United States Postal Service Considers Intermodal Supply Chain

Intermodal transportation, in many ways, has been a very steady mode during the depths of the economic downturn for many reasons. Some of these reasons include things like truck-competitive service, fuel efficiency, and the impressive investments being made by railroads into their networks.

Another interesting thing about intermodal is that it is not strictly for shippers. It is being used more than a bit by transportation bellwethers UPS (the single largest user of intermodal rail service in the U.S.) and FedEx to a large degree. It has not been used nearly as much by its counterparts at the United States Postal Service (USPS), but that could be changing.

A report by the USPS Office of Inspector General (OIG), entitled “Strategic Advantages of Moving Mail by Rail,” highlights the fact that moving USPS services and products on rail could be highly advantageous and beneficial for the USPS, with multiple benefits, including:

-shifting a portion of mail volume to rail without changing the overall transportation network could save $100 million per year and possibly more if it made an even greater commitment to rail and altered its network;
-significantly reducing greenhouse gas emissions and meeting the Postal Service’s environmental goals; and
- because of its lesser sensitivity to fuel price increases and greater control of its own infrastructure, rail transportation has major, long-term strategic advantages over highway.

While the USPS currently only spends $40 million on freight rail contracts compared to $3.3 billion on highway contracts, the report explains that USPS competitors have widely expanded their rail usage and worked hard to realign their networks with the nation’s railroads.

And the USPS OIG report said that by increasing its intermodal usage the USPS could save transportation costs, gain long-term strategic advantages, and still continue to meet existing service standards.

“While fully realizing all potential cost savings would take time and effort, some savings are achievable without changes to the current network,” the report stated. “The modernization of the rail industry has made it a viable, cost-effective option for meeting some of the Postal Service’s long-distance surface transportation needs. The rail industry’s improved services, increased capacity, reduced exposure to fuel price volatility, and long-term outlook can also protect the Postal Service from strategic risks posed by its current reliance on the highway trucking industry.”

Doug Caldwell, VP, EMEA, at AMFS, said that the USPS OIG report is “spot on,” explaining that UPS can get most coast to coast packages delivered in four days, and there is no reason why USPS can’t do the same.

UPS, said Caldwell, uses high priority trains, such as BNSF’s Southern Transcon Z Train, which travels between the UPS facility in suburban Chicago and Los Angeles, and has the highest track priority. AMFS estimates that 30 percent of UPS ground volumes travel by train, and even some of the deferred air ( 3-Day Select) is routed by train. And FedEx, in contrast, uses intermodal mostly for FedEx Freight, not Ground, according to Caldwell, whereas FedEx Ground uses highway primarily team drivers for long hauls.

And another highly regarded parcel analyst observed that intermodal could very well serve as a viable option for the USPS.

“UPS found a long time ago that packages can more quickly, efficiently and at lower cost than any other mode when they are on the rails,” said Jerry Hempstead, principal of Hempstead Consulting. “It takes a well choreographed ballet though to have your loads in the right spot at the right time to ensure your transactions move on the correct train and then at destination being ready to recover and transport your load to the correct USPS sortation node for ultimate delivery. Trains move in just about every type of weather and have the lowest cost-per-mile domestically. They operate 24/7 and don’t have the onerous Hours-of-Service rules that are constantly being ratcheted down by the DOT. The USPS can even outsource the drop/ recovery and train selection to a third party. FedEx is a late entry into the use of rail for its ground product but they have embraced the concept and it improves service on many legs and significantly reduces the cost.”