Synergistic Symbiosis

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Synergistic Symbiosis

• OrHow UPS uses the Post Officeto make money

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U.S. Ground Shipping Business

• 30 years ago the United States Post Office (USPS)
  had a near monopoly on ground parcel shipments.
• Today, United Parcel Service (UPS) has claimed a
  majority share of that market.
• USPS still has a major share (approx. 25) and
  since it is a government run agency, has a public
  service mandate to serve all that request
  service, even its competitors.

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Consolidators

• Consolidators are businesses that take large
  quantities of parcels from shippers and separate
  them by ZIP code and deliver them to local post
  offices for delivery by the USPS.
• USPS charges consolidators a fixed rate of 2.01
  to handle the final delivery. The consolidator
  charges its clients on average about 3.00 for
  delivery.
• Priority Mail with USPS costs 3.85.

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Enter the ever-looming Giant

• UPS has initiated a new service called UPS Basic.
• UPS is essentially assuming the role of
  consolidator with one difference.
• UPS is cherry picking the profitable parcels.
  They are choosing to deliver parcels with low
  associated variable costs (direct labor, vehicle
  usage) themselves. They send parcels that have
  high direct costs (rural and other difficult
  deliveries) to the USPS.

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What are you gonna do about it?

• The US Post Office has a duty to
• Honor its published rates
• Serve all those who want them without
  discrimination
• As long as any company meets the Postal services
  one-size-fits all rules, it must be allowed into
  the Parcel Select program (USPS pre-sort
  program).
• I cant treat one customer different than
  another. We have to take it and deliver it.
• John Rapp, USPS Senior VP of Operations.

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Down Side for UPS

• By introducing a bare-bones service (UPS Basic)
  UPS risks cannibalizing existing customers from
  its higher priced services
• UPS could suffer damage to its reputation by less
  reliable letter carriers.
• The Teamsters Union is upset that this service
  constitutes the use of outside labor which might
  displace union members.
• Source Wall Street Journal, Nov. 6, 2003.