Postmaster General DeJoy Pushes Reform: Can the US Postal Service Compete with FedEx and UPS?

Postmaster General Louis DeJoy is working not only to make the U.S. Postal Service financially stable, but also to transform the agency into a player that can compete with major private carriers such as FedEx and UPS.

DeJoy said in an interview with Supply Chain Dive earlier this month that he is not trying to "conquer" the competitive parcel delivery market, but he does want the struggling agency to become a leader in the field rather than merely reacting to market trends.

"Our goal is to ultimately achieve cost-effectiveness while working to get out of crisis," DeJoy said. "I think through highly reliable and affordable service, we will become the nation's preferred delivery service provider. That's the goal."

DeJoy has been deeply leading the agency through broad reforms to move toward this goal. The Postal Service has begunconsolidating its network of facilitiesand launchinglocal delivery servicesto remain competitive with other carriers.

Expanding the Postal Service's share of the delivery market would provide the agency with a much-needed financial boost. The agency accumulatedlosses of $87 billionbetween fiscal years 2007 and 2020. But experts say this is a daunting task even for someone as bold as DeJoy.

Carriers that have traditionally relied on the Postal Service for part of their deliveries are increasingly bringing delivery operations in-house. To keep pace with FedEx and UPS, the Postal Service must market its network to shippers more effectively while maintaining service levels above the 2020 trough.

No longer the Postal Service of grandma's era

As part of its growth plan, USPS is adjusting how it operates and does business to cope with surging parcel demand and declining mail volume. The intensified focus on parcel delivery puts the agency in direct competition with UPS, FedEx, and other parcel carriers.

"I think we're still in the early stages, but clearly they're trying to position themselves as an effective competitor to private carriers," said Michael Plunkett, president and CEO of the Association for Postal Commerce.

Edmund Carley, national president of the United Postmasters and Managers of America, said that during his 23 years at the agency, the Postal Service's business has changed dramatically. The internet has reduced the need for mail communication, and the days when the agency relied mainly on "grandma sending you a birthday card" to turn a profit are over.

"We used to prioritize mail because that was our main source of revenue," Carley said. "Now, the parcel business is the focus. That's one of DeJoy's points. To survive in the future, we have to change our approach."

Although shippers' interest ina diversified mix of carriersis growing as parcel rates climb, the Postal Service still faces difficulties in directly competing with the two delivery giants, said Nate Skiver, founder of LPF Spend Management. The list of parcel shippers with direct contracts with the Postal Service is "relatively short" compared with FedEx and UPS.

"I think the biggest challenge will be effectively reaching parcel shippers directly, offering services and contracting with them, rather than relying too heavily on third parties as in the past," Skiver said.

DeJoy understands the need to attract more commercial shippers. He said he is pushing the Postal Service's sales team to position the agency as a "more comprehensive solution provider," adding that the overhaul of its facility network will enable it to showcase the advantages of regional delivery services.

"We do have a dominant regional delivery system," DeJoy said. "It's not just the last mile, it's the last 200 miles."

Even so, the agency still needs to undergo a significant cultural shift to market its services more effectively, "rather than just assuming retailers will come knocking," Skiver said.

Accelerating the pace of change before peak season

DeJoy, a logistics executive before becoming Postmaster General, has driven major changes at a speed rarely seen in government agencies. A 10-yearPostal Service transformation planincludesadjusting service standardsandconsolidating thousands of delivery unitsinto large facilities nationwide.

"I feel like I'm not moving fast enough, and this is not an organization or environment accustomed to moving quickly," DeJoy said. He previously served as CEO of New Breed Logistics, which wasacquired by XPO Logistics。

Since 2021, the agency has deployed 249 new parcel processing machines, converted 100,000 part-time employees to full-time, and signed multiple long-term leases to enhance its peak-season processing capacity,according to a press release。

Although the Postal Service had deployed plans to improve operational efficiency before DeJoy, implementation has been much faster than under previous leadership, Carley said.

"He approaches the job with a more business-oriented mindset," Carley said of DeJoy. "His mantra is: 'If you were building the Postal Service from scratch today, it would never look like the network we have now.'"

Not all of DeJoy's changes have been fully welcomed by stakeholders. In 2020, an initiative to reduce late and extra truck trips from sorting facilities to delivery stations raised concerns that it could limit the ability to vote by mail.

DeJoy said the move was intended to reduce schedule deviations and improve decision-making about extra trips. Areportby the Postal Service's inspector general found that the initiative and other operational adjustments hurt the speed and reliability of mail delivery.

Despite early problems, the agency hopes its fast-moving changes will help it handle the surge in demand during the holiday shipping season, after beingcaught off guardin 2020. The Postal Service said its daily parcel processing capacity during peak season will reach 60 million items, up from 53 million in 2021.

Parcel delivery demand cooled in 2022, but the agency said in areport in Augustthat volume is still expected to remain above pre-pandemic levels. In the quarter ending June 30, the agency reported that revenue and volume in its shipping and packages category fell 1.1% and 5%, respectively, year over year.

FedEx and UPS face the same market dynamics, but they have adjusted their strategies,pursuing more profitable customer segmentsand using their pricing power to cushion the impact of declining volume.

However, overall industry trends may favor the Postal Service's peak-season performance, as slowing demand gives carriersmore processing capacity, allowing them to better handle demand surges.

DeJoy said that when leading the Postal Service, he often feels like he is in an antique shop, where every part of the agency has a sign reading: "Do not touch, fragile." But opposition to change and other resistance have not stopped him from working to achieve his vision.

"I don't agree with DeJoy on everything, but for better or worse, he has a plan," Carley said. "He sees a path forward for the Postal Service, and by golly, he's going to implement it, and we're going to help him achieve it."