If you can't beat 'em, join 'em, or so the U.S. Postal Service's Inspector General suggests. Through "co-opetition," partnering with private-sector competitors to deliver packages, the service could gain.
The OIG and University of Auckland economics professor John C. Panzar analyzed the idea as a potential economic "win-win-win" for the postal industry. The Postal Service and a private parcel carrier working in tandem would create a more efficient delivery service, according to the report. If the efficiency gains are high enough, customers could see prices fall.
Under the plan, private parcel services would handle the processing and transport of orders, but the USPS would utilize its efficient delivery services to get the packages to customers.
The result, the report's authors theorize, would allow both entities to offset their respective overheads: the USPS utilizing its cheaper delivery costs and the private companies their lower per-unit processing costs.
Under this operating model, Panzar projects that shippers could see lower costs for delivery, the USPS would see greater revenue for its delivery volume and consumers would see lower prices, generating the win-win-win.
But the plan works because of the relative bargaining power of the co-opetition partners.
"Co-opetition in the parcel delivery market constitutes a technological advance for the postal sector," the report reads. "By combining the strengths of the Postal Service and its [end-to-end] rivals, it has the effect of introducing a new, low-cost rival into the marketplace."
The benefit also holds up when the postal players are competing against a large mailer with its own delivery system, the report noted.
The USPS's lower delivery costs allow it to go head-to-head with the larger mailer, making the co-opetition model more attractive to the private parcel companies and the postal service's negotiating leverage greater.
The report notes that the arrangement is already partially in place, citing a Wall Street Journal article that noted FedEx uses USPS for 30 percent of its ground parcels, while UPS uses it for 40 percent of its ground parcels.
Read the report here.
