UPS vs. USPS: Mail Delivery Just Got More Interesting
Postmaster General Patrick Donahoe recently heaved his pack across his back and made the long trek to Capitol Hill to explain his organization's predicament. The U.S. Postal Service, you see, was burdened by costs that were too high, and revenues that were too low. With mail volume down 50% over the past decade, the Postal Service found itself with too many workers, too little work for them to do; too many idle post offices, too little demand for their services.
Unless Congress acted quickly, the USPS was doomed.
One week later, it seems Donahoe remembered whom it was he was asking to act "quickly." He reconsidered and took matters into his own hands. On Thursday, he announced a plan to slash $3 billion in costs from the post office's budget.
Put down your pitchforks -- this plan may work
Discussion of cost-cutting moves at the Postal Service usually revolves around the hot-button issues of closing actual post offices, eliminating Saturday delivery, and/or raising the cost of a first-class postage stamp. Directly affecting postal customers (read, "voters") as they do, such proposals seem designed to provoke outrage and demands that Congress fix the problem.
In contrast, the measures Donahoe now proposes seem designed less to incite the mob to take up pitchforks and torches ... and more designed to actually get the problem fixed.
The $3 billion cost-cutting initiative Donahoe unveiled Thursday includes plans to close 250 facilities, sell off half of the processing equipment, and lay off 35,000 now-redundant postal workers.
What does all this mean to you? Honestly, not a lot.
Worst case, says Donahoe, cutting distribution facilities will space out the distance between mail processing and mail delivering by only a few more miles, preventing "one-day" delivery of mail that's supposed to arrive in "three days or less." Worst case, we're talking about mail getting from sender to recipient in two or three days, rather than one or two or three.
A single step that promises to reduce post office costs by $3 billion, and bring USPS 30% closer to closing this year's $10 billion budget gap? What I don't know is why it took the post office so long to come up with such a rational, easy-to-implement, and considerably less inflammatory proposal.
UPS picking up USPS slack
Meanwhile, UPS (UPS) is taking advantage of postal turmoil to highlight how much more innovative its brown-clad couriers can be, compared to their blue-suited cousins.
On Wednesday, UPS announced a new service that aims to enhance customer satisfaction (what a concept!) and maybe even get a little extra change jingling in its pocket.
Termed "My Choice," UPS will allow customers to sign up to receive free email, text, or phone alerts on the night before a package is due for delivery, advising them of when to expect a knock at the door. An even more valuable feature is the ability to electronically sign in advance for packages requiring signatures confirming receipt. Result: No more little sticky notes on the front door telling you that you could have received a package if you had been home at the right time -- but sadly you weren't, and so you didn't.
Minus one letter, but so many pluses
Sound good to you? Well, it's good for UPS, too. Like so many service offerings these days, "My Choice" comes in two flavors: free and premium. Premium subscribers pay $40 per year for the ability to schedule deliveries at times that suit them best and to leave specific instructions for UPS drivers making deliveries ("beware of dog," "leave it with the neighbors," "beware of neighbors' dog" ...). The program also gives customers a two-hour delivery window (as opposed to the standard four-hour stretch). For a $5 fee, UPS will even let a customer reroute a package to an alternate delivery address, or to a specific UPS Store for pickup.
In addition to these revenue opportunities, UPS expects to reap other benefits. For one, it will save on fuel by eliminating wasted trips, trying to deliver packages to folks who won't be home anyway. For another, it will reap incalculable savings in the form of not upsetting customers with missed deliveries. And for a third, at least until its rivals announce their own counter moves, UPS steals a march on FedEx (FDX) ... and the USPS.
Motley Fool contributor Rich Smith does not own shares of any companies named above. The Motley Fool owns shares of FedEx and United Parcel Service. Motley Fool newsletter services have recommended buying shares of FedEx.