From the pony express to its experiments with missile-based mail delivery, the USPS has never been shy about trying new ventures. Now it's making a play for a bigger share of the international business-mail market, and Paul Vogel's in charge.
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.
The announcement didn't make much of a splash at the time. But a little over a year ago, the U.S. Postal Service upped the ante in the international mail wars when it announced it was going after a bigger share of the international business-mail market. As part of that push, it created a new Global Business unit to expand its business among international commercial mailers by offering them customized solutions and—something once unimaginable in the Postal Service's world—discounts.
To head the new Global Business organization, the USPS tapped Paul Vogel, a 38-year postal employee. Vogel now serves as managing director and senior vice president of the new organization, which essentially consolidates all postal international efforts—operations, transportation, finance, planning, information technology, account management, and postal relations—into one unit.
Vogel started his career with the USPS at the ground floor, working nights as a postal clerk while in college in Massachusetts. After college, he worked as a clerk and carrier before joining the Postal Service's management intern program in 1975. He has since served in numerous management positions in operations and logistics in New York City, Boston, Chicago, and Washington, D.C. Prior to his current appointment, Vogel was vice president of network operations, responsible for the national network of 350 mail processing and distribution centers, as well as the worldwide transportation network that moves the U.S. mail.
Vogel earned a bachelor of science degree in economics from Boston State College and a master of science degree in business management from the Massachusetts Institute of Technology Sloan Fellows Program.
He spoke recently with DC VELOCITY Group Editorial Director Mitch Mac Donald about his life's work; why FedEx and UPS are not the competition, but the "co-opetition"; and the Postal Service's short-lived flirtation with "rocket mail."
Q: You began your career with the USPS working nights as a postal clerk. How did you end up in logistics?
A: I was working my way through college, going to school during the day and working nights with the Postal Service as a clerk. As I graduated from college, I got into one of our management development programs. That exposed me to all of the different functions at the U.S. Postal Service, and one of those functions was logistics. I just absolutely fell in love with it. I have been working in operations, primarily logistics, for the past 30-plus years. The Postal Service has been very generous to me in allowing me to continue my education in this area. It is a subject that once you get into it, you either love it or hate it. I have fallen in love with it and have dedicated a career to it.
Q: Today, you are the senior vice president of global business. What are you responsible for in that position?
A: It means that everything that the U.S. Postal Service does with international services falls within the group I manage. That includes the international transportation and logistics as well as all of the processing facilities that we have here in the United States.
I also spend a lot of time dealing with all of the interaction that we have with other federal agencies, such as U.S. Customs, the Department of Homeland Security, and the State Department.
Ultimately, of course, I handle all of the dealings that we have with our international partners, including the air carriers, the foreign postal administrations, and the various integrators around the world that we do business with. I also have profit-and-loss responsibility, so all of the financial responsibilities including revenue fall under this group. As a result, we are constantly trying to grow the business and balance the network needs of a growing business. Our business has been growing very nicely.
Q: What is the overall scope of the U.S. Postal Service's operations?
A: We handle roughly 213 billion pieces per year—in fact, we do in one day what most of our integrators do in a year.We have about 37,000 retail outlets around the United States and take in about $75 billion in annual revenue.
Q: Everybody's familiar with the USPS's domestic services, but I don't think many people are aware of the scale of its international operations.
A: We are a country of immigrants and the need for us to do business internationally has always been driven, in large part, by that fact. That immigrant population wants to get stuff to their loved ones back home. We have pretty much always been a player in an effort called the Universal Postal Union, which links all of the postal services together. We have been a leader in that organization for the past couple hundred years.
The USPS has always striven to be the most convenient and cost-effective option for people. Today, we continue to extend that convenience to a lot of the small businesses, a growing residential customer base, and even some mediumsized and large businesses. They all rely on the Postal Service because of what I call our quick, easy, convenient solutions. They can just walk a package down the street to their local post office and they know it's going to get to its destination— domestically, but also internationally. They don't need accounts. They don't need big computer systems.
So we have been in the international business ever since the United States was in business and we are very prideful of the things that we have been able to accomplish. It is like the definition of logistics I read often in DC VELOCITY.
I know you've written in your monthly column that sometimes the best compliment a logistics manager can get is that the phone's not ringing. It's sometimes a good thing to be a bit transparent. We are not always visible with what we do. To an extent, we pride ourselves on being taken for granted.
Q: Given its unique position as a government agency that must also compete with private sector companies for services like parcel business, how much of what you do mirrors the activities of a private sector logistics company?
A: Actually, they are very similar. We are certainly a logistics company.
Q: To what extent do the USPS's domestic operations differ from the international operations you oversee?
A: We don't distinguish too much between how we handle and process international vs. domestic mail. It is all collected out of a collection box or out of a retail unit. It all rides the same trucks to our processing plants, where it is sorted. It differs slightly, obviously, in that the domestic mail stays within the country, whereas the international mail goes to one of our five key gateways around the United States, where it is broken down by country.
At that point in the network, the international stuff goes through all the different levels of containerization, documentation manifesting, and the different requirements that go along with international service, as I'm sure you know. Then it's handed off to one of our partners—we have considerably more partners in our international service than we do with domestic mail. Our relationship with the air carriers is pretty significant because we go to well over 200 airports around the world as well as almost 200 seaports worldwide.
Q: Can you explain in a little bit more detail how the Postal Service works with private sector integrators and consolidators, including its competitors, around the world?
A: At one point in time, we thought of companies like FedEx or UPS as competition. But now we're cooperating and competing with them simultaneously. We've even coined a new term, "coopetition," to reflect that blend of cooperation and competition.
We have come to realize that there are certain synergies and strengths that each one of the parties has. As an example, in certain delivery areas in the rural United States, we go there every day anyway because we provide a universal service, and oftentimes our "competitors" will use us for the delivery agent in some of those rural areas. Simultaneously, a lot of those integrators are great at flying airplanes and do a much better job at that than we have, so we use our integrators along with the commercial air carriers to fly a lot of the mail. We have significant revenue that we give our competitors every year to help us move the mail, not just domestically, but also internationally.
Q: In December 2006, the president signed into law legislation that gave the USPS more pricing flexibility. Can you explain a bit how that legislation changed things?
A: Under the former regulations, we had a Postal Rate Commission that would review our cost structures and do public hearings and eventually come up with rate recommendations for us. The PAEA, the Postal Accountability and Enhancement Act, created two distinct mindsets. One falls under the term that they call "market dominant," which you could kind of relate to a monopoly-type product, the universal service product so that every American will be able to receive mail deliveries and so forth. A lot of that is the more traditional monopoly products such as first-class letters and periodicals that require somebody to go every day to every door regardless of how much volume there may be. That is the one side. That is still regulated under this new act.
The act, though, also created a new service category for us called competitor products. With those competitive product categories, we have a lot of flexibility. The law states that we have to cover our cost structure, which obviously is a wise thing to do anyway. We are required to cover our costs by product and a mark-up to the overall institutional costs, which is pretty modest. It is 5.5 percent, if I remember correctly. After that, we've got tremendous flexibility to set prices based off of market conditions, off of other ways that we may want to expose products for the consuming public and find out what consumers really need in the new marketplace.
Q: Let's talk about metrics. What is the Postal Service doing to measure its performance?
A: A lot. A real lot, in fact. Every one of our major products, under PAEA, is required to have service measures. We measure any number of different categories and we group them as either financial or service measures.
Q: Let's start with the money. How do you measure financial performance?
A: We constantly look at what's needed to keep the revenue stream flowing. We are continually looking at ways to optimize our network to reduce costs. We're also looking for ways to make our transportation more efficient—evaluating our mix of air vs. surface transportation services, for example. There's a constant analysis of the number of processing centers we need around the United States.
Q: What kind of service measures do you use?
A: As I mentioned, every one of our products has a measurement. In the package business, the packages all have a bar code on them. All of those bar codes are associated with containers— whether those containers are small cartons or big truck trailers. We have agreements with our carriers that call for them to scan our items at both origin and destination. Our delivery partners abroad are also required to scan our items as they receive them at their offices of exchange all the way through their delivery. We reciprocate with the mail that is "destinating" here in the United States.
On the package express side, we have a sophisticated bar-code scanning system that not only gives us an end-to-end measure but also allows customers to track or trace. It also gives us a ton of diagnostic information so that we can constantly review where there are opportunities for improvement.
On the more traditional mail classes like first-class mail or periodicals, we also put bar codes on all of those pieces, which are scanned every time they hit our sorting and processing machines. That way we can track a letter all the way through the system, which gives us a tremendous amount of information to use to measure service. Also, we have contracted with IBM to measure performance under a program known as the EXFC or External First Class Measurement System. IBM provides us with an independent assessment of the actual time it takes a piece of first-class mail, once it's deposited into a collection box, to be delivered to a U.S. home, business, or post office box.
Q: What plans do you have for further efficiency enhancements?
A: In terms of new technologies, we are delving into RFID. On the international product, a lot of the mail containers that we ship on air carriers will carry RFID tags. Most of our offices or exchanges abroad and all those here in the United States are wired with scanning devices. We can track international pieces on an RFID system. It is a bit expensive, but it gives us very good diagnostic information. We are hoping that the price of RFID is going to come down significantly so that we can get more and more involved with the technology.
Q: If you could offer one piece of advice to young people considering a career in logistics, what would it be?
A: They need to be very flexible. The logistics industry continues to change as customer demands change and as technology continues to change, like the RFID systems we were just talking about. The bright young people coming into the business today will not only have to manage the process of moving stuff from one place to another, but also work with sophisticated technology that links the Postal Service's operations with those of its customers, vendors, and delivery partners.
Q: Any closing thoughts?
A: As I mentioned before, the logistics industry continues to change. There are a couple of leaders in the international logistics industry that are helping promote that change. I believe the U.S. Postal Service is one of them. That's been the case for the past 200 years. We were there with the pony express, we were there flying the first airplanes, we even tried missile delivery for a while. We are constantly looking to come up with new ideas. I constantly challenge not only my staff, but also providers and vendors to come up with new ideas and challenge the conventional wisdom. Oftentimes the response I get from that challenge is overwhelming. There are a lot of bright minds out there.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."