Imagine ordering a product online that promises an affordable price but comes with painfully slow delivery. Behind this scenario often lies complex logistics strategies and cost considerations. A potential new partnership between United Parcel Service (UPS) and the United States Postal Service (USPS) may bring fresh momentum to this "slow but affordable" delivery model.
Ground Saver Service Framework Takes Shape
UPS CEO Carol Tomé revealed during a recent earnings call that UPS and USPS have reached a "preliminary agreement" regarding UPS's Ground Saver service. The companies have agreed on key aspects including shipment volumes and rates, with more detailed terms expected to be finalized in coming weeks or months. If finalized, USPS would provide "last-mile" delivery support for Ground Saver packages.
"We still have work to do, but we're confident we'll reach an agreement that maintains our best-in-class service levels," Tomé said, adding that UPS would provide more information by the end of the fourth quarter.
Evolution and Challenges of Ground Saver
The Ground Saver service offers lower shipping rates in exchange for slower delivery times. The service evolved from UPS SurePost, which previously relied on USPS for final delivery. Under that arrangement, UPS would hand millions of SurePost packages to USPS for final delivery. However, beginning in early 2025, under reforms led by then-Postmaster General Louis DeJoy, USPS began adjusting its partnership agreements regarding final delivery capacity. Due to concerns about costs and reliability stemming from USPS reforms, UPS chose to keep SurePost volume in-house.
New Leadership Brings Renewed Talks
After David Steiner assumed the role of USPS Postmaster General in July, the two companies resumed negotiations about Ground Saver cooperation. Tomé noted, "Immediately after Mr. Steiner took office, we began discussions about how to establish a triple-win relationship—beneficial for the postal system, UPS, and our customers. The key to achieving this lies in leveraging each organization's strengths: USPS's expertise in final delivery and UPS's capabilities in middle-mile transportation."
Volume Decline and Cost Pressures
During negotiations, UPS's Ground Saver volume declined significantly. Third-quarter daily volume fell 32.7% year-over-year, partly due to UPS voluntarily reducing package volume from Amazon. Executive Vice President and CFO Brian Dykes noted during the earnings call that efficiently delivering Ground Saver shipments amid declining volume has been challenging. In the second quarter, UPS's performance took an $85 million hit due to unexpectedly high numbers of Ground Saver delivery locations.
"Density remains a challenge with the Ground Saver product," Tomé said. "We haven't been able to achieve higher package counts per stop in these residential deliveries. That's one reason we're very excited about rebuilding the partnership with USPS."
USPS Response
When asked about the UPS negotiations, USPS told Supply Chain Dive in July that it does not publicly discuss details of its commercial relationships.
Deep Dive: UPS Ground Saver Service
UPS Ground Saver is an economical shipping service designed for price-sensitive customers with less urgent delivery needs. The service combines UPS's transportation network with potential last-mile partners like USPS to achieve cost efficiency.
Service Features
- Economical: Ground Saver's primary advantage is lower shipping costs, making it ideal for small businesses and individual customers.
- Delivery Speed: Compared to faster UPS services, Ground Saver offers slower transit times, typically requiring several business days for delivery.
- Suitability: The service works best for lightweight, small-sized packages, commonly used for e-commerce orders.
Operational Model
Ground Saver typically involves these stages:
- Package Pickup: UPS collects packages from senders.
- Linehaul Transportation: UPS moves packages via its extensive ground and air network to distribution centers near destinations.
- Last-Mile Delivery: This critical phase may be handled by UPS directly or through partners like USPS.
Relationship with UPS SurePost
As mentioned earlier, Ground Saver is closely related to the former UPS SurePost service. SurePost was a similar collaborative service where UPS handled pickup and linehaul transportation while USPS completed final delivery. Ground Saver can be seen as an evolution or alternative to SurePost, allowing UPS flexibility in adjusting last-mile strategies based on market conditions and partnership status with USPS.
Deep Dive: United States Postal Service (USPS)
The United States Postal Service is an independent federal agency responsible for postal services across the nation. As one of the world's largest postal systems, USPS plays a vital role in connecting American individuals and businesses.
Primary Functions
- Mail Delivery: USPS's core function involves collecting, transporting, and delivering mail including letters, packages, and printed matter.
- Postal Services: USPS offers various services including postage sales, mail tracking, address changes, and PO box rentals.
- Financial Services: The agency also provides limited financial services like money orders and government benefit payments.
Organizational Structure
USPS is governed by an 11-member board of governors, including the Postmaster General who serves as chief executive officer overseeing daily operations.
Financial Situation
In recent years, USPS has faced significant financial challenges due to declining mail volume, rising operational costs, and heavy retirement benefit obligations. To address these issues, USPS has focused on improving efficiency, reducing costs, and developing new revenue streams.
Competition and Collaboration with Private Carriers
USPS maintains both competitive and cooperative relationships with private carriers like UPS and FedEx. In certain cases, USPS collaborates with these companies to provide joint delivery services—as seen in UPS's SurePost service which relied on USPS for final delivery.
Potential Impacts and Outlook
A potential Ground Saver partnership between UPS and USPS could affect multiple stakeholders:
- Consumers: May benefit from more competitive pricing and broader delivery coverage.
- UPS: Could reduce Ground Saver operating costs by leveraging USPS's last-mile network, improving profitability.
- USPS: May increase shipment volume, boost revenue, and better utilize its last-mile capacity.
- E-commerce Industry: Businesses could use Ground Saver to offer customers more economical shipping options, potentially increasing sales.
Ultimately, whether UPS and USPS finalize an agreement—and how it might affect the logistics industry and consumers—remains to be seen. However, as e-commerce continues growing and consumer delivery expectations evolve, cooperation and competition among logistics providers will likely become more complex and diverse.
Future Outlook
The potential UPS-USPS collaboration exemplifies how logistics companies adapt to market changes while pursuing mutual benefits. Looking ahead, as technology advances and consumer demands shift, logistics providers will need to continuously innovate and adjust operating models to remain competitive. Several trends may emerge:
- Smart Logistics: Increased adoption of AI, big data, and IoT technologies to enhance efficiency, optimize routes, and improve customer experiences.
- Sustainability: Greater emphasis on environmentally friendly transportation methods and packaging materials as ecological awareness grows.
- Personalization: More customized services tailored to specific customer needs, such as flexible delivery times and locations.
- Collaboration: Stronger partnerships among logistics providers, e-commerce platforms, retailers, and suppliers to build more efficient, integrated supply chains.
In summary, the logistics industry faces unprecedented opportunities and challenges. Only through constant innovation and market adaptation can companies distinguish themselves in intense competition while delivering superior service to customers.