USPS Sees $25M in Lost Revenue Due to Pricing Errors

As Postmaster General Louis DeJoy continues toward full implementation of the United States Postal Service’s ten-year plan, “Delivering for America,” the postal service faces yet another significant setback in its pursuit of a cost-effective and efficient business strategy. Due to an error in processing the USPS’ Parcel Return Service, the agency saw a staggering $25M in revenue loss over three years. The revenue loss, revealed in an audit report from the agency’s Office of Inspector General, shows that, for USPS, the road to cost-effectiveness is rife with challenges.

But USPS isn’t the only organization facing difficulties in today’s volatile global supply chain. Continued conflict in the Red Sea is hitting U.S. retailers hard, and FedEx’s ongoing contract negotiations with pilots have come across yet another significant setback. In today’s dynamic global supply chain, nobody has it easy. This week, we’re diving into the headlines shaping the global logistics landscape. Here's what you need to know in an industry that’s always moving.

USPS Sees $25M in Lost Revenue Due to Reverse Logistics Pricing Errors

Due to pricing errors between August 2020 and October 2023, the USPS lost an estimated $25M in potential revenue, according to a Jan. 9 audit report from the USPS’ Office of Inspector General. In the report, the errors are attributed to failures of the USPS’ pricing verification process during the reverse logistics Parcel Return Service. The Parcel Return Service, which aims to capture volume from consumer returns, failed to correctly document the type of facility at which the parcel was processed, a key factor in determining parcel rates.

“Management agrees to not only examine the attributes of weight and dimension during the

verification process but also include the type of facility,” USPS management wrote in an addendum to the Office of Inspector General report. “Management will be moving Parcel Return Service (PRS) from the Electronic Verification System (eVS) to USPS Ship, a new

manifesting and payment system, which will incorporate the facility type into the pricing

verification process.”

USPS Contract Fallout Could Force Furloughs at FedEx Express

The United States Postal Service–the single largest source of volume for FedEx Express, the air division of parcel giant FedEx–has seen a historic drop in demand in the years following the pandemic-era e-commerce boom. As a result, the USPS may make significant changes to its current $2B contract with FedEx Express, according to reporting from Reuters.

The potential contract changes with USPS come at an inopportune time for FedEx Express, which has struggled to reach a labor deal with its pilots, represented by the Air Line Pilots Association (ALPA). Should the contract with USPS fall through, FedEx Express will likely be forced to abandon current retirement and buyout incentives in favor of wide-scale pilot furloughs.

Impact of Red Sea Crisis Uneven Across U.S. Retailers, Analysis Indicates

According to a recent analysis from Jeffries, a leading procurement consultancy, the Red Sea crisis is significantly impacting certain U.S. retailers while leaving others largely unscathed. The report, spearheaded by Jeffries Analyst Jonathan Matuszewski, indicated that retailers with a globalized sourcing strategy, such as Best Buy, Wayfair, Beyond Inc. (formerly Overstock), and RH, are facing greater headwinds during the historic disruption to global trade. However, brands that have prioritized domestic sourcing models, such as The Home Depot, Lowe’s, and Tractor Supply Co., have been largely insulated from the negative impacts of the Red Sea crisis.

“Bottom line,” the report said, per a Supply Chain Dive article, “investors should expect temporarily higher inventory levels from transit delays and higher costs from air freight, but few executives have signaled materiality.”

Amazon Announces New VP of Worldwide Operations

In a message to employees, e-commerce giant Amazon announced that Udit Madan, formerly the global delivery services division leader, will take over the top supply chain role at the company, VP of Worldwide Operations. Madan takes over the role following the promotion of John Felton, previous VP of Worldwide Operations, to Senior Vice President and CFO of Amazon Web Services.

“Udit is a talented leader who has been in Operations his entire career. He was at the helm when we built Amazon Logistics, and over the past two years has grown our entire Transportation business, better connecting the middle and last mile than ever before,” said John Felton in the Jan. 18 communique. “The plan and goals we have will continue to improve safety, speed, cost, and quality.”

Maersk & Hapag-Lloyd Form New Maritime Alliance

Two of the world’s largest maritime carriers, Maersk and Hapag-Lloyd, recently announced an alliance under which certain vessels will operate under joint operational command. The coalition will comprise 290 vessels with a combined capacity of 3.4M TEU. Under the agreement, “Gemini Cooperation,” Maersk will provide 60% of the required vessels, Hapag-Lloyd the remaining 40%.

“We are pleased to enter this cooperation with Hapag-Lloyd, which is the ideal ocean partner on our strategic journey,” Vincent Clerc, CEO of Maersk, wrote in a Jan. 17 press release. “By entering this cooperation, we will be offering our customers a flexible ocean network that will be raising the bar for reliability in the industry. This will strengthen our integrated logistics offering and meet our customers’ needs.”

Panama Canal Officials Limit Vessel Transits by Additional 36%

Officials at the drought-stricken Panama Canal, among the global supply chain’s most vital waterways, have limited the number of vessels allowed to transit the canal by an additional 36%. Canal officials now estimate that the drought conditions plaguing the canal will be responsible for $500M–$700M in 2024, up from previous estimates of $200M.

“It’s vital that the country sends a message that we’re going to take this on and find a solution to this water problem,” said Panama Canal Administrator Ricaurte Vásquez in a quote obtained by The Associated Press.

J.B. Hunt Sees Growth in Intermodal Volumes, Contradicting Industry Trends

U.S. logistics company J.B. Hunt saw significant growth in intermodal volumes in the last quarter of FY 2023. The carrier’s 6% increase in intermodal volumes is a bellwether of slowly rising volumes in a transportation industry otherwise plagued by stubbornly low volumes across modalities.

“During the (fourth) quarter, we saw a peak season in intermodal that neither we nor our customers, nor our rail providers were expecting,” said J.B. Hunt EVP and President of Intermodal Darren Field, per Trucking Dive.

As Businesses Scramble to Make Budgets Count, Supply Chain Professionals Turn to Intelligent Audit

In today’s competitive logistics landscape, businesses are under unprecedented pressure to make every penny count. With over twenty-five years at the cutting edge of supply chain innovation, Intelligent Audit offers shippers an invaluable array of software assets to avoid costly oversights:

Get started with Intelligent Audit, and see what twenty-five years of transportation innovation can do for your business today.

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