USPS Delivery Unit Injection Proposal Raises Service and Cost Concerns Among Shipping Partners

The U.S. Postal Service is evaluating modifications to its collaboration with key shipping partners, a development that industry experts caution could undermine service reliability and exert upward pressure on delivery pricing.

According to experts interviewed by Supply Chain Dive, the proposed adjustments would target shipping consolidators—entities that aggregate customers' parcels and tender them to Postal Service facilities for final-mile delivery. These consolidators, including DHL eCommerce, OSM Worldwide, and Pitney Bowes, handle a substantial share of USPS parcel volume, prompting shippers to worry that any changes could have far-reaching consequences.

"It will ultimately translate to a price increase for the underlying customer," said Derek Lossing, a former Amazon Logistics leader who now serves as founder and principal advisor at Cirrus Global Advisors.

Specifically, the Postal Service has initiated discussions with major partners regarding which facility access points consolidators use to introduce volume into its network, along with the negotiated rate discounts tied to that process, according to multiple experts familiar with the matter.

The agency is seeking to have consolidators deposit packages further upstream in its network, rather than at destination delivery units—the final stop before mail and parcels reach their intended addresses. While consolidators are already accustomed to injecting volume at earlier network points, they often prefer downstream delivery unit injection to retain greater control over shipments and secure more favorable discounts.

Shifting volume upstream could expose more shipments to potential delivery delays within the agency's network, an area where USPS has faced challenges during its ongoing "Delivering for America" overhaul.

An industry source with direct knowledge of the proposal emphasized that the change is not imminent. Rather, the Postal Service—currently in the midst of a wide-ranging network overhaul—is beginning conversations with consolidators to outline what a transition away from delivery unit injection might entail.

“There was a general guideline that discounted rates on the [delivery unit] inductions are going away, but that hasn’t been further defined as to what the alternative will look like,” the source said of the Postal Service’s proposal.

The Postal Service declined to comment.

Changes Could Spur Workshare Partner Shakeups

Historically, the Postal Service has benefited from consolidators delivering volume closer to the final stages of the delivery process. This arrangement, known as worksharing, enables the agency to avoid added costs and operational strain associated with processing and handling extra parcels. According to a 2018 report from the agency's Office of Inspector General, most of the Postal Service's commercial packages and mail are covered by workshare-based discounts.

Experts note that a future with fewer delivery unit volume injections—and the associated discounts—would complicate consolidators' ability to offer reliable, low-cost services through the Postal Service. Relying on the agency for more steps in the delivery process increases exposure to potential network delays.

"We are in the early stages of our discussions with the USPS on how we can continue working with them to achieve their goals and maintain the same level of service for our customers," said Andrea Scarpulla, a DHL eCommerce spokesperson, in an email.

The potential move could represent an attempt by the Postal Service to cultivate more direct relationships with shippers that currently use workshare partners, while also advancing its long-term cost-savings objectives, according to Oscar Gladman, director of parcel carrier development at Geodis. The agency has witnessed growth in its Ground Advantage shipping service, which competes with FedEx and UPS—a bright spot amid otherwise lackluster quarterly results.

"Why not force that volume upstream a little bit further, charge a higher rate to inject at that point, and now all of a sudden, Ground Advantage maybe looks a little bit more competitive?" Gladman said.

Consolidators could consider shifting volume to other carriers to maintain shipping speeds that align with customer expectations.

"Don't assume that if you make these changes that regional carriers aren't going to get a lot of [the volume]," said Jim Cochrane, CEO of the Package Shippers Association. "I think they will."

Proposal Falls in Line with Postal Service’s Long-Term Plan

Recent service challenges at the agency have drawn national attention and scrutiny from lawmakers as Postmaster General and CEO Louis DeJoy advances a network overhaul under the 10-year "Delivering for America" plan.

As part of this plan, the agency is consolidating some delivery units into larger-scale sorting and delivery centers to optimize its facilities footprint. In a 2023 report, the Postal Service stated it is evaluating more than 100 new sorting and delivery center locations nationwide to provide faster service between local retailers and consumers.

Amid this shakeup, consolidators are working to assuage concerns that any change to delivery unit injections is imminent. While the overhaul will affect current network entry points, Kevin Collins, president of Postal Service workshare partner ACI Logistix, told Supply Chain Dive that legal challenges, congressional inquiries, and Postal Regulatory Commission involvement could delay or impact any future plans.

Cirrus Global Advisors’ Lossing noted that direct relationships with the Postal Service could help consolidator-reliant shippers avoid added costs stemming from the potential changes. However, he emphasized that consolidators would still offer advantages for shippers to consider.

“Pitney Bowes can get a contract over the finish line in a couple of weeks and you can start shipping with them,” he said. “That’s not necessarily the case with the Postal Service.”