“Co-opetition” in US parcel delivery

As reported by Post & Parcel:

The US Postal Service (USPS) Office of Inspector General (OIG) has published a new paper which claims that there is potential for a “win win win” situation when the USPS enters into a negotiated service agreement (NSA) with a large private parcel carrier.

In other words, the study, which was authored by Dr. John C. Panzar, professor of economics, University of Auckland, argues this could be a triple win: for USPS, the private parcel carrier and the consumer.

The OIG study explained: “The Postal Service is better off through increased revenues, competitors are better off through lower delivery costs, and consumers potentially benefit from lower prices”.

The Executive Summary of the OIG report commented: “This result occurs because through co-opetition the Postal Service and the private parcel carrier create the more efficient end-to-end parcel delivery service. The private firm provides the more efficient mail processing and transportation, and the Postal Service provides the more efficient delivery portion. If efficiency gains are high enough, co-opetition can lead to overall lower end-to-end (E2E) prices for parcel customers.”

The Summary added that “under the assumptions of Professor Panzar’s model”, it was found that “the greatest efficiency is obtained when upstream parcel volume is handled by the private sector but delivered by the Postal Service”.

Ken Wood is the founder of LJM Consultants. LJM helps clients negotiate “Best in Class” UPS/FedEx agreements. LJM was recently named the “best parcel auditing company in America” and was also inducted into Inc. Magazine’s Top 500/5000 fastest growing companies in America for 2013. To learn how LJM Consultants can help your company get the parcel contract you deserve, call 631-844-9500 or email kenwood@myLJM.com.

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