The Effects of the USPS Losses Author: T Nguyen
April 02, 2012

2012 has been a busy year for the shipping industry both in big news items.  Such events as the 2012 shipping rate increase has already affected many businesses’ budget plans for the year while floods and earthquakes in 2011 has shaken up many companies to look deeper into their risk management programs to create a viable Plan B.  An interesting piece of news that will only, most likely, grow bigger as the year continues is the United States Postal Service (USPS) budget crisis.  USPS has been losing money for a long period of time from a $5.1 billion operator loss for the 2011 fiscal year and a $3.2 billion loss for the first quarter of 2012.  They expect to default on retiree health benefits to the government this year and could hit their $15 billion debt ceiling by the end of the year.

Why is this important to note for those that don’t use USPS for their shipping? There are many implications and shipping aspects that could potentially affect the other carriers along with customers.  One of these effects deals directly with FedEx which has a direct contract with the USPS to move First Class, Priority, and Express by air.  Most likely, analysts are predicting a substantial cut when it’s contract is up for renewal.  This change could result in a possible power play by UPS for more share or have the air freight change to ground services instead, resulting in a different revenue stream.  For customers, both shippers and receivers, expect both price fluctuations from the carriers and possible service extensions or cuts.  The USPS, for instance, is expecting to cut Saturday service, which would divert customers more to the major carriers and an increased traffic.  It will be more important than ever for consumers to make sure they are reviewing their invoices and negotiating appropriate deals.

Even with all these changes, one important lesson for any shipper to keep in mind is to always be open-minded and knowledgeable about the options you have in shipping and ways that will financially benefit your company.  For instance, our company always stays abreast of the changing shipping field and which rates and discounts are available for businesses.  Stay connected with Source as we continue to analyze and watch shipping news along with ways we can continue to help you reduce your shipping costs.

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