Chapter 4 Our Operations
Equipment Optimization
The Run Plan Generator (RPG) is an innovative program for scheduling equipment in plants to increase efficiency and reduce variation. Most plants have now implemented RPG for at least one processing operation. The deployment of version 2.0 of the program in October 2008 will increase the tool’s capability to plan for different scenarios while improving overall system integration. A new exception report was created that reflects weekly RPG compliance by side. This report facilitates Area and Headquarters oversight.
The Tray Consolidation Initiative improves the density of First-Class Mail trays and gains cost savings through reductions in unit processing and transportation cost. More than $5 million in savings were achieved this year. Standardizing and consolidating sort programs and mail flows are vital to this effort. A goal of 12.9 pounds per tray is targeted for next year including all postal generated First-Class Mail assigned to air transportation.
Network Optimization
Changes in customer mailing, fluctuations in volume, and developments in technology require that the Postal Service continuously monitor and adapt its processing and transportation network to achieve optimal performance. In recent years, many segments of total mail volume have changed dramatically. For example, stamped First-Class Mail, which requires a high degree of processing, is down 1.5 percent from 2007. At that same time, the volume of mail presorted by customers or entered at destination facilities has increased as a share of total mail. Ongoing adjustment to such changes is essential to maximize utilization of the network, with the goal of increasing efficiency while maintaining or improving service.
In June 2008, the Postal Service submitted its Network Plan to Congress, highlighting three integrated elements of its optimization effort: Continued closure of airport mail centers (AMCs); consolidation of redundant mail processing operations; and evaluation of alternatives to transform the 35-year-old bulk mail center (BMC) network.
Eleven AMCs were closed in 2008, with operations relocated to other facilities. These closures avoid the unnecessary expense of maintaining facilities on costly airport property. They also reflect a shift of more mail from air to surface transportation, which can substantially reduce cost without compromising service performance.
The second element is the consolidation of outgoing and/or incoming mail processing operations among one or more plants. Consolidation is considered when service objectives can be met and operational efficiency improved. A revised handbook, Area Mail Processing (AMP) Guidelines, was issued this year to help evaluate the business cases for individual projects, support development of feasibility studies and post-implementation reviews, and communicate with the local communities.
A third element of the plan is the evaluation of alternatives to ensure that the Postal Service’s Bulk Mail Center (BMC) network remains responsive to evolving needs. Customer use of the postal surface network has declined significantly over time.
In the past, most Parcel Post and Standard Mail was deposited at origin and transported by the Postal Service to its destination. However, by 2007, 52 percent of Parcel Post was dropped at the destination delivery units and 45 percent of Standard Mail was dropped at destination processing plants, bypassing BMC processing completely. In 2008, the Postal Service conducted research to better understand industry best practices and capabilities that could help address postal needs for distribution and long-haul surface transportation. The Postal Service is currently evaluating alternatives to leverage these industry best practices within its network.
In other optimization activities, two remote encoding centers (RECs) were consolidated this year, leaving six in operation. Improved addressing and automated scanning capabilities continue to reduce the need for RECs, specialized facilities where operators key in address information, often for illegible or otherwise poorly-addressed mail.
In July, standard “critical entry times” took effect for destination entry Standard Mail, mail that is dropped closer to destination by the mailer or mailer agent. This step was taken to provide more consistency and predictability for mailers while ensuring that postal managers have appropriate processing and transportation resources available to meet demand. Bed-loaded trailers must be entered into the postal system by noon; mail on pallets and other containers must be entered by 4 p.m. Critical entry times for First-Class Mail, Standard Mail, Periodicals, and Package Services are established locally at the Postal Service processing facility.
Transportation
In 2008, the Postal Service spent $6.96 billion for mail transportation, including terminal dues, transit charges, and other international expenses discussed below. The $459 million increase over 2007 is primarily the result of rising fuel costs and contractual increases.