USPS 2021 Rate Increases Likely to Have Big Impact

November 19, 2020


Shippers hoping for a bit of respite from 2021 rate increases announced by FedEx and UPS are in for a disappointment. This week, the USPS announced new rates for its competitive services including Priority Mail and First-Class Package and the impact will undoubtedly be felt by shippers. Services rates are effective January 24, 2021.

Retail rates for Priority Mail will increase by an overall average of 3.5% and 1.2% for Priority Mail Express service. Additionally, commercial rates for Priority Mail will increase an average of 4.2% and 2.5% for Priority Mail Express.

Per the USPS 2021 rate increase announcement:

  • Destination delivery unit (DDU) entered parcels average price increase will be 4.9%.
  • Destination sectional center facility (DSCF) destination entered parcels average price will increase by 10.7%.
  • Destination network distribution center (DNDC) parcels, the average price will increase by 9.7%.
  • Parcel Select Ground will see a 1.3% increase in average price.
  • Prices for Parcel Select Lightweight average price will increase by 20.0%.

“This is going to be a crusher for shippers and will particularly hurt e-commerce shippers.”

- John Haber said regarding USPS’ latest rate announcement.

In its press release, USPS noted “the Postal Service has some of the lowest letter-mail postage rates in the industrialized world and continues to offer a great value in shipping. Unlike some other shippers, the Postal Service does not add surcharges for fuel, residential delivery or regular Saturday delivery.”

USPS implements $100 fee for oversized packages

However, despite no surcharges for fuel, residential or Saturday delivery, a potentially damaging surcharge will be introduced in 2021.  A $100 fee will be assessed on parcels “found in the mailstream” that exceed the maximum mailable size limit which is a combined length and girth greater than 130 inches. This surcharge will certainly impact a growing trend of bigger, bulkier online orders.

The USPS reported its annual earnings for the period ending September 30 and indicated package volume increased 18.8%. Despite an increase in package revenue, costs for additional workers and increases in transportation services weighed on this segment. According to Postmaster General DeJoy, this is the most labor-intensive service.

For 2021, DeJoy expects slower growth in package services mainly due to difficult year-over-year comparisons. The forecast is for 116 billion pieces. Package revenue is forecasted in the low single digits.

Massive losses projected to continue

Overall, the USPS expects losses to continue with a forecasted 2021 loss of $9.7 billion as compared to $7.6 billion for this year. As shippers look to save on costs as well as to ensure capacity, creativity will be needed in 2021. This may involve such alternative solutions as gig-online platforms, regional small parcel carriers and LTL carriers. Regardless, shippers will need to have back up plans in place including more than one last-mile delivery provider to avoid delays or other last-mile mishaps.


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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USPS 2021 Rate Increases Likely to Have Big Impact

November 19, 2020


Shippers hoping for a bit of respite from 2021 rate increases announced by FedEx and UPS are in for a disappointment. This week, the USPS announced new rates for its competitive services including Priority Mail and First-Class Package and the impact will undoubtedly be felt by shippers. Services rates are effective January 24, 2021. Retail rates for Priority Mail will increase by an overall average of 3.5% and 1.2% for Priority Mail Express service. Additionally, commercial rates for Priority Mail will increase an average of 4.2% and 2.5% for Priority Mail Express. Per the USPS 2021 rate increase announcement:

  • Destination delivery unit (DDU) entered parcels average price increase will be 4.9%.
  • Destination sectional center facility (DSCF) destination entered parcels average price will increase by 10.7%.
  • Destination network distribution center (DNDC) parcels, the average price will increase by 9.7%.
  • Parcel Select Ground will see a 1.3% increase in average price.
  • Prices for Parcel Select Lightweight average price will increase by 20.0%.

“This is going to be a crusher for shippers and will particularly hurt e-commerce shippers.”

- John Haber said regarding USPS’ latest rate announcement.
In its press release, USPS noted “the Postal Service has some of the lowest letter-mail postage rates in the industrialized world and continues to offer a great value in shipping. Unlike some other shippers, the Postal Service does not add surcharges for fuel, residential delivery or regular Saturday delivery.”

USPS implements $100 fee for oversized packages

However, despite no surcharges for fuel, residential or Saturday delivery, a potentially damaging surcharge will be introduced in 2021.  A $100 fee will be assessed on parcels “found in the mailstream” that exceed the maximum mailable size limit which is a combined length and girth greater than 130 inches. This surcharge will certainly impact a growing trend of bigger, bulkier online orders. The USPS reported its annual earnings for the period ending September 30 and indicated package volume increased 18.8%. Despite an increase in package revenue, costs for additional workers and increases in transportation services weighed on this segment. According to Postmaster General DeJoy, this is the most labor-intensive service. For 2021, DeJoy expects slower growth in package services mainly due to difficult year-over-year comparisons. The forecast is for 116 billion pieces. Package revenue is forecasted in the low single digits.

Massive losses projected to continue

Overall, the USPS expects losses to continue with a forecasted 2021 loss of $9.7 billion as compared to $7.6 billion for this year. As shippers look to save on costs as well as to ensure capacity, creativity will be needed in 2021. This may involve such alternative solutions as gig-online platforms, regional small parcel carriers and LTL carriers. Regardless, shippers will need to have back up plans in place including more than one last-mile delivery provider to avoid delays or other last-mile mishaps.

ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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