Tuesday, August 17, 2010

Is This Blog the Postal Service's Source of Information on its Customers?

I am honored that this blog has sufficient credibility to allow the Postal Service to quote it to support the Postal Service's proposal to move Commercial Standard Mail Parcels to the Competitive Products list.  On page 10 of Appendix B of its filing, the Postal Service referenced the post, "Why the Postal Service Matters, FedEx needs it."

In that post, I noted that a significant share of Standard Mail Parcels were used to deliver parcel delivery services sold by FedEx and United Parcel Service.  My post was based on an analysis of public information gleaned from the Postal Service's and FedEx's website which showed that the total volume of Parcel Select was less than the volume FedEx shipped using its SmartPost service.  

My analysis was limited as I could only use public data.  I presume that the Postal Service has better information on the use of the Standard Mail Parcel product by FedEx and United Parcel Service and the proportion of the volume and revenue from this product that is generated by United Parcel Service and FedEx.   That information would be far more credible than anything that I could generate and post in this blog.   

More importantly, this information will be critical in trying to price the product once it is placed on the competitive products list.    The Postal Service needs to know not only the total volume tendered by FedEx and United Parcel Service for specific products but also the volume and revenue by facility where the parcels are dropped.  This will allow it to identify differences in the portions of the Postal Service's processing and delivery networks used by parcels tendered by FedEx and United Parcel Service as individual customers.  For example, United Parcel Service and FedEx may use the Postal Service for different mixes of parcels destined to urban, suburban, exurban, rural, and remote addresses which affect the cost of handling their parcels.  With this information the Postal Service could maximize its return for serving United Parcel Service and FedEx by matching prices (or discounts from published rates) based on the differences in how the two companies use the Postal Service's delivery services.  This is exactly how United Parcel Service and FedEx set rates within contracts with their largest customers and how the Postal Service should estimate its costs prior to negotiating contracts for competitive products.

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