on Mar 23rd, 2013 | 10 comments
 

The federal government ships a considerable number of packages each year, primarily using FedEx and UPS. In fiscal year 2012, federal agencies spent almost $337 million on shipping services through General Services Administration (GSA) contracts. The U.S. Postal Service earned only $4.8 million of that revenue, or less than 2 percent, a recent Office of Inspector General audit report found.

The Postal Service faces several challenges to growing its share of this market. Unlike its competitors, the Postal Service cannot offer necessary discounts to penetrate a market, attract new customers, or match competitors’ prices. In addition, the Postal Service’s lack of a guaranteed 2-day or 3-day express delivery product prevented it from qualifying for one of the GSA’s most lucrative contracts. Priority Mail regularly meets 2-day and 3-day delivery performance (90 percent of the time), but it did not qualify because it does not include a delivery guarantee.

As a late entrant to the GSA market, the Postal Service is at a distinct disadvantage. FedEx and UPS have been vendors since 2001, nearly 8 years longer than the Postal Service, and they have built solid relationships with the federal agencies. The OIG audit report noted that many federal agencies are reluctant to leave these long-term relationships and switch to the Postal Service. Further, the Postal Service does not always accept the payment methods desired by customers, forcing federal agencies that ship with the Postal Service via a GSA contract to use one of its four payment methods. Its competitors accept multiple payment methods, such as electronic billing data files.

At least one federal agency had specific requirements that disqualified the Postal Service from participating. The audit found that the U.S. Department of Defense (DoD) provides preferential treatment to those shippers that have their own aircraft and participate in the Civil Reserve Air Fleet (CRAF) program. Because the Postal Service does not own aircraft, it is prohibited from competing for DoD business allocated to CRAF participants, even when demonstrating lower prices.

The OIG audit concluded that the Postal Service could capture a larger share of the federal shipping market if it could overcome these challenges. We would like to hear your ideas. What are some ways the Postal Service might be able to increase its shipping sales to federal agencies? How best might the Postal Service overcome some of the considerable challenges noted in the audit report?

10 Comments


This review is really interesting and something I have wondered about for a while. A few of the challenges – improving sales relationships and accepting more billing options – seem like they could be more easily overcome than the DoD concern about no aircraft. Is Postsl Service doing anything to get more options for billing or improving sales efforts?

MMD, thanks for your comment. Federal Sector Specialists and Strategic Account Managers are focusing on increasing government sales. With regards to billing options, management is discussing payment method options for the federal sector.

Is there anything prohibiting the Postal Service from introducing a guaranteed 2- or 3-day product? If it is meeting that standard nearly all the time anyway, it seems the potential for additional business might outweigh the risk.

The Pricing group is analyzing the value of 2- and 3-day guaranteed express delivery products. Thanks for your comment.

I was thinking about the lost GSA contract due to the lack of a 2-3 day shipping guarantee. I believe amazon prime, which uses UPS, also requires a 2-3 day guarantee for their 2 day shipping deal. If the post office offered the 2-3 day guarantee not only could they potentially get a lucrative GSA contract but also a lucrative amazon contract. Those two major customers may be enough to justify the marginal increase in risk from offering the 2-3 day shipping.

I think it’s going to come down to “dollars and sense” for other agencies. When the cost for shipping by Postal Service helps their bottom-line, it will make sense for them to use Postal Service whenever possible.

There must be some government forum that Postal Service Sales can visit and hit alot of the agency reps in this area, to get the word out. Or maybe a EDDM campaign to all the agencies in the DC area.

It may be of interest, but do you think that the postal service can start implementing “new” services such as scanning the mail and such and delivering them by email attachments, logging in to view mail, etc?
Something similar to some of these new tech startups. Since the postal service has access to our mail already, I think that the customer will rely more and trust you than some of these new startups! And in the long run, can generate some more “greenbacks!”

There seems to be a lot of analyzing and no action What prohibits USPS from offering the 2 & 3 day express delivery?
If increasing labor costs outweighs benefits then restructuring is needed. Federal agencies should be given the price match guarantee, as well as extending pymt options for the federal sector using USPS.

If USPS wants to increase their share of the mkt they must be equal in their abilities to offer the same advantages as FED EX & UPS. This is common sense. What changes needed must be done. Otherwise what purpose does USPS HAVE. in this mkt?
I can’t see any reason federal sector customers should not be given the same competitive pricing and expanded methods of paying for their business with the USPS. Pretty sad we can’t figure that one out quick!

Honestly I see no reason private sector should not be given same competitive options using the USPS. Why are we in this mkt sector if we can’t compete? I like using USPS. I’ve not researched it yet from a business customers views. I will though. This info is excellent in making people realize why we see UPS ‘ FED EX Trucks delivering products instead if the USPS.
I’ll research further to see why such a major deal to implement changes to.USPS Concerning what qualifies 2 & 3 day service as I’ve pd for Saturday Delivery by both competitors to be informed of some ridiculous reason my prd wasn’t delivered. So, who’s auditing them for their compliance to guarantees? I’m sure independent auditors, but the margin of error has to be less than 100% guarantee. I think we’ve all experienced delays on guaranteed delivery by FED EX & UPS.
Who is responsible for this site? But, if it educates me to my options for shipping from private & business perspective it’s good. I’ll repost after do more research.

USA Today just featured a video about this topic, using data straight from the related report:

http://www.usatoday.com/videos/news/2013/03/26/2021337/

I’ve never understood why the Gov contracted with UPS & FedEx. Unless the USPS cant offer a specialized service that UPS & FedEx do, there is no reason why the Gov cant use USPS. The Gov loves to use and abuse the USPS, saddle them with pre funding retirement, but cant do anything to pay for that in a timely fashion. Let certain members of the Gov mail for free with just a signature, but then contracts with UOS & FedEx to ship.

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