In the fall of 2014, Supply Chain Matters began to call reader attention to the notion that the U.S. Postal Service could well change the dynamics of B2C/B2B parcel shipping and online fulfillment strategies. The headline of 2014 was that the agency was aggressively cutting shipping rates and improving customer service in order to capture more of the shipping volume and package delivery revenues associated with online commerce. The agency was put to the test in the holiday surge of 2014, and again in 2015, and seems to have fared very well.
The agency has now formed a close relationship with Amazon as both have partnered to provide Sunday and same-day delivery along with finding more cost-efficient means for transporting packages to customer destinations. Amazon has deployed a network of package pre-sortation facilities which are then trucked to regional and local post offices for last-mile delivery. More of these Amazon pre-sort facilities will be deployed this year. When both FedEx and UPS instituted dimensional-based package pricing at the beginning of this year, the USPS became an important alternative for package shipping requirements.
In August, Bloomberg BusinessWeek featured an article reflecting on the ongoing USPS strategy under its new postmaster Megan Brennan and disclosed an estimate from Bernstein Research indicating that the agency handled 40 percent of Amazon’s fulfillment needs in 2014 amounting to nearly 150 million items. That compares to a Bernstein estimate of 15-20 percent of amazon volume handled by FedEx and 20-25 percent handled by UPS.
This week, China’s dominant online fulfillment provider Alibaba has also reached out to the USPS. A posting in Venture Beat indicates that the Alibaba logistics unit, Cainiao has signed a Memorandum of Understanding with the agency to “develop new international shipping solutions, and enhance the logistics service experience for both sellers and buyers involved in cross-border commerce.” The report indicates that Cainiao and the USPS have agreed to work together to speed delivery of merchandise sold through AliExpress and destined for online customers in the United States, and to help delivery networks globally, especially in Latin America. Such an agreement obviously opens the door for online Chinese companies to sell and fulfill orders directly with U.S. based customers.
The announcement is yet another opportunity for the USPS to become both a broader domestic and international player in the logistics and fulfillment of B2C/B2B online commerce and will probably lead to other efforts to insure online providers control shipping costs while continuing to innovate in last-mile delivery.