One small upside to losing 26 percent of mail volume and relaxing delivery service standards over the past decade is that the U.S. Postal Service should experience a significant decline in its costs as well. Except that hasn’t happened for transportation costs.

In fact, Postal Service transportation costs have risen about 18 percent, or by around $1 billion, from 2008 to 2017. Transportation costs were about 11 percent of total operating costs of $72 billion in FY2017. Our latest white paper, What’s Driving Postal Transportation Costs?, attempted to figure out why.

The Postal Service attributes the increase to significant growth in parcel volumes and higher driver wages. It’s true that an increase in parcels – which are heavier and thus costlier to transport than letters and flats – puts upward pressure on costs. However, some parcels receive little to no postal transportation because shippers enter them in the postal network at the destination post office. And, any increase in transportation costs due to parcel growth would be partially offset by savings stemming from the decline in letters and flats.

It’s also true that inflation – such as higher wages and increased fuel costs – is a factor. But how big a factor? Our analysis studied how much of the change in transportation costs was due to:

  • The change in mail volume – including both the decline in letters and flats and the increase in parcels.
  • The change in transportation-related costs, such as fuel and driver wages.

We found that these two factors together likely explain 61 percent of the cost increase. This leaves 39 percent of costs – or about $418 million – caused by other things. The Postal Service has said it loses some efficiencies because it can’t put letters and parcels traveling between the same facilities on the same trucks for service reasons. In addition, both the Postal Service’s programs designed to cut transportation costs to date have not met their expected cost savings estimates.

Should the Postal Service be doing more to cut transportation costs? What other factors, besides rising fuel costs and drivers' wages, could explain the cost increases for transportation?

Comments (6)

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  • anon

    Your scanning system is not working. This is causing mail to get caught in a circular pattern, not going anywhere, or returning to the sender as not deliverable. These same letters have been going to the same addresses for years and suddenly the address does not exist. Not only is the same piece of mail being handled over and over, affecting costs at USPS, but it is also costing the customer additional postage due to remailing and time due to the need to confirm mailing addresses. Fix the scanning issues and then reevaluate your transportation costs.

    Apr 30, 2019
  • anon

    Why and who has authority to bypass set rates and give discount rates to such companies as Stamps.com and AMAZON? Then who is it that complains and does not understand why USPS finances are in the RED? These kind of deals need to stop unless you are trying to put the USPS out of business!

    Apr 25, 2019
  • anon

    Truth is managment false scans things delivered, lies on reports and are either injured or lazy. For those that work, here is more work for those that don't, management is too lazy to check on the non productive employees even with GPS and all their "tools".

    Apr 04, 2019
  • anon

    If all of USPS packages follow the shipping progress of my current one...then I know how you can save money. Package went from Pleasant hill, ca, east of San Francisco, to San Mateo,ca west of SF, ca, to Los Angles Ca, currently back to SF, ca. It has passed within close proximity (within a few miles) to it's destination in Clovis "twice".....What GPS or Maps does USPS use? Very poor management.

    Mar 22, 2019
  • anon

    As usps closed plants transportation costs had to rise. It is simple theory of flow. Take this example. Before closing a plant, 10 large semi trailers brought product to be sorted and delivered to end destination post offices. For arguement/s sake, let's say 20 flat beds did the delivery and averaged 100 miles round trip. Costs were 10 drivers and their time plus 20 drivers and their time plus fuels, maintenance, etc. The plant is closed. All sorting is now done 100 miles further away from the end destination post offices. The 10 semi's may or may not reduce costs based on where their origin is and the new destination is. The 20 flatbeds now add 200 miles of round trip to the new plant and the co committed increase of salaries, time, fuel, maintenance to the mix....Multiply this by the number of runs per day,ie morning, noon and dispatch and costs have really gone up. You had to know this was going to occur. #2... Your audits also show increases of late and second deliveries because the new plants scheme can't handle the different volumes in a timely fashion. This also drivers up trany costs.. What do you think about these points?

    Mar 21, 2019
  • anon

    Thank you for your comments. Before it realigned the network, the Postal Service estimated the impact of realignment and the corresponding decline First-Class Mail service standards on transportation costs. The Postal Service estimated that the overall impact would lead to a reduction in transportation costs. At the time of this estimation, the Postal Service acknowledged that the miles between certain facilities would increase, but that cost of these additional miles would be more than offset by a reduction in the number of overall trips and an increase in capacity utilization. Our analysis found that there was no significant increase in capacity utilization.

    Apr 02, 2019

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