Can Amazon Save the Post Office?

KOM Cover 13 April 2018

In 2016 the Office of Inspector General for the United States Postal Service (USPS) hired Stanford Business School to study technology trends and innovation in last mile delivery. It found what we all now know, that parcel delivery options for consumers are exploding as new technologies arise to serve demand from online shopping. The study also concluded that opportunities do exist to leverage analytics, algorithms, and drones in the near future to protect and potentially expand markets.

Recent rumblings out of the White House imply that the Post Office is too stupid to protect itself in dealings with e-commerce giant Amazon. I think the exact opposite is true. The Post Office saw this coming years ago and has been systematically making the transition away from the now largely useless job of delivering junk mail to a focus on last mile logistics.

Follow the Money

Although a government entity, the Post Office does run somewhat like a business with revenue and costs and an urgency to keep up with customer needs. For decades prior to the arrival of the internet it was essentially the only way to send and receive mail, whether letters to Grandma or bills from the power company. Such communication was of very high value and needed to be nearly continuous for everyone.

During this long golden age the stamps were cheap and mail delivery itself was romantic, even at times heroic. No longer. Most of the mail we get today can be called junk mail, and although I don’t know of any data to prove it, I’d wager that more than half goes straight into the bin without even being opened. Electronic bill payment, email, texting and e-signatures now serve our vital communication needs better, faster and cheaper.

Meanwhile, the rise of e-commerce has meant a steady increase in the number of parcels delivered – to the extent that some people sheepishly admit getting package deliveries nearly every day of the week. Postal Service data clearly shows the trend away from mail and toward packages.

KOM Blog 13 April 2018 Web

Whether the rates negotiated between the Post Office and Amazon are fair isn’t really a matter of public policy. Amazon is a customer, just like every other e-commerce business who ships with the USPS, and is free to strike whatever deal both parties consider fair. It is also true that Amazon uses UPS, FedEx and myriad other providers to get the job done. The only real certainty is that everyone with a stake in last mile logistics sees more future opportunity in parcel delivery than in traditional mail.

Lean Logistics

Logistics network optimization depends heavily on drop density. Occasional, oddball deliveries distributed over a wide area increase the cost per drop and raise the importance of analytics like route optimization and load planning.

Frequent, standard deliveries in a small geography tilt the analytical load back to the distribution center where sortation and sequencing determine how effectively a bunch of separate but like-sized items are bundled together to ensure reliable and complete drops. This is why a single online order often comes in several separate deliveries while the mailman gives you all your mail at once, no matter where it came from.

KOM Blog 13 April 2018 Web 2

The Post Office grew up in the second kind of system while Amazon has pioneered innovation in its fulfilment centers to efficiently feed the first. Maybe the Post Office hopes not only to stave off financial ruin by growing parcel revenue but also to learn how to handle the logistics techniques needed to succeed in an email world. Wouldn’t working closely with Amazon offer a golden opportunity to accelerate the transition?

Neither Snow nor Rain nor Heat…

The USPS motto is rousing, and as a matter of history, reliable postal service is one pillar of a civilized society. The staff at my local Post Office are consistently excellent and the mailman utterly reliable. Despite their best efforts, the Bureau of Labor Statistics projects a 13% decline in Postal Service employment by 2026. Delivery truck driver jobs meanwhile are projected to grow 7% in the same period.

Maybe, if they learn fast enough, the Post Office can change this story.

Author Kevin O'Marah

Chief Content Officer, SCM World

More posts by Kevin O'Marah