The U.S. Postal Service has aggressively moved to reduce costs by consolidating its processing network and realigning its delivery facilities. However, it has essentially eliminated rail transportation, which is the least costly way to move mail long distances.

During the recent economic downturn, railroads invested heavily in infrastructure to improve service. Private industry shippers of time-sensitive materials have responded to these improvements by shifting volume from highway to rail. UPS (the largest rail customer in the U.S.) attempts to put any package traveling over 750 miles on rail. JB Hunt, one of the Postal Service’s largest highway contractors, has shifted a substantial freight volume to rail and now earns more than one-third of its overall revenue from intermodal rail transportation.

The potential benefits to the Postal Service are clear. Rail is a less expensive and more environmentally friendly transportation mode compared to trucking. Recent estimates show that intermodal rail service can improve fuel efficiency by about 3.5 times relative to highway tractor-trailer service. In addition, rail gives the Postal Service more capacity flexibility as this mode can operate one-way, while highway transportation must be purchased in round-trips. Since Postal Service volumes tend to flow from north to south and east to west, utilizing rail would avoid the cost of paying for empty or near-empty trucks on the return trips. Rail is also far less susceptible to the weather interruptions that can wreak havoc on highways.
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The shift to rail, however, is not without its drawbacks. On average, rail is slower than highway transportation. It would also require greater monitoring and pre-planning and complex decision-making by management. For example, the Postal Service would need to choose when to dispatch to rail yards versus alternatives such as dispatching a highway trailer to a network distribution center or other consolidation points.

Although it would require some additional efforts, the potential savings to the Postal Service of converting from highway to rail could be tremendous. While concerns related to speed of service moved the Postal Service almost completely away from rail, other shipping companies are embracing rail with vigor.

This blog is hosted by the OIG’s Risk Analysis Research Center (RARC).

Comments (5)

  • anon

    Rail would be effective in heavily populated high volume areas. Of course it should be considered and tested.

    Sep 28, 2011
  • anon

    Railroads have enough regulation as is. I think railroads are designed to carry "freight", not information assets. I suppose certain classes would work, however I simply can't add up the cost to benefit ratio? + - ? However, I thought Standard & other were all regionalized origin? Packages? Or the mt equipment could be shipped that way??? But, really when it comes to mt equipment, there should be no reason to ship it "regionally" without being full of mail, if it is managed properly.

    Sep 21, 2011
  • anon

    The question is touchy. Might be OK to evaluate rail, just as we should always be evaluating several concepts. At this point I think we need to stay the course, using air for long distance First Class/Priority Mail and trucks for short distance letter and parcels. I believe we must never reduce service for any excuse. Management has asked us to provide service, we have done it, and service should remain the foundation. I suspect much of the high bulk standard mail is already drop shipped by printers/mailers directly to our plants so the USPS doesn't need to long haul that much standard mail. As for weather, it's a factor most of our contract haulers use the Interstates which are a proven safe course. UPS is using more rail to move their "ground" service parcels which require 4-7 days travel time. (Note that UPS is very adept at watching costs on this "cheap" end of their business. They also love to give this segment to the USPS for lasts mile of delivery!)

    Sep 05, 2011
  • anon

    Can the railroads take on the volume from the USPS? I believe rail capacity is already at its limit from current time-sensitive customers.

    Sep 05, 2011
  • anon

    If as expected, the delivery standards are adjusted to result in longer end to end goals, rail service is definitely a viable economic substitute to air.

    Sep 05, 2011

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