Readiness for Package Growth – Processing Capacity
BACKGROUND:
Strong consumer demand for goods purchased over the Internet has driven growth in package volume in an otherwise declining mail market. In calendar year 2010 total online sales increased 12.6 percent from the prior year. Online retail sales in the U.S. are expected to grow to $278.9 billion by 2015. This growing package segment provides the U.S. Postal Service an opportunity to help counter the reduction in First-Class Mail® volume and the flattening of Standard Mail® volume. In its 2012 Five-Year Business Plan, the Postal Service projects that volume, which was 3.5 billion packages in fiscal year 2012, will grow by 5 to 6 percent per year through 2017.
The Postal Service, through its Delivering Results, Innovation, Value, and Efficiency initiative, is working to establish a package processing and delivery network that supports this package growth. Customer expectations for packages are rising through demand for free shipping and increased tracking and visibility capabilities.
This report is one of a series of U.S. Postal Service Office of Inspector General products that addresses the Postal Service’s readiness for growth in the package business. Our objective was to assess the Postal Service's package processing capacity to meet anticipated volume increases.
WHAT THE OIG FOUND:
The Postal Service has sufficient machine capacity to process all nonpeak period package volume. It can process an average of about 29 million packages daily, which is more than sufficient to process the 24 million packages it receives. During the December peak period, the Postal Service augments its machine capacity with manual processing. The Postal Service does this to avoid having excess machine capacity and its associated costs for the other 11 months of the year. But, to meet anticipated package growth, the Postal Service could improve machine throughput by properly staffing machines and adjusting the mail arrival schedule.
WHAT THE OIG RECOMMENDED:
We recommended the vice president, Network Operations, ensure package processing equipment is adequately staffed, standardize package processing operations where feasible, and adjust mail arrival schedules as necessary.