• on Jun 15th, 2009 in Strategy & Public Policy | 30 comments
    The Postal Service has asked suppliers to cooperate in efforts to reduce contract costs in light of the current financial crisis by identifying scope reductions, process improvements, and price reduction opportunities. In his March 25, 2009 Statement before the Congressional Committee on Oversight and Government Reform, Postmaster General John E. Potter stated:

    The Postal Service, with a physical presence in communities from coast to coast, including 37,000 facilities, spends almost $15 billion on supplies and services each year, from air transportation to building rental, from motor vehicles to computer systems, from processing equipment to Priority Mail envelopes in our lobbies. We are working to renegotiate contracts with our suppliers to reflect our reduced needs and to obtain even better value for each dollar we spend. Across the organization we are also constraining spending in every area possible.

    With the economy in a slump, many suppliers may be equally suffering financially. Will this work for or against the Postal Service’s contract renegotiation initiative? Some suppliers may be unwilling to renegotiate contracts because they cannot afford the reductions. Others may be motivated to renegotiate, reasoning that some business is better than no business.

    What do you think?

    This blog topic is hosted by the OIG's Risk Analysis Research Center (RARC).

  • on Jun 8th, 2009 in Delivery & Collection | 78 comments

    It’s 7:30 am and you’re a letter carrier . . . so take a moment and imagine the following as a typical workday. First, you walk into the office, clock in, and check in with the boss. Then, you load up the vehicle with the mail that is already prepared for your route. Finally, at 7:45 am, you jump into the vehicle, drive off and begin delivering the mail. At no point are you required to manually sort mail. Is that day far off in the future . . . or, is it just around the corner?

    Currently, Delivery Point Sequence (DPS) letters are automated to the delivery point so that the carrier can take it directly to the street. DPS mail is picked up by the carrier on the way to the vehicle and does not need additional manual sorting. The purpose of the DPS program is to reduce the amount of time carriers spend in the office manually sorting letters, thereby reducing cost and improving accuracy and speed of delivery. Since 1993, when DPS was introduced, the share of city delivery routes receiving DPS letters has grown to more than 99 percent and the share of rural routes has grown to 86 percent. On average, these routes receive 88 percent of their letters in DPS order. The Postal Service’s goal is to raise the DPS percentage to 95 percent by 2010. The chart below depicts how the share of DPS letters and manually sorted (cased) letters on city delivery routes has changed over time.

    Delivery is the Postal Service’s largest cost center accounting for more than 40 percent of expenses, and having carriers manually sort mail takes time and money. Carrier routes are configured to take eight hours to complete, and those eight hours include time spent in the office . . . primarily manually sorting mail, as well as time spent on the street. According to the Postal Service, over the last 15 years, it has recognized over $5 billion in savings due to DPS.

    Now, the Postal Service wants to replicate for flats — large envelopes, magazines, and catalogs — what is done for letters by implementing the Flat Sequencing System (FSS). The FSS will sort flats into delivery point sequence. In FY 2007, the Postal Service processed 52 billion flats and 80 percent needed to be sorted manually in the office by the carrier. The plan is for FSS to reduce the amount of time carriers spend in the office manually sorting flat mail. Although FSS is not quite ready for primetime, the Postal Service is currently piloting it at the Dulles Processing and Distribution Center in Virginia.

    If the majority of the mail is sorted in delivery point sequence using automation, it will dramatically change how a carrier spends his or her workday. Remember, you are the carrier and now you have automated sorted bundles of DPS letters and FSS mail. There was no need to manually sort any of this mail in the office. You only had to pick up the mail and maybe a few parcels before you headed out on your route. What does this mean? Well, for starters, because carriers begin delivering mail earlier, carriers have a longer day out on the street. In addition, more time dedicated to delivering the mail will likely result in carriers being back in the office within their allotted 8-hour tour, thereby reducing overtime and late deliveries. Further, avoiding the evening rush hour traffic may result in decreased auto accidents. Finally, because the mail is delivered more quickly, customer service may be improved.

    What do you think? Do you think that the days of manually sorting mail in the office are coming to an end? It took 15 years to realize the impact of DPS; will it take longer for FSS? Will increased delivery points and decreased mail volume have an impact? Can you think of some other challenges and benefits that may be presented because of DPS and FSS?

    This blog is hosted by the OIG's Delivery directorate.

  • on Jun 1st, 2009 in Mail Processing & Transportation | 17 comments
    While the Postal Service leads the world in processing letter mail, private sector competitors have a higher market share for parcels. And while letter volumes are decreasing, parcel volumes are projected to increase. Although parcels represent less than 2 percent of mail volumes, the Postal Service parcel business makes up 13 percent of the market share in the U.S. The chart on the left depicts the market share for parcels. Just how do parcel industry giants keep their costs down and productivity up, even in today’s economic environment? And, is there anything that the Postal Service can learn from them? After visiting operations of the two parcel industry giants, the OIG learned that although the Postal Service has many things in common with the industry giants, it could also learn a few things. The benchmarked entities and the Postal Service process parcels both manually and use automation. However, the following best practices came to light:
    • Employees are predominantly part-time, often working four-hour shifts with staggered start times to accommodate volume loads.
    • Employees are moved among tasks quickly to meet the needs of changing volumes, including crossing-crafts between unloading, scanning, processing, and even facility maintenance.
    • Parcels move quickly through the facilities, generally on conveyor belts, and are not staged in transport equipment in waiting areas or moved around between pieces of processing equipment manually.

    Which of the best practices listed above do you think would most positively impact the cost of handling parcels in our processing centers if the Postal Service implemented them? This blog is hosted by the OIG's Network Optimization directorate.

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