Background

The U.S. Postal Service meets the majority of its long-distance surface transportation needs with highway transportation – known as highway contract routes (HCR). In 2013, the Postal Service spent more than $3.4 billion on HCRs and only about $43 million on rail. However, trends in the highway transportation industry indicate challenges in attracting qualified drivers due to driver age, pay, and work demands. According to industry leaders, rail transportation can provide benefits such as improved service, lower costs, and a smaller carbon footprint.

Our objective was to determine whether opportunities exist to economically and effectively use rail to transport Standard Mail and Package Services Mail. This report focuses on the New Jersey Network Distribution Center (NDC) and Consolidation and Deconsolidation Facility (CDF).

What The OIG Found

Opportunities exist to economically and effectively use rail to transport goals by converting 41 HCR trips to rail. The Postal Service uses HCRs because they provide the shortest transit times and the added assurance that all mail meets service standards. In addition, the Postal Service experienced capacity and reliability issues with rail in the past and has not fully assessed all rail options. Management stated that rail is not a viable way to meet service standards and does not fit into its operating plans.

However, we believe rail is a viable option and should be reconsidered. We estimate the Postal Service could save about $10.8 million annually by using some rail for transportation associated with the New Jersey NDC and CDF. Rail could accommodate some volume and still meet service standards, but would require expanded transit times. It would also require moving some Periodicals through the existing Surface Transfer Center network, which may add costs.

What The OIG Recommended

We recommended management conduct a cost/benefit analysis of transportation associated with the New Jersey NDC and CDF to determine if rail is more cost-effective than HCR, where service responsive, and test whether some HCR transportation can be converted to rail. In addition, we recommended management consider moving Periodicals through the established Surface Transfer Center network and changing operating plans to accommodate rail when doing so is economical and meets service standards.