The U.S. Postal Service has aggressively moved to reduce costs by consolidating its processing network and realigning its delivery facilities. However, it has essentially eliminated rail transportation, which is the least costly way to move mail long distances. During the recent economic downturn, railroads invested heavily in infrastructure to improve service. Private industry shippers of time-sensitive materials have responded to these improvements by shifting volume from highway to rail. UPS (the largest rail customer in the U.S.) attempts to put any package traveling over 750 miles on rail. JB Hunt, one of the Postal Service’s largest highway contractors, has shifted a substantial freight volume to rail and now earns more than one-third of its overall revenue from intermodal rail transportation. The potential benefits to the Postal Service are clear. Rail is a less expensive and more environmentally friendly transportation mode compared to trucking. Recent estimates show that intermodal rail service can improve fuel efficiency by about 3.5 times relative to highway tractor-trailer service. In addition, rail gives the Postal Service more capacity flexibility as this mode can operate one-way, while highway transportation must be purchased in round-trips. Since Postal Service volumes tend to flow from north to south and east to west, utilizing rail would avoid the cost of paying for empty or near-empty trucks on the return trips. Rail is also far less susceptible to the weather interruptions that can wreak havoc on highways. The shift to rail, however, is not without its drawbacks. On average, rail is slower than highway transportation. It would also require greater monitoring and pre-planning and complex decision-making by management. For example, the Postal Service would need to choose when to dispatch to rail yards versus alternatives such as dispatching a highway trailer to a network distribution center or other consolidation points. Although it would require some additional efforts, the potential savings to the Postal Service of converting from highway to rail could be tremendous. While concerns related to speed of service moved the Postal Service almost completely away from rail, other shipping companies are embracing rail with vigor. This blog is hosted by the OIG’s Risk Analysis Research Center (RARC).
on Sep 5th, 2011
in Mail Processing & Transportation
| 5 comments
on Feb 7th, 2011
in Ideas Worth Exploring
| 3 comments
[dropcap style="font-size: 60px; color: #9b9b9b;"] I [/dropcap]n recent years, a growing number of people have chosen to avoid crowded shopping malls by doing their holiday shopping online. To a certain extent, online shopping reduces their carbon footprint by keeping these individuals from driving to and from the store. However, their packages still have to be delivered. What if postal customers could choose to have carbon neutral delivery for an extra fee? In 2009, Itella, Finland’s postal service, introduced a program where customers could pay extra for carbon neutral delivery, adding the “Itella Green” marking to letters for less than a penny or parcels for around five cents. Itella achieved carbon neutrality through a combination of energy efficient delivery vehicles by funding reputable, environmentally-friendly projects. While Itella’s plans include increasing carbon efficiency in all three phases of the package delivery process: sorting, transportation, and delivery, the greatest carbon efficiency gains currently come from their shift to electric or fuel efficient delivery vehicles. On February 1 Itella made the cost of carbon neutrality a standard part of all postage, making it the first country to offer completely carbon neutral delivery. That way, when a customer uses Itella to send a letter, package, or direct mail, they know they are getting zero net emissions. Through their efforts, Itella has made carbon neutral delivery, a key element in developing a “green” reputation and an advantage in competitive areas like package delivery. Is offering carbon neutral delivery as a separate, specialized service that customers can purchase an idea worth exploring for the Postal Service? The Postal Service is already in the process of converting its delivery fleet to cleaner electric vehicles, making carbon neutrality easier to achieve in the coming years. Moreover, does it make sense to give consumers a choice in terms of the environmental friendliness of their mail delivery? Sources: Hellmail Itella This topic is hosted by the OIG’s Risk Analysis Research Center (RARC).
on Jan 24th, 2011
in Mail Processing & Transportation
| 8 comments
The Postal Service established International Service Centers (ISCs) in 1996 to become more competitive in the international mail market. ISCs distribute and dispatch both incoming and outgoing international mail. The ISC network has facilities located in five major cities: New York, Miami, Chicago, Los Angeles, and San Francisco. The Postal Service hoped that ISCs would improve service and provide the structure needed to support new products and increase revenue. However, International Mail volume has not increased as projected by the ISC marketing and sales plan. During the period FY 2007 to FY 2010, International mail volume declined by approximately 29 percent (from 858 million to 609 million mailpieces). Although the Postal Service reduced expenses by nearly $6 billion in fiscal year (FY) 2009 and by almost $789 million during the first three quarters of FY 2010, the reductions have not been sufficient to offset declines in mail volume revenue. Consequently, the Postal Service is reviewing its mail processing and retail networks to remove duplication and make them more efficient to reflect current mail volumes. In light of international mail volume declines and the Postal Service’s current financial condition, does the Postal Service still need a separate network to handle international mail? Are there other options the Postal Service could pursue to increase International mail volumes and revenue? Please share your comment(s) on how to make the ISC network more profitable, effective, efficient and economical. This topic is hosted by the OIG’s Network Processing Audit Team.