The “First and Last Mile” Strategy: A Critical Assessment

As the U.S. Postal Service continues to address its difficult financial situation, some have argued that overall efficiency would improve if the Postal Service were to focus exclusively on the first and last mile (collection and delivery). While the introduction of workshare discounts has led to private industry taking over a portion of the middle mile – mail processing and transportation – allowing private industry to take over the entire middle mile warrants close examination. We therefore asked Dr. John Panzar, an expert in postal economics, to look at the economic implications of the Postal Service abandoning the middle mile completely and focusing exclusively on the first and last mile for the letter and flat market. Dr. Panzar finds that the Postal Service’s mail processing plays a vital role in ensuring the efficiency of the postal sector, even in the absence of economies of scale in mail processing.