USPS, UPS Plan Rural Offering

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United Parcel Service will offer a customized service that combines its ground delivery service with the U.S. Postal Service's Parcel Select, possibly resulting in lower rates for mailers using UPS.


UPS will use Parcel Select for deliveries up to five pounds, primarily to rural or super-rural areas. Customers will give their packages to UPS, which will move them through its ground network. UPS will separate out the packages that are to be delivered to the rural areas and turn them over to the local post office for final delivery.


UPS currently charges a $1.75 surcharge for rural deliveries. It is unknown how much UPS will pay the postal service for each package.


"We're going after volumes UPS currently does not have," UPS spokeswoman Susan Rosenberg. "We're working with customers that are not currently UPS customers."


Rosenberg said customers have signed on, but are not yet using the service. She would not name the customers or say when the service would begin.


"UPS has lost a lot of residential lightweight package volume to consolidators," said Doug Caldwell, a vice president at AFMS Transportation Management Group, a transportation management consultancy in Portland, OR. "This is partly because consolidators can come in and offer a lower rate, particularly on lightweight, residential packages, than UPS."


Parcel Select consolidators are concerned about the partnership, Caldwell said. They have been able to get business for deliveries to rural areas from mailers who might be UPS customers, but use the consolidators for shipments to rural locations to avoid the UPS surcharge.


Caldwell also said that because UPS now will share delivery of packages that have gone exclusively through Parcel Select, the postal service could "lose some fairly significant volumes, at least in the short run."


In the long run, however, the relationship with UPS may benefit the postal service.


"This is pretty historic," Caldwell said.


Insiders said that FedEx might announce a similar partnership soon.


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