Earlier today, a mutually beneficial agreement between DHL eCommerce, a subsidiary of global logistics services provider, Deutsche Post DHL Group, and the United States Postal Service (USPS) was announced, in the form of a new exclusive multi-year United States last-mile parcel delivery contract valued at more than $10 billion.
Officials for the organizations called this agreement “unprecedented” in their 25-year relationship. And they added that by strengthening this relationship benefits DHL eCommerce leverage what they called accelerating e-commerce trends, while expanding in the U.S. market, in the coming years, through both its domestic and international services.
Regarding the specifics of this new agreement, the organizations said that DHL eCommerce focuses on nationwide pickup and sortation across its 19 fully automated hubs and linehaul on its air and ground network prior to teaming up with the USPS for completion of the final mile for all deliveries. And it is able to leverage the USPS’s final-mile network that accesses more than 41,550 ZIP codes, as well as more than 170 million delivery points six days a week.
On a media call today, USPS Postmaster General and CEO David Steiner said this agreement is significant, in that it reflects exactly the type of future USPS needs to be building, rooted in trust, long-term relationships, and the smart usage of the Postal Services strengths, which he called unmatched, as it has made significant investments in recent years in people, technology, transportation, and processing ability.
“We are committed to the customers and the businesses we serve, which brings us to what, I believe, is our strongest asset, our last-mile network,” he said. “It’s one of the great advantages of this institution, and this announcement shows how we can leverage that strength in ways that create more value for customers, supports growth, and makes us more responsive to the marketplace. It also shows that strong relationships, like the one we’ve enjoyed with DHL for over 25 years, are not static, they evolve, they deepen, and they create room for new ideas and better solutions over time.
That’s good for the Postal Service, good for DHL e-Commerce, and good for the millions of customers and businesses who depend on reliable, efficient delivery. It’s also good for the 1,000s of jobs that are supported by this work and by the broader ecosystem that grows around strong, durable commercial relationships like this one. So, today’s announcement is not just about one contract, it’s an example of the kind of Postal Service we’re building—more collaborative, more capable, and better positioned for long-term success. We’re absolutely thrilled to be moving in that direction alongside our friends and counterparts at DHL.”
From the perspective of DHL eCommerce, the business-to-consumer (B2C) parcel arm of DHL, its CEO Scott Ashbaugh explained a key driver for this agreement is that the USPS last-mile network is what he described as the most powerful in the United States, adding that in any domestic B2C parcel operation, the last mile segment is absolutely critical to success, with the company aiming to double its business by 2030.
“A company our size literally has every option at its disposal for last-mile,” he said. “We could build it ourselves or we could find someone who does it, or partner with a leader. But with careful consideration, we reaffirmed today that we will partner exclusively with USPS for the long-term to execute the last mile of our DHL e-commerce deliveries in the United States, of all conceivable options. USPS is without question the most effective. They are already at every American’s doorstep six days a week, and at the end of the day, there is no more efficient model. So, DHL e-Commerce offers one of the most reliable, affordable, and sustainable B2C parcel delivery solutions in the market, [coupled with] the power of the USPS last-mile.”
In order to prepare the USPS for volume growth from agreements like the one announced today, USPS’s Steiner observed that what the USPS has tried to do is make a network that is available to every type of customer, with some customers wanting a full end-to-end network product, and others wanting middle-mile or last-mile delivery.
And with the USPS delivering to 170 million locations six days a week, he said the USPS is the best U.S.-based last-mile provider by default.
“For us this is a matter of meeting the customers where they are and meeting the customers’ needs,” said Steiner. “DHL is obviously one of the great logistics companies in the world, but DHL doesn’t want to spend the massive amounts of capital that they would need to spend to build out a last-mile network in the United States, so we have a total win-win. We’ve invested that capital, so we’ve already got that last-mile capability. What you have is a combination of the world’s greatest logistics company on the front end and the world’s greatest postal service on the back end.”
When asked how this agreement differs from the previous one between the two organizations, DHL eCommerce’s Ashbaugh said that the major difference is the duration of this new agreement, while declining to disclose a specific length.
“For the first time, we have a multi-year agreement, and that allows us more predictability and gives confidence to our clients that over the long term they’re in a good place with us with our solution,” he said. “It is about the duration of the agreement and what that does in our ability to extend longer-term agreements with our clients and have them feel comfortable to shift their volume from wherever they may be into the DHL and USPS networks.”
When asked what makes this agreement exclusive to DHL eCommerce, Ashbaugh noted that it is not necessarily exclusive to DHL eCommerce, it is more that DHL eCommerce is “pledging exclusivity” to the USPS.
“In this contract, with the relationship we have built with USPS over a long period of time and the trust that is there, we feel comfortable giving 100% of our packages that are domestic USPS deliveries for DHL eCommerce for the last-mile,” he said. “When we say exclusivity, we mean just in terms of volumes we have in our network and how they are delivered, going to the USPS.”
An industry observer explained that this agreement speaks to the fact that the USPS and DHL eCommerce need each other.
“That is the signal they are giving, and they are going to continue to partner going forward, even though the USPS ‘Delivery for America Plan’ is about going direct to large B2C shippers,” said Robert Persuit, senior director of business development, at ShipMatrix. “This [agreement] allows DHL eCommerce to go to its shippers and say it is going to be business as usual. There was a contract coming up, but there was uncertainty as to whether DHL eCommerce itself would be available in the future. The $10 billion number is not necessarily the most important part; the most important part is that they are going to continue to do business and that they need each other.”
Persuit also noted that the USPS is not going to be able to enact its desire to go direct B2C until they concentrate on just the packages that go into the mailbox, because it does not have the ability to do that, which speaks to the need for this agreement.
“The USPS needs DHL eCommerce because that is base volume it would not have, and DHL eCommerce needs USPS because it has not built out any infrastructure for U.S. last-mile delivery. It is about helping e-commerce sales and their shippers and keeping that volume with the USPS, which is what this is all about.”
