The U.S. Postal Service (USPS) is undergoing significant transformations as it shifts its operational focus from traditional mail delivery to parcel shipping in response to the evolving demands of e-commerce and profitability goals. To remain competitive, the USPS has announced investments in its network infrastructure and adjusted its service model to better align with current market conditions.

Key Changes and Implications

1. Ending Workshare Partner Discounts
   One of the USPS’s biggest changes is ending discounts for workshare partners, such as consolidators who bundle packages for lower rates. According to Postmaster General Louis DeJoy, these consolidators currently process 2 billion packages annually, nearly 25% of the USPS’s package volume. By eliminating these discounts, the USPS plans to boost profitability by setting more competitive rates and focusing on direct relationships with shippers, moving away from bulk discount structures that impact margins.
2. Fewer Drop-Off Locations for Consolidators
   Drop-off points for consolidators will be reduced from 10,000 locations to 500 larger hubs. These hubs will handle higher volumes and streamline processes, aligning with USPS’s goal to centralize resources in urban hubs where demand is greatest.
3. Consolidated Rural Pickups
   To streamline rural operations, the USPS plans to combine morning and afternoon pickups at some rural post offices into a single morning route to regional hubs, adding one day to delivery times for certain areas over 50 miles from a regional center. This change is designed to reduce operating costs through consolidated transportation and increase efficiency for rural areas with fewer, more targeted trips.

Financial Impact
The USPS projects that these adjustments will save $2.8 – $3.3 billion annually, supporting its shift to financial stability in the competitive package delivery sector.

However, eliminating discounts, limiting the number of drop-off locations, and adding an additional layer of regional facilities to the USPS network will increase last-mile delivery costs for companies. Speed options such as same-day and next-day delivery will be jeopardized in various parts of the network that are less profitable to USPS.

Shippers could see significant increases in last-mile delivery costs, ranging from 10% to 30%, depending on the specific service and volume. This change will mainly affect smaller shippers who rely heavily on these discounts to remain competitive. The exact impact will vary based on the shipping volumes and routes, but overall, it could increase shipping costs for many businesses.

Ending discounts with consolidators may not directly cause delays in last-mile delivery services, but it could lead to some indirect effects.

If shippers face higher costs, they might adjust their shipping strategies, potentially leading to fewer D2C shipments or a shift to different carriers.

This could strain capacity for some services and create bottlenecks, resulting in delays.

Additionally, smaller shippers who cannot afford the sudden burden of higher costs are left with limited options. They face either passing the shipping cost increases on to consumers or making cuts to their shipping operations, impacting overall service efficiency.

As the USPS focuses on optimizing its network and raising its rates to help cover costs, it’s time to review your options. If you’re considering carriers with a national network, you may want to think again — they can be an even costlier option.

These carriers are usually consolidators as well, and with changes to USPS’ consolidator service, these large nationwide carriers will pass on their higher costs by increasing their prices. The reduced number of injection points into the USPS network will also negatively impact service and time in transit.

New and developing nationwide delivery carriers are another option, but many of these carriers have become financially strapped by investing in their network expansions. As a result, many may not be reliable, and networks may be unstable. They also may have less flexibility in terms of service offerings and coverage areas, potentially limiting their ability to meet the diverse needs of customers.

Another option is a crowdsourced solution. While the price may be right, the adage “you get what you pay for” might apply if you’re unfamiliar with how they operate. Reliability may be questionable, and tracking capabilities may not be as detailed as needed.

Another option for shippers to consider is a Regional Delivery Service (RDS) provider.

Benefits of RDS Providers
[🚀] Fast & Flexible Delivery: One of the main benefits of RDS providers is their ability to offer specialized, faster, and more flexible delivery options—such as same-day, next-day, or even time-specific delivery windows—compared to other carriers.

[💲] Cost-Effective: Working with an RDS provider can also be more cost-effective, as these carriers typically have lower operational costs.

As one of the largest RDS providers, Capstone Logistics is financially stable and takes pride in being reliable and providing high service levels.

Capstone Logistics’ parcel network comprises 26 cross-dock facilities that enable efficient pickup and delivery of consolidated, repackaged, and sorted shipments. Its density in urban markets and co-mingling of shipments reduce shippers’ costs and transit times, allowing for competitive pricing and faster delivery options.

Capstone’s strong technology capabilities also allow it to offer specific 📦 last-mile services for expedited and scheduled deliveries, as well as specialized services for 🛒 grocery, pharma, and e-commerce.

Please visit our website or contact us for more details.