DC Velocity - May 2015

Over the years, Congress has freed up the USPS to compete for private-sector business. However, the law confines the scope of its operations to what are known as “postal products.” Meanwhile, many foreign postal systems have been partially or wholly deregulated and have jumped full-bore into businesses beyond their original mandates.

The most visible is Deutsche Post AG, the centuries-old German postal system that was privatized in phases during the 1980s and 1990s. In the past 25 years, it has made dozens of acquisitions, including the express carrier DHL and multinational freight forwarders Danzas and Air Express International, to diversify its revenue stream. In its 2014 fiscal year, mail accounted for less than 30 percent of Deutsche Post’s total revenue.

Although mail remains an important line of business for postal organizations, the rapid growth of digital communication alternatives means that, for many posts, it is no longer the largest revenue source. In 2011 and 2012, nonmail revenue outweighed mail revenue for postal organizations around the world, according to the OIG.

Many posts are transforming into hybrid organizations that offer broad product portfolios. For example, Norway Post offers simplified customs clearance for parcel deliveries, while Finland Post offers cold-storage logistics services for groceries, the report said. Through recent acquisitions, Singapore Post Ltd. provides ocean freight, warehousing, and fulfillment services in six countries, the OIG said. Australia Post provides a payment solution called PostPay, which builds on the post’s brand to offer a confirmed delivery and payment solution, according to the OIG.

USPS faces the same profound market shifts as its global counterparts. First-class mail, the agency’s most profitable service line, has seen multiyear declines in revenue and volume, a trend that USPS officials acknowledge is unlikely to be reversed. In its 2014 fiscal year, which ended Sept. 30, first-class mail volume declined by 2. 2 billion pieces year over year. By contrast, package and shipping services volume grew by 8. 1 percent year over year. However, package services account for a fraction of USPS’s total sales of nearly $68 billion.

It would take legislation to alter USPS’s mandate in such dramatic fashion. Steve DeHaan, president and CEO of the International Warehouse Logistics Association (IWLA), which represents the public warehousing industry, said that lawmakers he and his staff have conferred with about USPS’s e-fulfillment project were either unaware of it or surprised by it.

“We are actively watching this,” DeHaan said in a recent phone interview. He acknowledged that IWLA members have to balance their concern over an enormous competitor potentially entering their midst with the awareness that many are USPS customers.

DeHaan questioned the legality of the program because it was undertaken without legislative action. Ninivaggi, the USPS spokeswoman, said the program does not currently require legal approval because it is just an operational test.

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