Savings Not Delivered

Oct 29 2018
OIG Blog Category: Mail Processing & Transportation 17 Comments

It’s hard to argue with the rationale behind rightsizing the postal network. With mail volumes in decline, it made sense for the U.S. Postal Service to see if it could consolidate facilities and equipment.

That’s what USPS did from 2011 to 2015 as part of a two-phased network rationalization plan when it consolidated 223 facilities. As part of Phase II, the Postal Service also revised its First-Class Mail service standards, eliminating overnight delivery for single-piece FCM and shifting some FCM from the two-day service standard to three days.

These revisions enabled the Postal Service to expand its mail processing operational window to process mail on fewer machines, thus using less facility square footage. This part of the change is known as the Operating Window Change (OWC), and USPS projected the OWC would save a total of $1.6 billion in fiscal years 2016 and 2017.

But to quote the poet Robert Burns: “The best laid plans of mice and men, often go awry.”

The OWC changes did not deliver the expected savings, our recent audit report found. The Postal Service saved only about $91 million in fiscal years 2016 and 2017, not the $1.6 billion originally projected. In addition, we could not verify the Postal Service’s identified savings of $275 million in FY 2016 and $17 million in FY 2017.

Management disagreed with our findings on savings, among other things, stating that the changing business environment made it nearly impossible to isolate savings related to the OWC. The Postal Service also said it remains optimistic it will eventually achieve the full projected savings, but we concluded USPS will never likely achieve the projected annual $806 million OWC savings.

Finally, we noted that even though the Postal Service has not achieved its projected savings, reverting to the previous operational window would likely cause further service disruption and additional cost, primarily from having to re-open closed facilities, return employees back to night-shift work, and realign transportation networks.

Have you adjusted to the First-Class Mail service standard changes? How much First-Class Mail do you usually send or receive?

Comments (17)

  • anon

    It is a shame that ASPS is being shown as a loss. I use our post office all the time and even though things have hurt it, due to our technology, I think the Post Offices are needed for those who don't have access to this high tech and depend on face to face. I just hope USPS increases to a viable that keeps it going...even though this article says otherwise

    Nov 04, 2018
  • anon

    We agree that a Postal Service can be profitable in the technology age, while continuing to provide the American public with trusted, affordable, universal service.

    Nov 12, 2018
  • anon

    I was just wondering whether or not the Inspector General, et al, seek input from postal carriers, window personnel, etc, as to what might make the postal service, in particular their centers, more efficient. Of course, most don't want to lose payable hours or jobs, however there are, no doubt, some full timers who might consider putting in fewer days. Whichever the case, these are the people who can assist with reaching your goals. Thank you! G Downey, Pittsburgh

    Nov 04, 2018
  • anon

    Thank you for your posting. We are always seeking from Postal Service employees and the public with our from Blogs and Audit Asks questions.

    Nov 12, 2018
  • anon

    What to capture real savings? Get rid of Area offices. Before the age of the Internet and instantaneous communication along with video conferencing, etc., Areas were needed to disseminate the information from headquarters to the Districts and then to the field and back up the chain. Now, Headquarters information is provided at a stroke of a key and data is now inputted daily, if not hourly into countless programs. Area levels have become nothing more than a filter for information and serve no real purpose other than to those that serve in those positions. By doing away with areas, the cost savings could be astronomical in regards to salary, buildings, transportation, etc.

    Nov 03, 2018
  • anon

    SHOCKING!! Estimates of the cost savings of transferring work from one place to another that completely ignore the actual efficiency of those places at performing that work were inaccurate. Midsized to small plants have on average been significantly more efficient at processing mail than the largest plants. It doesn't take a genius to figure it that getting rid of them and transferring that work to larger less efficient sites is unlikely to save money.

    Nov 03, 2018
  • anon

    Processing for MSN moved to MKE. So if I mail a letter to the other side of the city my letter goes to MKE sits for a day or two then gets processed only to be mistakenly sent to Green Bay, then back to MKE for another day or two. Bring back processing to MSN.

    Oct 31, 2018
  • anon

    It’s only mail, don’t get too worked up. Nobody cares.

    Oct 30, 2018
  • anon

    From the report: “However, transportation costs have increased by more than $1 billion, or 15.4 percent, since the OWC was implemented. Postal Service management said that transportation costs increased because the volume of packages require more space than other types of mail as well as higher driver contract rates.” Simple solution: do what UPS Ground does and use intermodal rail. It’s vastly cheaper than OTR trucking—and almost as fast (not that speed matters—nobody chooses to ship parcels via the USPS for speed, only price). Intermodal rail works even better now that there are fewer processing facilities — in other words, there’s more volume going between fewer places, which is perfect for rail. If intermodal rail works for UPS Ground, which is both faster and cheaper than USPS Parcel Post, there’s no reason the Post Office can’t use it as well. I have never been able to understand why USPS management is so anti-rail. It’s downright fiscally irresponsible.

    Oct 30, 2018
  • anon

    Thank you for your comment regarding the use of rail. Please search for the reports we issued about the use of rail to move mail: Suitability of Rail Transportation – New Jersey Network Distribution Center, and Parallel Tracks? Lessons from the Railroad Industry.

    Nov 12, 2018
  • anon

    RUN THE SYSTEM LIKE A BUSINESS. A for profit company looks for ways to econimize. Yes the regular mail is much less volume than it used to be. It appears the major support for the everyday deliveries is junk mail. With all the identification issues out there I have gone paperless as much as possible with utilities and credit card being on line and auto pay. As a buisness I would reduce the delivery days to 4. Monday, Tuesday, Thursday and Friday. Skip Wednesday and Saturday. As an organization the cost savings would be in the billions by not running the vehicles. The savings would include reduced hours of service for employees, less fuel, less wear and tear on vehicles, less tire wear. The actual post offices could remain open 6 days like other businesses. As for the employees, no one would be let go. Instead the reduction would come through attrition and retirements. Wake up and figure out a true cost savings model.

    Oct 30, 2018
  • anon

    Yea, that works if you have internet access and don't live in rural America.

    Nov 03, 2018
  • anon

    I send almost ZERO first class mail. I work in a mail facility and nobody cares if the mail gets processed or not. The place I was excessed from ran well and I was told it was showing a profit so the logical thing to do was shut it down. Running well and showing a profit didn't fit in with managements plan. The craft employees are supposed to deal with morons in charge that couldn't run a doughnut shop. The stupidity is beyond my ability to comprehend. From what I can tell the USPS wants it's employees to hate their jobs - GLAD I'M NEAR RETIREMENT. You could not excel at your job if you wanted to and without personal satisfaction you have people looking at the clock and waiting to retire.

    Oct 29, 2018
  • anon

    Where did they think they were going to save money, in my state we they shut down every processing plant but ours. They moved all the employees they were still getting paid, the plants are still in use with skeleton crews so you still have maintenance, utilities, leases ect... and GOD knows what transportation is costing them running mail 100 miles past its delivery point just to send it back the next day.

    Oct 29, 2018
  • anon

    How about getting the Congress to change the law requiring the prepayment of retirement and medical funds for staffing for 75 years so the US Postal Service has more ability to provide services us to.

    Oct 29, 2018
  • anon

    The change in service standards to eliminate overnight delivery of local mail has been a major inconvenience. I am shocked to learn that the Postal Service saved only a small amount of money--and now claims that restoring the previous service level supposedly would cost too much money. The American public is the big loser. Congress should be informed, and postal management should be held accountable.

    Oct 29, 2018
  • anon

    The Springfield, MO P&DC at which I work as a Mail Processing Clerk was initially targeted for closure under this plan; wiser heads prevailed, and we remain open, serving customers in the 648, 654-658 areas. It is frustrating to see good FCM in red trays, sitting there and waiting for the next day to be processed -- I often try to explain to friends why a letter mailed to-day in Springfield will not arrive until Wednesday -- making excuses in reality, because I know that this mail absolutely could and should have been delivered Tuesday. Let's just say that we cannot turn back the clock and reopen closed facilities: why not, at the very least, process mail for our 658 area? Anyone with inside knowledge of the post office knows that this could be done fairly easily, separating local mail from all else as it goes through the AFCS machines and then adding it to the already washed city mail which, in Springfield, is usually among the last runs processed. Until that day, I will do what nearly all employees of the plant do -- take our letters to manual operations, knowing that if they are being delivered in our service area that they will be delivered that next day. One thing I know well from my 30-plus years of running a business: Customers respond favourably to good service, and go elsewhere when the service you offer lags behind. If we want to maintain our current levels, and (gasp) even grow our business, then provide superior customer service that includes overnight First Class delivery.

    Oct 29, 2018

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