Wednesday, November 12, 2008
USPS,FedEx and UPS Scheme to Survive Shipping Slump
With more business closing, mail and package delivery services are taking different routes to cut costs.
The U.S. Postal Service may make history for the wrong reason, as it contemplates cutting as many as 40,000 workers (out of 685,000). According to the Washington Post, USPS mail volume dropped 11% t in fiscal 2008, which resulted in the service spending $2.3 billion more than it took in. USPS may also offer early retirement packages to workers over the age of 50 with 20 years or more of experience.
The discouraging stats were followed with gloomy predictions from William Burrus, the union president for American Postal Workers, who said the losses cannot be recovered by postage rate increases. One quote that grabbed my attention was when Burrus admitted another rate hike would encourage mailers to consider alternatives including that groundbreaking invention known as "e-mail".
Burrus actually said.
Industry observers suggest that if postage rates rise too sharply, major mailers would abandon hard-copy communication in favor of e-mail and other technologies.
Wow, they're just now considering the threat of e-mail? Personally, I think USPS' reaction confirms a disturbing lack of foresight within the company's leadership.
Conversely, FedEx (NYSE:FDX) saw the potential for increased overhead costs three years ago and prioritized smarter routing within its Express division(other divisions- home delivery and ground are mostly freelancers). FedEx assigned the most efficiently-sized vehicle for each route. That measure alone saved more than 45 million gallons of fuel.
Currently, Fed Ex has 30 initiatives for increasing jet fuel efficiency, ranging from improvements ito n-flight planning to aircraft operation efficiencies. Advertising expenses may also be cut. Like USPS, FedEx may have its own historical moment. For the first time in 12 years, it may not fork out millions of dollars for a Super Bowl ad.
FedEx's chief rival, United Parcel Service (NYSE: UPS) could gain from from DHL's loss. Pending contract approval, DHL,a german- based company, will close its U.S. shipping terminals and will shift its air cargo to UPS. UPS is also adding hybrids and more fuel efficient vehicles to its fleet.
Even if FedEx was acting on its gut feeling, I credit its leadership for using the long-term, big picture approach that may have saved the company from making the drastic cuts that USPS is considering.
Posted By Matt O'Hern at 03:08 PM
Permanent Link: USPS,FedEx and UPS Scheme to Survive Shipping Slump
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(10) Comments on USPS,FedEx and UPS Scheme to Survive Shipping Slump
What makes you think UPS and FedEx is not getting ready to cut their staffing. Hold tight. It's coming.
Comments by John Doe : Wednesday, November 12, 2008 at 04:09 PM
Gee, where to begin? There are no plans at the Postal Service to "cut" 40,000 employees. An explanation of that erroreneous report can be found on the New Release section of usps.com. The projected volume loss for '08 is nine billion pieces but its not electronic diversion, it&s ad mail, mostly from the financial and housing industries, the sectors hardest hit by the economic slowdown. USPS will also show a loss of $2.3 billion (or thereabouts) for '08 but that would have been easily offset were it not for the recently enacted federal requirement that the Postal Service pre fund its retiree health benefits to the tune of $5.4 billion annually. Early retirements are being offered to some (3,685 have accepted to date) but it seems to me that's the smart way to match worforce to workload. The correct spelling of the last name of the President of the APWU is Burrus and I'm quite certain that he knows that electronic diversion has been with us for quite some time. I know he'd also agree that advertising mail is the ad medium that works best. As for price, the record will show the US Postal Service is still the best bargain in the world.
Comments by Gerry McKiernan : Wednesday, November 12, 2008 at 04:26 PM
Sorry about the spelling of Burrus, I revised the story with the corrected version. I hope the best for USPS. As you said, they're very reliable and affordable,but as you also pointed out those federal requirements can override smart proposals and plans. There are too many factors to put one side at fault, but as an outsider comparing the three biggest services, FedEx seems like it was best prepared to handle this crisis.It's only my opinion and I could be wrong, but only time will tell.
Comments by Matt : Wednesday, November 12, 2008 at 05:18 PM
What many forget about the USPS business model is that it is still a government service. Set up to service EVERY address in this country. Operating 30,000+ storefronts. While Wal-mart has only 3000+ stores. Prohibited by law be anything else other than non-profit until recently. Costing the tax payers of this country ZERO tax dollars. Funny how corporate people will criticize this service that provides a basic service but have no problems with people like Hedge Fund Managers pulling in BILLIONS a year. You have 700,000 Amercians working as civil servants so you can send a credit application to Alaska for 25 cents (bulk mail rate). We have the most efficient and affordable mail service in the WORLD. That is why EU had to privatize their mail service. The EU saw that mail service could be self sustaining and more efficient. Just like the good old USA USPS.
Comments by BIGTEX : Wednesday, November 12, 2008 at 08:40 PM
Fedex has a no layoff policy. They have cut full time hours, and overtime is unheard of these days. I believe volume seems to be getting larger due to DHL closing up shop.
Comments by Seth : Wednesday, November 12, 2008 at 09:42 PM
USPS SUCKS! I will never send anything through them they have no way to track. I only use UPS
Comments by tom putnam : Thursday, November 13, 2008 at 11:36 AM
Bigtex's point well made! There is no reason to be unkind in making points and counterpoints in a discussion.
Comments by Ben : Thursday, November 13, 2008 at 12:40 PM
FedEx and UPS volume will grow in the next quarter with Tuesday's announcement of DHL going under.
Comments by Mike : Thursday, November 13, 2008 at 10:51 PM
I work for UPS and just to let you know, we are already taking their business. Getting new accounts everyday just in my center.
Comments by Justin : Thursday, November 13, 2008 at 11:21 PM
Well, I just hope the people laid off by DHL get jobs somewhere. As for USPS, they have been going on relentlessly. Kudos to them. DHL and UPS, fight it out. Its all yours.
Comments by Anil Kuttan : Friday, November 14, 2008 at 07:54 AM
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