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How Could the USPS Shutdown Affect Shipping?

September 23, 2020 Published by

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For more than 200 hundred years, the United States Postal Service (USPS) has delivered parcels to homes across America. It has played a large and important role in the day-to-day lives of Americans – so much so that it is impossible to picture life in the U.S. without it. Recently, the USPS has experienced severe financial difficulties that have only been compounded by the reduction of mail volume caused by the COVID-19 pandemic. As such, there is now a very real possibility that the USPS could shut down and disappear from American life.

Many American people and businesses depend on the USPS. We’ll explain how the USPS shutdown could affect shipping in the United States of America. First, we will examine the importance of the USPS in logistics.

Why The USPS Is Vital To Logistics in the U.S.A.

Logistics providers are vital to the health of any economy, and the USPS plays an especially unique role as it is the only provider with a universal service mandate. What does this mean exactly? Unlike mail services like DHL and UPS that add surcharges for mail delivery to rural areas, the USPS charges the same amount of postage to send a parcel to major cities like San Francisco as it does to a remote location like Alaska. Although this is incredibly useful for American people and businesses, maintaining this universal service mandate requires an extreme amount of logistical coordination and financial support.

In fiscal year 2018, the USPS lost more than $3 billion, according to a report from the USPS task force. Its cumulative losses are now nearing $70 billion. A major contributor to the USPS’s financial losses is the Postal Accountability and Enhancement Act – a 2006 law that required it to prepay healthcare benefits for pensioners on a 50-year schedule, starting with an obligation to set aside more than $5 billion a year for 10 years. This requirement by the law to pre-fund retirement benefits was responsible for $54.8 billion of the USPS’ $62.4 billion in losses from 2007 to 2016, according to a May audit report by the Postal Services’ Office of Inspector General. Additional losses caused by the COVID pandemic have now spurred a $25 billion rescue deal that remains stuck in the Senate.

With these troubling financial statistics in mind, it’s important to be prepared for the worst-case scenario. So, what would happen if the USPS were to shut down?

The USPS Shutdown and Logistics

If a USPS shutdown occurred, it would have a major impact on rural communities and business owners, especially those who partner with Amazon. While Amazon is now taking more responsibility for its deliveries than it has in the past, the USPS remains the second-biggest carrier for Amazon and its partners. This spells disaster for delivery to rural areas since Amazon has primarily focused on building delivery networks in urban areas. Amazon logistics delivers five times more packages to urban addresses than rural addresses.

Amazon would have to quickly improve its “last-mile delivery” services in rural areas if the USPS were to shut down. Delivery times of packages could suffer in the case of a USPS shutdown. Particularly in pandemic conditions, shipping delays could jeopardize the health of millions who depend on online shopping services for medication and other essential supplies.

Businesses dependent on the USPS for shipping would also need to adapt after the shutdown. They would have to switch to mail services like UPS, DHL, or Fed-Ex. There is also a strong possibility additional expenses will be tacked onto these services, especially if products are shipped to rural areas.

Life After the USPS Shutdown

Although the USPS did not shut down in June like some had speculated it would, it is still not out of the woods yet. With the leader of the Postal Service saying it could “run out of cash” by October 2020, it’s important to consider how your business would adapt to a world without the USPS.