UPS to replace FedEx as U.S. Postal Service’s primary air cargo provider

In a significant shift in the logistics and delivery industry, United Parcel Service (UPS) has been named the primary air cargo provider for the United States Postal Service (USPS), taking over from FedEx after more than two decades. This change comes as FedEx and USPS could not agree on terms to extend their long-standing partnership, which was once highly lucrative but has seen a decline in value due to USPS’s strategic shift towards ground transportation for cost efficiency.

FedEx’s departure from its role with USPS marks a notable change in the logistics landscape. Despite the end of this partnership affecting FedEx’s revenue consistency and network density, analysts like Faisal Hersi from Edward Jones view it as not entirely negative. FedEx’s Express segment, which was heavily involved with USPS, only contributed about 4% to its annual revenue. Moreover, FedEx anticipates an improvement in profitability by fiscal 2025, even as it plans to adjust its network to compensate for the loss of nearly $2 billion in annual business from USPS.

On the other hand, this new contract is a boon for UPS, promising to enhance its delivery network’s density and potentially increase its revenue, which had been forecasted to fall short of Wall Street expectations earlier in the year. The financial specifics of the deal remain undisclosed, yet it’s described as “significant” by UPS. This development could lead to adjustments in the operational strategies of both UPS and FedEx, as well as impact the broader logistics and delivery sector.

The transition also reflects broader industry trends, such as the move towards distribution center localization, mirroring Amazon.com’s strategy to expedite delivery times by reducing reliance on air cargo services. This strategic realignment within USPS to accommodate changing customer preferences underscores the evolving nature of logistics and delivery services in response to the growing demand for faster, more efficient shipping solutions……….[read more]

Rising Dough

Considering the strategic shifts in logistics partnerships, such as the transition from FedEx to UPS by USPS, what implications might this have for the future of e-commerce delivery services and the overall consumer experience?