What’s Driving Postal Transportation Costs?
March 18, 2019 (RARC-WP-19-002)
- The Postal Service’s transportation costs have increased over the last 10 years, despite an overall decline in mail volume and the relaxation of First-Class Mail service standards.
- Nearly 40 percent of the increase cannot be explained by changes in mail volume and transportation-related inputs alone.
While costs in general are expected to increase over time due to inflation, there were other factors that put downward pressure on the Postal Service’s transportation costs. Namely, the overall decline in mail volume and the reduction in First-Class Mail service standards. This led us to wonder how much costs should have been expected to change in response to two things: (1) the overall change in mail volume, including the decline in letters and flats and the increase in parcels; and (2) the overall change in transportation-related input costs, including fuel and driver wages.
The OIG found that almost 40 percent of the increase in transportation costs over the last ten years cannot be explained by these two factors alone. This finding does not mean these cost increases are necessarily bad or improper, but rather signals that further explanation is warranted. A better understanding of what is driving these costs could help the Postal Service find ways to contain them in the future.