Third-quarter fiscal 2022 results for the United States Postal Service (USPS) saw total revenue post a 1.4% year-over-year increase to $18.741 billion, the organization reported last night. And it posted an adjusted quarterly loss of $459 million compared to an adjusted loss of $41 million for the same quarter last year, while posting a net profit of $59.7 billion, compared to a loss of 3 .0 billion in the second quarter of fiscal year 2021.
The net income gain is due to the enactment of the Postal Service Reform Act, which passed earlier this year and is focused on improving the financial health of the long-beleaguered USPS. A key part of this legislation was to repeal the USPS’s longstanding requirement to prepay future retiree health benefits annually, as well as to cancel all outstanding prepayment obligations.
The Postal Service Reform Act (PSRA) is a key component of the USPS’ 10-year “Delivering for America” strategic plan that was rolled out in March 2021 and focused on financial sustainability and service excellence, to meet the needs customers and businesses. . The plan takes an ambitious approach focused on helping the USPS get on a solid financial footing, as the organization has been in the red for more than 15 years.
Total quarterly volume was essentially flat, down 0.7%, or 201 million items per year, including: marketing mail down 3.5%, or 545 million items, with revenue down up 9.4%, or $324 million; First-class mail volume down 5.1%, or 620 million pieces, with stable revenues; and shipping and packaging volume down 5.0%, or 92 million pieces, with revenue down 1.1%, or $85 million.
USPS officials said a key goal of the Delivering for America plan focuses on meeting or exceeding 95% on-time service for all mail and shipping products “once all elements of the plan are implemented”. And he said it took an average of 2.5 days to deliver mail or a package during the quarter, a 7% improvement from 2.7 days a year ago, with 93.3% of first-class couriers delivered on time, for a 5.4% improvement.
Other key deliverables it has highlighted in the plan include: expanding its parcel handling capacity, improving operating accuracy; and the introduction of USPS Connect, an offering comprised of four distinct features that provide a variety of options to help shippers meet strong consumer demand for affordable and fast local, regional and national deliveries and returns.
“Our strong on-time delivery results and revenue growth this quarter demonstrate that we are making good progress in implementing our Delivering for America plan and becoming the high-performing organization the public expects and deserves. “, Postmaster General and CEO Louis DeJoy said in a statement. . “The one-time non-monetary benefit we experienced from the enactment of postal reform legislation was significant, but also created distortions. The fact is, we have a long way to go and a lot of hard work in our 10-year transformation to ensure the long-term financial sustainability of the Postal Service, but we are confident that we will achieve what we set out to accomplish.
Focus on Shipping and Packages: In its Form 10-Q statement, UPS said segment volume remains above pre-pandemic levels despite the annual decline in volume, due to the surge in trade electronics caused by the pandemic the previous year.
“We believe consumer behavior has changed during the pandemic, and our shipping and parcel volume is not expected to return to pre-pandemic levels as the country has increasingly relied on security and convenience or e-commerce,” the USPS said. “However, the e-commerce boom has continued to wane as the economy recovers. Additionally, competition in the overall market has intensified as some major customers have resumed delivering their volume. from our network and aggressively price their products and services to fill their networks and increase package density.
Quarterly Parcel Services revenue, at $2.334 billion, was down 1.1% year on year, with volume essentially flat, at 874 million pieces.
The USPS said these numbers reflect the high package volumes seen over the past year related to the pandemic and also growing competition in the marketplace. The USPS describes this segment as primarily a last-mile business that bypasses much of its infrastructure and is one of its least expensive flat-rate services.
Jerry Hempstead, President of Hempstead Consulting, explained how, looking at the number of packages, for all major package carriers, the most consistent theme is that packages are down, due to the fact that the pricing environment has emboldened carriers, due to a lack of competition, which translated into revenue gains.
“Fewer packages at higher revenues translate to higher costs for shippers,” he said. “Parcel services in the latest USPS depot demonstrate this. Of particular note is the drop in Parcel Select parcels, which is the service used by Amazon, UPS SurePost, DHL ecommerce and others. “is a signal that the retail consumer economy is slowing. In UPS’s most recent filing, we saw declines in all service categories, both domestic and international.”
Gordon Glazer, principal consultant for San Diego-based parcel consultancy Shipware LLC, said the USPS is riding a wave of good news.
“Congress’s passage of the PSRA, although belated, fundamentally corrected the fiscal imbalance from previous PAEA legislation passed by the 2006 lame duck Congress,” he said. “The ink was not even dry on this legislation when those in the know started calling for changes.
As for USPS volumes, Glazer said they’ve been declining overall over the past two decades, with more profitable first-class mail declining faster than other services while Marketing Mail [formerly Standard] and packages contributed less to overhead.
“So there are fewer pieces of mail per depot and over 1.5 million new delivery points that the USPS has to expand to accommodate each year,” he said. “Another good news is the additional $3 billion for more electric replacement vehicles. It was the right decision at the right time. 95% on-time transit.”
Addressing the Delivery For America plan, Glazer explained that if allowed to be completed this time around, it will result in more efficient processing in fewer large factories with less intra-hub transportation expense.
“When you look at pricing, there are two key areas to cut costs: operations and labor,” he said. “While the focus has been on improving operational efficiency, there is still much to reduce, reducing labor costs through attrition is a low-hanging fruit.”
As the USPS is poised to have a great fourth quarter (calendar), Glazer said rumors are circulating of a new maximum surcharge that may remain in place through next January, coupled with a general rate increase. scheduled for 2023.
“FedEx has already announced sky-high fourth-quarter peak surcharges for its Ground Economy service and PMG DeJoy has indicated its desire to raise USPS prices whenever it can,” Glazer said.
“I remain optimistic that any peak surcharge will be commensurate with actual incremental spend, as they have done for the past couple of years. This penetration type pricing will help drive volumes up throughout the year as shippers would prefer not to make in-season changes.To offset this upward pressure on prices, there are more than a dozen new carrier competitors who will seek any opportunity to grab market share alongside regional carriers. more established and postal consolidators.
About the Author
Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Modern material handlingand Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight forwarding and material handling industries on a daily basis. Contact Jeff Berman