The USPS is making a change to two services that are slower and cheaper alternatives to Priority Mail, and the Postal Regulatory Commission (PRC) is concerned the changes could lead to disruptions and higher costs.
On March 21, 2022, the USPS filed its intentions with the PRC to make a change to Retail Ground (RG) and Parcel Select Ground (PSG), which are both “competitive” products over which the PRC has limited oversight.
The USPS said the fundamental rationale for the planned change was to enhance service to customers sending larger packages:
“The opportunity to offer this enhanced service arose as a consequence of the planned change to the FCPS service standard and the concomitant improvement and optimization of the Postal Service’s package processing and surface network. By consolidating RG and PSG volume with FCPS volume, the Postal Service can offer faster service for packages that exceed the weight and size limitations of FCPS.”
The USPS is referring to changes that went into effect on May 1, 2022, in which it now transports all First Class Package Service (FCPS) packages by ground; previously it had sent packages that traveled longer distances by air – it estimated 32% of volume would see the service standard increase by one or two days.
The March USPS filing with the PRC also stated:
“The Postal Service submits that customers would benefit from for the provision of a low-cost, medium-speed, shipping service for packages in excess of one pound. The market for a faster, economical ground shipping product has seen significant recent growth and is expected to continue to grow as new shippers enter the market and business-to-customer shipments continue to increase.
“Shifting RG and PSG volume to follow FCPS volume would also enable the further optimization of the Postal Service’s package processing and surface transportation networks. This added volume would fill existing unused capacity, maximizing surface transportation utility and value. In addition, by eliminating the current interim processing stops, the Postal Service can reduce the overall processing burden while at the same time improving speed and reliability by reducing touch points. And, by combining multiple sorts, the change would improve volume and capacity in surface lanes.”
The PRC issued its advisory opinion today (which is nonbinding). In addition to finding the change could lead to “disruptions in processing and transportation operations and cost increases,” the regulator also took issue with the market research conducted by the Postal Service to bolster its assertions.
Crucially, the PRC also found that the projected transportation efficiencies to reduce reliance on air transportation and operate a more efficient surface transportation network were not evident in the near term. (“The Postal Service is unable to predict when these efficiencies might materialize. The Commission notes that the calculated transportation cost changes are based on numerous assumptions, several of which might be unrealistic.”)
We’re not sure what types of shippers use the two services – here’s how the USPS defined them in its March 21st filing:
Retail Ground: “RG service is an economical ground shipping solution for retail (single-piece) customers for packages, thick envelopes, and tubes weighing less than 70 pounds and up to 130 inches combined length and girth that are not required to be sent as First Class Mail. RG service is available at Post Offices and other postal retail facilities. Pricing depends on package weight, size, and the distance to be shipped.”
Parcel Select Ground: “PSG is similar to RG but targeted at commercial shippers. Like RG, PSG is limited by weight and overall size and priced by weight, size, and the distance to be shipped. Unlike RG, PSG allows for initial entry of packages into the mail flow both at Post Offices and at originating downstream processing and distribution centers.”
We didn’t see any mention in the filings about whether speeding up those ground services would have any impact on Priority Mail services.
After outlining its concerns, the PRC issued 5 recommendations and said it “encourages the Postal Service to review these recommendations with serious consideration.”