Leveraging Postal Service Purchasing Power to Generate Revenue

Apr 13 2009
OIG Blog Category: Strategy & Public Policy 12 Comments

The Postal Service spends approximately $13 billion each year with contractors, most of whom are also customers of the Postal Service. Meanwhile, the Postal Service has experienced the most significant mail decline in its history. Mail volume fell by 9.5 billion pieces in fiscal year (FY) 2008. The economic stress of current times is a major factor in this decline, and additional Postal Service revenue is lost when major businesses merge and combine their customer mail base.

In March 2007, U.S. Postal Service officials developed Supply Management’s 3 Year Strategic Plan. One of the goals of the plan was to develop revenue generating opportunities. The plan mentioned that Supply Management should look further to identify additional opportunities to generate revenue. To meet its goal, Supply Management will focus on revenue generating opportunities that include partnering with Marketing and other business partners to identify revenue generating opportunities, increasing the use of volume rebates, and increasing licensing of its intellectual property (for example, cluster box unit delivery equipment). Royalty payments from various mail automation technology purchased through contracts will also increase revenue. The Postal Service is also considering advertising opportunities in its contracted transportation program.

The Office of Inspector General has efforts underway to analyze Postal Service efforts to leverage its significant buying power to create revenue generating opportunities. We would like to solicit the knowledge and opinions of Postal Service employees and the mailing community. Our question is: How can the Postal Service best leverage its buying power to generate revenue and what opportunities may it currently be missing to do so?

Comments (12)

  • anon

    The USPS is not getting the best prices with delivery etc from their current quote system.My companies used to sell strapping and machines to the USPS for 15 years but with new purchasing processes they have lost contact with the best suppliers and are now paying much more than they should be with better service than now being experienced.

    Apr 28, 2010
  • anon

    Whenever bundling occurs there is the opportunity for suppliers to add costs. Unbundling costs reduces pricing down to real costs and not inflated ones. Currently Suppliers of USPS products and services combine shipping and handling costs with the price of the item. My recommendation is that the shipping costs need to be unbundled and paid separately. If you asked UPS or FedEx suppliers how those two companies pay for their shipping costs for their own supplies you would see that they are paid separately and are not bundled. Our CAPS (Centralized Accounting Payment System) could be used to streamline payment for USPS shipping costs. From the Suppliers that I have worked with, they would be willing to use this option on their Supply Chain side, but their Sales Group is very reluctant because they will lose margins. Also, all USPS contracts need to limit the mark up allowed on products. A recent whistle blower from the DOD called out a midwest company for exceeding the limit of a 30% mark up, they indicated that the same was happpenning to USPS but we could not take action as no such limit exists in our contracts. Working together USPS Sales and Procurement can open doors and meet new contacts and leverage relationships to grow USPS revenue and reduce costs. Procurement should have a USPS Sales contact for every major contract that works directly with Procurement and the Supplier to maximize our revenue. Just that appearance of a partnership, sends the right message on the direction the Supplier relationship is going to take with USPS.

    Jun 18, 2009
  • anon

    Mail volume down, the postal service should initiate a mail tax to be collected from business accepting payments online. They should reduce hours, combine routes, force central neighborhood delivery areas using apartment complex type boxes. one stop per neighborhood and then out. No Saturday mail. No union.

    Jun 18, 2009
  • anon

    The USPS spends over $13B annually on contracts. When the request for proposal and/or information are posted, they should include the opportunity for a company to say we will charge you this much for the widget and we will use X $'s of your PM and EM products to ship not only to your facilities (which should be mandatory) but also to ship our goods and services to other businesses. This just makes good sense and is way business is often done in the private sector. If the business does choose to combine an offer/purchase of services along with price that would be great. We find once customers try our services, they stick with us and expand usage? Why? Because we have the best products and services for the price and the "test" allows them to dispel any preconceived ideas they may have had. Also, the requirement to ship USPS for USPS purchases should NOT be waived without direct review and consultation with the VP, Sales unless it is a weight, length and girth issue.

    May 04, 2009
  • anon

    For me I would use the post office more often if they had a good tracking system. The one currently used is aweful. I have even opted to recieve the status via email and recieved a email 2 days after the package arrived that my package had been delivered. If you fix that I would have more confidence in your ability to handle my packages. I also think that you should have more partnerships such as co-op or franchises. It will increase the awareness. Most people don't see there post man or have to go to the post office. But when you see the post office everywhere you normally shop you will most likely go to use the services due to convience.

    Apr 23, 2009
  • anon

    Postal management should focus on delivery mail as efficiently as possible. We already have a Marketing staff actively working on mail volume generation programs. Now they want to include more overhead to the effort--including Supply Management personnel? As for the non-frills local delivery options--how many "carrier bundles" can a typical letter carrier carry in a single day? One? Two? Three or more? I say, "No!" to any mail discount that doesn't leverage flat or letter sequencing!

    Apr 17, 2009
  • anon

    I was told by a supervisor that the PO recently needed a new breaker switch, and that it cost 700.00 from Granger, but that it was available across town for 200.00. She explained that our contract with Granger includes some type of rebate at the end of the year, but why spend over three times the cost with Granger, when we could purchase the part locally, (which would be good for the local economy) instead of waiting for the end of the year and recieve a rebate? I doubt they would they rebate the entire difference of 500.00.

    Apr 14, 2009
  • anon

    How about offering a local delivery unit, no frills, flyer delivery option to local businesses - starting with those you frequent or buy from. No fees or applications - just give ID, contact info, and $$ (dedicated AIC) to local unit with enough flyers for all delivery points. Supervisor distributes enough to each carrier to cover their deliveries (could be a carrier 'bundle' issue here). This could be an inexpensive way for local businesses to promote special offers.

    Apr 14, 2009
  • anon

    This is widely done in Canada. Local businesses pay approximately 8 cents per piece, the unit keeps 6 and the carrier gets 2 cents, and they get 3 days to deliver them all. No bundle issue because the carriers gets part of it. It is so popular that many depots (post offices) get 10-15 per week and accounts for a nice "boost" in the carriers pay, not to mention the easy revenue for the depot. It is not automation friendly though and Canada Post is currently trying to figure this out. With the volume declines currently happening with USPS this would be a great idea to try.

    Apr 21, 2009
  • anon

    I wonder if the Postal Service could license out some of it's mail processing technology to other postal systems in other nations? It would be a win-win for all involved. It's not like they are really competing with us for postal revenue, and if anything, it could help out with mail speed worldwide.

    Apr 13, 2009
  • anon

    The Postal Service should open up in Supermarkets. We need to be where people go. People will be able to put their package in a cart and bring it in! User friendly! The Postal Service should close their existing retail offices and go where there is activity We should not wait for the People to come to us, We should go to them!

    Apr 13, 2009
  • anon

    I think this is a good idea with some potentials. The more important idea, however, in my humble opinion, is how the Postal can leverage its tremendous purchasing power to get better pricing and better service from its suppliers. Perhaps that would be a topic for another blog.

    Apr 13, 2009

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