Public-private partnerships have been around for a while, mostly as a way for cash-strapped governments to take advantage of private capital and expertise. We hear of them in infrastructure projects. But when private and public agencies work together in providing commercial services, it becomes an example of the awkward phrase ‘co-opetition.’

Unique partnership

The United States Postal Service (USPS) has agreements with FedEx and UPS, two global private parcel delivery companies, to deliver parcels to the door of customers within the US.

This interesting agreement came about because the USPS has the unique competence of delivering letters and parcels to almost every doorstep in the country, and it does so efficiently and at a lower cost than the private carriers.

So, the private companies deliver the parcels to the nearest post-office and the USPS takes care of the ‘last mile’ delivery and makes some money on it.

The private carriers have their fleet of offices, airplanes and logistics competencies to rush packages around long distances and rely on USPS to get it cheaply to their destination.

It is estimated that about 30-40 per cent of the parcels of these two private carriers are being delivered by the USPS.

While co-operating, the USPS also competes with UPS and Fedex in the case of small parcels, where a customer can choose to go directly to USPS or to the private carriers, although there are restrictions on the maximum size of parcels USPS can carry.

Mutual benefits

In turn, the USPS also enjoys a government-granted monopoly in the delivery of letters (a private carrier can only carry ‘express’ letters), and also access to the ‘mail box’ in the destination. Only a mail carrier can put items into the mailbox!

The USPS is in a bit of a pickle really, and needs all the help it can get. The coming of the Internet and on-line banking has hit the usage of the postal service hard.

Post offices responded to these changes by selling covers, packing materials, and so on, making it convenient to just go to the post office with your gift to be shipped and get everything else including labels and gift cards there. Yet, the USPS lost money every year from 2006-2010.

Other countries in the developed world are also struggling with restructuring their mail services. Germany’s Deutsche Post has gone far in privatising its operations, re-working its costs and compensation structures, and in expanding into new businesses such as banking.

The USPS wanted to go into banking but permission was not granted. The Japanese and Indian postal systems have done a remarkable job in providing limited banking services.

The deal with UPS/Fedex seems to have helped some. The USPS is said to have made an operating profit so far this year, but that is without taking into account a required pre-funding of retirement obligations.

The postal service plans to increase its parcel delivery business by modernising its operations.All that will require large investments, which can come if it takes another step in the direction of privatisation.

The writer is the dean of the Jindal Global Business School, Sonepat, Delhi NCR

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