UPS, Postal Service enter joint venture

The U.S. States Postal Service, which lost $199 million in fiscal 2000, has added United Parcel Service to the list of companies it hopes will help improve its efficiency.

UPS announced on Thursday that it would offer a range of postal-related services, including presorting and localized printing of mail items. The company joins FedEx Corp., DHL Worldwide Express and Emery Worldwide, among others, that perform sorting or transportation service behind the scenes of mail delivery.

"The Post Office has reached out for help, and is encouraging private enterprise to help out with sorting mail before it goes into the postal system," said Paul Carlin, former Postmaster General who recently sold his company, Mail2000, to UPS.

Carlin was referring to Workshare, a program created in the 1970s that got the private sector involved in presorting mail.

"It's a win-win situation for everyone. Workshare decreases the Post Office costs and at the same time offers discounted rates to large volume mailers," Carlin said.

The services will be offered under a new business unit headed by Randy Pulito, former president of UPS Europe and vice president of corporate strategy. UPS has delivered mail into international postal systems before, but this is its first involvement with the U.S. Postal Service, the company confirmed.

UPS will offer business customers "hybrid mail" services in which letters that originated in electronic form are printed and mailed as close to their final destination as possible. UPS bought Mail2000, a hybrid mail company based in Bethesda, Md., earlier this year. The service is aimed at companies that want to get mass mail like invoices and mortgage statements out quicker and cheaper than they can otherwise.

Carlin said the service would focus on first-class mail, typically shaving delivery times by five days, and delivery costs by 5 cents apiece.

First-class mail will be the main target of the Mail2000 service, even though that part of the USPS volume is growing at less than 1% a year, as more and more people send personal e-mails instead of letters and charge and settle bills online.

However, marketing mail is increasing by 3% to 8% a year, the Economist Intelligence Unit's ebusinessforum.com service quoted Pitney Bowes Chairman and CEO as saying.

The Internet has helped fuel the volume, which currently stands at around 80 billion pieces annually. America Online, for instance, is the fastest-growing direct-mail marketer in the United States. UPS says it has less to offer in the way of savings and speed to that market, although Mail2000 would offer mass marketers a reliable postal alternative. UPS is looking for Mail2000 customers who are sending out 250,000 pieces of mail a month, or more.

UPS on Thursday also launched UPS Presort, which is aimed at businesses that don't have the mail volume to justify a daily pickup by either the USPS or a presorting service – around 2,000 items a day. UPS already is picking up packages from most mail rooms. Now they will take mail, and hand it off to a presorting company that will bundles and bar-code it, before it enters the postal system.

The service means smaller volume shippers can enjoy bulk rate discounts otherwise unavailable.

UPS also will offer mailing of so-called flats – items that are bigger than a letter but smaller than a parcel, such as annual reports and prospectuses. UPS has acquired Global Management Services LLC, known as RMX. Companies give their "flats" to RMX, which presorts them by ZIP code and enters them into the USPS delivery system as close to destination as possible, saving customers 15% to 30% in postal rates. Delivery time is improved too, bringing it close to first class mail service, UPS said.

The UPS agreements come in the wake of January's deal with FedEx Express. That alliance is expected to generate $7 billion in revenue over the next seven years as FedEx provides domestic air transportation of postal express shipments.

Emery Worldwide, which currently has a contract for a portion of mail from the Priority and Express categories, is suing over the no-bid nature of the FedEx contract. Other carriers and aviation service companies have signed a petition, sent to the Justice Department in a move to open a formal inquiry into the deal.