• on Mar 2nd, 2015 in Mail Processing & Transportation | 5 comments

    If you’re a shipper, you may have noticed your fuel surcharge fees aren’t going down in step with the declining price of oil. That’s because both FedEx and UPS tie their fuel surcharges to the price of diesel, which hasn’t dropped as far or as fast as gasoline prices. Furthermore, both shipping giants recently adjusted how they calculate fuel surcharges, resulting in surcharges that won’t drop as much as they would have under the previous calculation. In some cases, fuel surcharges are even going up.

    Fuel surcharges are common in the transport industry, from taxis and airlines to moving and delivery companies. Many of these industries instituted fuel surcharges to smooth out costs when fuel prices were skyrocketing. But in times of low fuel prices, like now, customers see these surcharges as a blatant money-grab.

    Right about now, you may be noting the U.S. Postal Service doesn’t have a fuel surcharge. It also didn’t go all in on dimensional weight pricing (See our previous blog). And it’s not likely to chase the next big thing in pricing: “surge” or “peak” pricing. For the 2015 holiday season, UPS said it plans to follow the Uber model and hit shippers with “peak” prices on its busiest days. This comes after UPS said it experienced higher-than-anticipated 2014 peak season expenses. FedEx is expected to follow suit. For consumers, this could mean the end of free shipping, at least on last-minute orders around the holidays.

    So, the Postal Service might look even more attractive these days with its relatively straightforward, consistent pricing. Of course, the Postal Service isn’t a public company, so it’s not under the same pressure to deliver profits as UPS and FedEx are. But customers are not too interested in the whys and wherefores – they just want low-priced, reliable, fast delivery.

    Do you think the Postal Service is well-positioned to lure away commercial package business from FedEx and UPS? Does the lack of a fuel surcharge put the Postal Service at any kind of a competitive disadvantage? Or is it only advantageous? Do you see the Uber surge or peak pricing model getting a foothold in other industries? 

  • on Aug 19th, 2013 in Mail Processing & Transportation | 11 comments

    Alternative fueled vehicles are gaining renewed interest with the abundance of cheap, domestic natural gas. Compressed natural gas (CNG) vehicles took off in the 1990s as infrastructure development surged. Service stations then declined for a decade but are now resurging. Liquefied natural gas and ethanol are other options, as is a new clean fuel called GDiesel, a combination of conventional diesel and natural gas that can be used on conventional diesel engines without modifications.

    With so many attractive options and an aging delivery fleet in need of an upgrade, the time seems ripe for the U.S. Postal Service to convert or retrofit its fleet. But a quick overhaul remains problematic given a significant hurdle: the Postal Service lacks capital to make a major investment. Another question is where the Postal Service should place its bets. Should it convert to an electric fleet or go with CNG or are the emerging hybrid technologies the way to go? Should it put all its eggs in one basket or should it convert parts of the fleet to different fuels? How does the Postal Service remain flexible enough to adapt to the best technology knowing that rapid innovation in the alternative fuel sector means the next best thing could be right around the corner?

    The Postal Service has set a target of increasing alternative fuel use in postal vehicles by 10 percent annually through 2015. It also has goals for reducing postal-vehicle petroleum use and contract transportation petroleum use by 20 percent annually in that time. In its 2012 Sustainability Report, the Postal Service notes that it continues to take proactive steps to increase the use of alternative fuels. It is testing many types of alternative fuels, including fuel cell vehicle, electric long-life vehicles, and new hybrid technologies. “Providing affordable delivery service requires our use of alternate fuels that are conveniently available and competitively priced,” the Postal Service said in the report.

    Converting or retrofitting the fleet to an alternative fuel has to make sense financially and logistically based on how the Postal Service operates. Lower fuel costs make the financial benefits of alternative fuels easier to justify. Their environmental benefits are well documented. But logistics remain an issue. If refueling stations are not conveniently or strategically located, the Postal Service has to travel further from its routes. This can affect service and costs.

    Share your thoughts on the best strategy for an alternative fuel fleet. Should the Postal Service throw in with one type of fuel or continue experimenting with a number of options? Should it set more aggressive goals for reducing its use of petroleum and increasing its alternative fuel use? Or does its financial situation limit its ability to move aggressively in those areas?

  • on Feb 11th, 2013 in Mail Processing & Transportation | 7 comments

    The Postal Service is a leader among federal agencies in sustainability efforts. In 2009, it joined with 20 international postal operators to commit to a 20 percent reduction in carbon emissions by 2020, a goal it has made significant progress toward achieving. A major contributor to greenhouse gas emissions is vehicle emissions. With the largest civilian fleet in the country – more than 213,000 vehicles – the Postal Service has both an enormous opportunity and an enormous challenge in reducing its fuel consumption. So far, the challenges have proved considerable. In its most recent sustainability report for fiscal year 2011, the Postal Service reported that while it met its sustainability goals in six categories, it did not reach its target for reducing petroleum fuel consumption in its own vehicles or in those used by contractors. A growing number of delivery points each year and an aging vehicle fleet have made it difficult for the Postal Service to reduce its petroleum use. Although the Postal Service has worked diligently towards its goal of using alternative fuels, real gains in energy efficiency will be limited until it can overhaul the fleet. Unless the Postal Service’s financial situation improves or it finds alternative methods for capital investment, it is not likely to replace its existing fleet of vehicles. This raises questions about the limitations on the Postal Service’s ability to reduce its petroleum fuel use and how it can best leverage alternative fuel options. How should the Postal Service achieve its fuel consumption goals when its financial situation is so dire? Should it suspend some of its sustainability efforts while tackling its larger financial and business model challenges? The Sustainability Report indicates that sustainability efforts make financial sense, with savings from reduced fuel use and new revenue from recycling products. Could the savings and revenues be used creatively to fund new energy-savings projects?

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