Package Consolidator Paxis Shuts Down

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Paxis, a package consolidator and distribution services company started in December 1998 through a joint venture between Lockheed Martin Postal Holdings LLC and GATX Logistics/Stephens LLC, closed last month.

On Nov. 12, the company -- a small shipment consolidator that took packages from the vendor and dropped them into the U.S. Postal Service system for final delivery -- stopped accepting packages immediately and suspended operations at its eight distribution centers around the country as well as at its Jacksonville, FL, headquarters. Paxis employed 175 people.

Reportedly, Paxis left several thousand packages in terminal buildings and on trucks. Unpaid drivers were holding trucks filled with packages. Thousands of customers were affected.

Paxis provided nationwide parcel consolidation services and Destination Bulk Mail Center rates to shippers. It combined the automation and information technology and systems integration expertise of Lockheed Martin Distribution Technologies, the USPS' largest provider of technology products and services, with the integrated logistics capabilities of GATX Logistics, one of the nation's premier logistics providers.

Paxis used a pricing model designed to attract large mailers that figured postage rates from the USPS Bulk Mail Center instead of from the Paxis hubs. For example, a mailer might regularly drop a Greensboro, NC, parcel directly into the Greensboro bulk mail center in order to get a drop-ship discount. Paxis, which only had eight hubs versus the USPS' 21, would drop parcels directly into the Greensboro BMC hub for its customers instead of its own hub -- in Atlanta, for example -- and give customers a discount off the BMC rate.

"The pricing model made some sense, but I always questioned the service," said Joseph Ball, executive vice president at the Florida Gift Fruit Shippers Association, Orlando, FL, who is also a member of the board and executive committee of the Parcel Shippers Association. "Each Paxis hub had a greater service area than a BMC but fewer packages than a BMC. I always questioned how you could expect better service over a wider area with less parcel volume than a BMC."

Reportedly, Paxis never got enough volume to make this model work. Insiders said it moved fewer than 40 million packages in 1999.

Paxis is exploring strategic opportunities with several potential buyers for its network and assets, including proprietary barcode technology along with large, modern package sorting facilities with state-of-the-art package handling and sortation equipment.

"We still believe the Paxis concept is sound," said Paxis president Judith F. Marks. "We have provided our customers a cost-effective package delivery alternative and have provided excellent service to our customers. However, the time line to acceptable profitability has exceeded original projections."

In a statement, Lockheed Martin said, "Although we still believe in the Paxis concept, continuing the operations would have required further investment that we are not willing to make at this time."

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