July 16 2024 05:33 AM

    With his "Delivering for America" project, Postmaster General (PMG) Louis DeJoy is disrupting the status quo that has plagued the USPS for decades and, in so doing, he’s making enemies and probably supporting the competition.


    There’s his usual clash with politicians (who never ran a business, never mind one with 600,000 employees) who call for endless studies. They only proliferate the disastrous conditions, colossal mounting debt, and inefficiencies of the USPS, with no accountability. Enemy #1. Last year, he abruptly terminated a 12+ year partnership with resellers. Enemy #2. This year he eliminated DDU drop offs for consolidators. This will disrupt industry, increase costs, and leave many reeling. Enemy #3? These actions have left many wondering… what’s next?


    Other remaining USPS partners purported to be on Mr. DeJoy’s “Hit List” include technology providers such as Pitney Bowes, Endicia, Stamps.com, Shippo, and Easypost. These companies built high-tech solutions that drove USPS parcel volume higher for many years. It’s rumored that in 2023 Mr. DeJoy’s team put them on notice but stopped short of terminating their agreements. This was most likely due to USPS’s inability to replace them in 2024. Is it just a matter of time?


    Then there’s SaaS platforms such as Ordoro, Desktop Shipper, Shipstation (and many others) that provide merchants/consumers discounted USPS shipping services including the ever-popular CEC program. Here again, these organizations offer value-added services and drive USPS parcel shipping volume. So far Mr. DeJoy has left these partners alone, but for how long? Motivated by self-preservation, these SaaS platforms must prepare for future USPS relationship changes.


    These platforms are actively seeking to partner with alternative parcel delivery services. It appears the rumor of possible changes alone is driving parcel volume to competitors. Contenders to replace the USPS include regional, crowd sourced parcel carriers including OnTrac, Uber, Roadie, UPS (DAP), and, of course, Amazon. Amazon is already the largest private parcel carrier in America, and it seems like nothing can slow its meteoric growth in the residential delivery space. Should our very own USPS be helping?


    To be fair to Mr. DeJoy, last year he was forewarned of the loss of parcel volume that would result from the cancellation of the reseller program, but package volume has only increased. He was right, they were wrong. Changing agreements with consolidators may prove beneficial: time will tell. But what are the predictable results of the elimination of PC postage and platform partners? How will these actions affect our industry, e-com merchants, and consumers? Will it help the USPS achieve its goal to grow or will it shrink parcel volume? Allow me to prognosticate…


    The USPS must have equal or better technology and support in place to eliminate PC postage providers. Both must be scalable to handle the volume (including peak). If systems fail, USPS shipments will be diverted to other parcel carriers, resulting in more losses. Many argue the USPS is ill-prepared.


    If Mr. DeJoy cancels partner platforms, some small businesses will go bankrupt and this will boost unemployment. These innovative SaaS based organizations have built their businesses around the USPS partnership. Everyone benefited with consumers paying much lower label and SaaS subscription transaction fees. Those organizations that don’t go insolvent will be forced to pass higher SaaS subscription/label transaction fees along to merchants and consumers. That’s inflationary.


    Lastly, the USPS will continue to assist its competitors and the long-term risk will be lower volume, increased environmental damage (more third parties delivering to 160M+ homes everyday), and increased pricing pressure. The USPS, merchants, and consumers alike would be well-served if Mr. DeJoy would guarantee these partner platforms are protected for years to come, and he should do it now.


    So, what is the PMG’s motivation to make all these changes? That’s easy: he was recently quoted as saying “we have roughly $39 billion worth of mail and it costs me $70 billion to deliver it.” Mr. DeJoy is a civil servant. He undertook a program to transform a 200+ year old organization designed to deliver mail, an organization that now delivers hundreds of millions of parcels that is on the forefront of e-commerce. He is attempting to fix a behemoth institution that has fallen 15 years behind in technological innovation and has been mis-managed for so long it seems the last modernization project (prior to DeJoy) was when it migrated mail delivery to gas powered vehicles… from horses.


    Many want to stop him from achieving the goals of the Deliver for America plan. So, is the USPS transformation under the PMG’s leadership going to be beneficial to most Americans OR should Mr. DeJoy be stopped? To put this into perspective, imagine today if Amazon had to start delivering millions of pieces of mail every day to 160M residential addresses without adopting its technology: It would be catastrophic. Something must be done. Clearly, modernization is necessary, and few have the courage (as does Mr. DeJoy) to tackle this daunting project.


    The Delivering for America plan will transform the USPS to a more modern, streamlined operation that will be designed to… you guessed it, deliver packages. It will save billions, enhance the lives of hundreds of thousands of USPS employees, provide improved, competitive, world class package delivery service, and prevent the USPS from becoming dependent on taxpayers to fund crippling deficits each year.


    If he solves the USPS’s financial woes and package delivery inefficiencies, he will have accomplished something just short of a miracle. Marvel will have found its next Superhero! However, this modernization effort will require strong, lasting PC postage and platform partnerships to succeed, while terminating them will have the reverse effect.


    As Chance the Gardener once said; “As long as the roots are not severed, all is well and all will be well in the garden." Mr. DeJoy should maintain the platform partnerships that will continue to promote USPS parcel shipping as they have always done. Harnessing these tech companies will help the USPS grow and attain profitability, improve the environment, and mitigate numerous risks.


    Jim LeRose is CRO, Ordoro.

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