Procurement Sustentation 11: Postal Services

As per our infrastructure damnation post on Postal Services, public postal services, even though not widely used by most large enterprises, are necessary to prevent private monopolies and to force the private enterprises to be more competitive than they would otherwise have to be.

More importantly, they are often vital for large retailers that depend on direct to consumer sales (and shipping) as, sometimes, public sector service prices (for large retailers who cut good deals) are better than private sector prices, and just as quick (as many postal services have enough carriers to cover every door 5 days a week without having to add staff or miss promised delivery dates in peak seasons).

But the costs might skyrocket as many postal services go deeper and deeper into the red, and look to stabilize themselves through increased package costs (and USPS rates recently went up rather significantly in the US for parcels), and those retailers not ready for this may find themselves losing customers hand over fists who balk at shipping prices that dwarf the costs of the products they are buying. Even if the retailer has the volume to negotiate only a slight increase, any increase can be devastating.

So what can a retailer do?

The first thing it needs to do is try to lock in long term price agreements with the public sector postal services it is dependent on. That way, if prices do rapidly rise, it has the time to negotiate the best deal it can with private carriers if it has to go the private route.

The next thing it needs to do is start negotiating with multiple private carriers that can handle its volumes and try to negotiate deals as good as it has in the private sector and switch about half of it’s volume to the private carrier who wins. That way it has both options, and can even switch back to the public sector if the private sector option because more costly or risky.

Finally, it has to explore in-store or near-store pick-up options. For example, Amazon is exploring locker pick-up in urban locations that can be as fast, or faster, than direct-to-door shipping, and cheaper too. Multi-channel delivery options are the key to perpetual success.

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