Separate or Integrated? Least-Cost Parcel Delivery Methods in a Flexible Delivery Environment

The chapter 'Separate or Integrated? Least-Cost Parcel Delivery Methods in a Flexible Delivery Environment' examines the efficiency of integrating parcel delivery with letter delivery versus using dedicated parcel routes. It discusses the fall in letter demand and rise in parcel delivery, leading to a debate on the optimal delivery method. The author presents a model comparing the costs of integrated and separate parcel delivery, calibrated with recent USPS studies. The model reveals that integrated delivery is generally more cost-effective, but separate delivery could be advantageous at very high parcel volumes or with significant productivity gains. The chapter highlights the importance of considering scope economies, productivity, and capacity constraints in making informed decisions about parcel delivery methods.