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Develop Logistics Support Strategy

Logistics is defined as that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption to meet Client needs. Some supply chains include return processes, or the reverse flow of goods, in addition to outbound delivery (e.g., the return and replacement of reparables, packing materials, or damaged goods). Logistics planning will address these considerations.

The Postal Service encourages the practice of results-based logistics to optimize the flow of materials through the supply stream. Results-based logistics stresses speed and reliability over quantity. Because of the expense associated with managing large quantities of material, Supply Management focuses on the swift and reliable supply and maintenance of material essential to proper operation of a product or service, as opposed to managing large quantities of inventory on its own.

The Item Manager is responsible for developing, implementing, and monitoring the performance of a logistics strategy for the product(s) required by the Client. The Client and the Purchase/SCM Team will support the development of the strategy, with the Client having approval authority. While a number of Postal Service organizations, systems, and processes exist for logistics support, the common factors are:

Operating concept, including operational availability requirements

Product description

Development and deployment schedules

Maintenance concepts

Current and projected demand patterns

Supply concepts

Data requirements

End-of-life management

Risk analysis

Operating Concept

Logistics is required to ensure continuous support of a Client's operational needs, which are defined in the Define and Understand Client Needs, Goals, and Strategies topic of the Conceptualize Need task of Process Step 1: Identify Needs. This information should include how reliable the Client expects the product to be and how quickly it needs to be available from the time the need is identified. This information drives what types of support must be acquired, in what quantities, and where it must be positioned to meet the needs.

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Product Description

What the product is will also drive what type of support is required. Commodities will have unique characteristics that will influence the logistics required. For example, mail processing equipment will require major transportation to get to installation sites, trained technicians to install and maintain, tools and test equipment for diagnostics and repair, and spare components and supplies to keep the equipment operational.

Development and Deployment Schedules

This factor comprises two elements - time and location. Time determines how quickly logistics solutions have to be in place and can be broken down into further elements such as research and development (R&D), production, testing, and deployment. Sufficient allocation of time for the Item Manager to perform reliability and maintainability analysis, comparative analysis with existing products or systems, and coordination of the distribution and information networks will create opportunities for major total cost of ownership (TCO) savings throughout the rest of the operational life cycle. Additional information on TCO can be found in the Develop Preliminary Total Cost of Ownership (TCO) Estimate topic of the Conceptualize Need task of Process Step 1: Identify Needs.

Location can be broken down into production and operational locations. If a supplier has multiple potential production locations, there are opportunities for reducing distribution costs by analyzing routing costs between the production locations and operational sites. For example, if a supplier has production capabilities in New Jersey, Illinois, and California and the major operational sites are on the West Coast, production in California would be encouraged to reduce transportation costs. Matching this knowledge with the expected demand patterns for replacement or sustaining products (parts or consumables) enables a distribution plan to be developed - direct from supplier or to one or more distribution facilities.

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Maintenance Concepts

Maintenance concepts are based on the product, its complexity, and how it will be used. The goal of the maintenance concept or strategy is to assure the operational availability specified by the Client. A wide variety of support options are available to the maintenance planners, ranging from 100 percent supplier support to 100 percent Postal Service support. Product reliability, availability, and maintainability factors will drive determinations of levels of maintenance, skill sets, staffing, diagnostic equipment, tools, parts, consumables, and quantities.

A key factor often overlooked when developing a maintenance concept is that many products also use related consumables or supplies, such as cleaning supplies and computers. Demand analysis to establish sourcing, quantities, and storage location decisions must also be performed for these products. The maintenance concept will be formalized into a maintenance plan and documented in a joint Integrated Logistics Support Plan (ILSP), in accordance with Management Instruction AS-520-2004-10, Integrated Logistics Support for Capital Equipment.

Current and Projected Demand Patterns

To determine current and projected demand patterns, two elements must be considered: the use of standardized products already in use by the Postal Service and the use of current or similar demand information as the basis for projecting future needs. The use of standardized products, already in use by the Postal Service, will allow for optimizing strategic sourcing, consolidation and synergy of demand, and simplification of ordering. The Item Manager will assure that suppliers have access to the listings of standard products for use in the development phase of any new products or equipment. Publication 112, Spares, Parts, and Equipment Catalog (SPEC) lists all stocked parts and is available to suppliers by subscription from Material Management Technical Data. If it is determined that a purchase should be made, the contract should call out the use of these items and ask for explanations if the items are not used.

The second element is using current or similar demand information as the basis for projecting future needs. Existing items may or may not be used on the new product or equipment. If they are being used, then the Item Manager will analyze whether the new product or equipment will influence the demand utilization patterns. User or maintenance data should be reviewed to understand what the demand drivers are for this item and what opportunities exist to change the drivers to reduce overall demand and TCO. For example, moving to a better-quality item may cost slightly more, but significantly reduce demand over the life of the product. Once this is done, the Item Manager must fold in the projected usage for the new product or equipment into the existing item forecasts and adjust the replenishment schedules accordingly. If the product or equipment is not in the existing catalogs, then a provisioning analysis needs to be done (see below).

A slight variation of these techniques can be used when the Postal Service does not currently supply the exact item being proposed, but has similar items being used in similar situations. In these instances, the Item Manager can use comparative analysis to extrapolate the existing demand into future projections. This can be carried one step further and consideration given to simply adding the new item and its demand to an existing strategic sourcing contract.

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Supply Concepts

From the operating and maintenance concepts, an approach can be developed on how the product or equipment can be sustained over its life cycle with parts and supplies (aka a supply concept). This concept addresses what needs to be supplied, where, when, by whom, and how. Some of the common elements are:

Provisioning Analysis


Test equipment


Distribution plan

Customer service

Process improvement

Data requirements

End-of-life management

Risk analysis (the Postal Service logistics philosophy is to manage risk through speed and reliability, not quantity)

Provisioning Analysis

Provisioning is the process of deciding what parts and supplies will need to be replenished, at what organizational level, and in what quantities. Some of the tools used are work breakdown structure, mean-time-between-failure (MTBF) rates, reliability analysis, and allocated supply cycle times. MTBF calculates the average amount of time a component or part takes to fail.


Consumables are often required in daily operations and to sustain the product or equipment. They may comprise such things as cleaning solutions and swabs or the paper and labels required by printers associated with the end items. Frequently, different consumables are managed by different Category Management Centers (CMCs) other than the one acquiring the item. The Client and Item Manager must assure that these other offices are brought into the process early in the development cycle and are kept fully involved throughout the life cycle. The CMC with the primary purchasing responsibility should lead the coordination effort.

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Test Equipment

Test equipment is equipment classified as required to diagnose product or equipment deficiencies or to test that adjustments or repairs have been successful. Test equipment can be as simple as templates or jigs or as complex as extensive computer equipment. Test equipment must also be analyzed for support requirements such as operating concepts, maintenance concepts, and individual supply concepts.


Quality should be considered at the beginning of the design process. Use of suppliers with demonstrated high-quality standards and programs can greatly enhance on-time deployment and reduce the risk of early failures. Reliability and maintainability are part of the integrated logistics support plan (ILSP) developed by Maintenance, but must be sustained by the Item Manager throughout the life cycle.

Distribution Plan

When making distribution decisions for a single item, there must be a systematic approach to determining the most cost-effective and efficient means of distribution. Three common options of warehousing and distribution are:

Supplier provides storage and distribution, or direct vendor delivery (DVD) and manufacturer delivery - after the item is purchased, the supplier is responsible for storing the item and distributing it to the Postal Service Client destination. The costs associated with storage and distribution are built into the purchase price for the item.

Postal Service-provided storage and distribution, through Material Distribution Centers (MDCs) or other Postal Service facilities - the Postal Service assumes responsibility for the item once it is purchased, provides storage and distribution of the item, and incurs the associated costs directly.

Logistics service providers - third-party logistics (3PL) providers, Critical Parts Centers (CPCs), fourth-party logistics (4PL) providers, and virtual service providers. 3PLs provide logistics services under contract. 4PLs manage other logistics providers under contract. A virtual service provider assembles a number of physical logistics providers into strategic alliances that encourage sharing of their facilities to achieve the pooling of warehousing and transportation over a wide geographical area. It is possible to have a virtual purchase, a virtual transportation provider, and an integrated extended logistics enterprise hub. The Postal Service may contract with commercial logistics providers to store and/or distribute the item after purchase and then pay the providers for their services.

The storage and distribution costs associated with each of these options may differ from each other and may vary depending on the specific item. In addition, some items could potentially use a combination of these options. As a result, when purchasing an item, it is critical to evaluate the different viable storage and distribution alternatives and select the one that is most cost-effective and efficient. Cost-modeling tools are effective in this evaluation and selection. The Postal Service uses the Distribution Cost Analysis Tool (DCAT) for making storage and distribution decisions in cooperation with Postal Service and 3PL transportation providers. The DCAT is a cost estimation tool that can be used to evaluate postpurchase warehousing and distribution costs. Transportation allocations are addressed by the Transportation Solution Determination Process.

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Customer Service

Customer service is an integral part of customer satisfaction that provides the customer with the ability to know where to go with questions and to resolve problems. Customer service can be internal to the Postal Service or provided by a supplier or through a third-party provider. The Purchase/SCM Team, in coordination with the Client, needs to assess what types of questions the customers may have, what data they may need, how to capture and resolve problem calls, and what reports need to be provided to the Item Manager and Contracting Officer. Reports should provide insight into the types and frequency of calls, as well as the supplier's performance. National Materials Customer Service provides help-desk support for parts, supplies, and equipment.

Process Improvement

Process improvement is a formal process for the Postal Service and its suppliers to understand support processes, monitor execution, and identify opportunities to reduce the TCO. While this may appear to be counter to a supplier's maximization of profit, performance improvement goals and incentives should be considered to provide opportunities for shared benefits. Some examples of where improvements can be found are:

Failure analysis - examining why failures occur and under what circumstances. Reduction or elimination of failure will increase the availability of product, reduce usage, and reduce the maintenance and replenishment costs.

Cycle-time analysis - documenting the time processes in the supply chain and the wait time between processes. Reduction in cycle times can reduce the time in production, time to the customer, and the amount of inventory required.

Cost analysis - understanding what drives the costs or the use of the products. Cost drivers can arise at any point in the supply chain, from raw materials through manufacture to use by the ultimate customer.

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Data Requirements

Certain types of information are required from the supplier and should be defined up front during this phase. Data requirements are the information needs of the Client, the Supplier, the Purchase/SCM Team, and the supporting Postal Service infrastructures. Requirements should be defined for information flows that are necessary (input and output) and the data systems that will be used to manage the product. This is especially critical for any information technology needs.

Investment Recovery

Opportunities for investment recovery need to be identified for the existing product that is being replaced and, during preplanning, for when the new products are to be replaced. In the former, the issues include, but are not limited to, what to do with the displaced product, how to write off any remaining depreciation value, and how to phase out the supporting assets (parts, test equipment, supplies, etc.) while the old product is being phased out. For investment recovery of new equipment, potential disposal issues and opportunities for recouping any of the Postal Service costs need to be identified. Additional information on investment recovery can be found in the Develop Preliminary Investment Recovery Plan topic of the Develop Sourcing Strategy task of Process Step 2: Evaluate Sources.

Risk Analysis

Risk analysis should be performed in conjunction with the development of the logistics support strategy. Additional information can be found in the Manage Risks topic of the Decide on Make vs. Buy task of Process Step 1: Identify Needs.

Other Topics Considered

Develop Preliminary Total Cost of Ownership (TCO) Estimates topic, Conceptualize Need task, Process Step 1: Identify Needs

Develop Demand Management Strategy topic, Conceptualize Need task, Process Step 1: Identify Needs

Manage Risks topic, Decide on Make vs. Buy task, Process Step 1: Identify Needs

Develop Preliminary Investment Recovery Plan topic, Develop Sourcing Strategy task, Process Step 2: Evaluate Sources

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