detached":false,"_editorskit_block_options_position":"{}","footnotes":""},"categories":[19],"tags":[],"class_list":["post-1885","post","type-post","status-publish","format-standard","hentry","category-usps-news"],"_links":{"self":[{"href":"https:\/\/apwu73.com\/index.php?rest_route=\/wp\/v2\/posts\/1885","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/apwu73.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/apwu73.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/apwu73.com\/index.php?rest_route=\/wp\/v2\/users\/14"}],"replies":[{"embeddable":true,"href":"https:\/\/apwu73.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1885"}],"version-history":[{"count":2,"href":"https:\/\/apwu73.com\/index.php?rest_route=\/wp\/v2\/posts\/1885\/revisions"}],"predecessor-version":[{"id":1895,"href":"https:\/\/apwu73.com\/index.php?rest_route=\/wp\/v2\/posts\/1885\/revisions\/1895"}],"wp:attachment":[{"href":"https:\/\/apwu73.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1885"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/apwu73.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1885"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/apwu73.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1885"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}