Several contracts were awarded to improve mail processing, mail transport equipment (MTE) distribution, and protection from biohazards. Contracts were awarded in the amount of $320.8 million for the manufacture, delivery, installation and test of 74 Automated Package Processing System (APPS) machines for nationwide deployment. This next generation small parcel and bundle sorting system includes automated in-feed and induction stations, optical character recognition, and video coding systems for increased throughput and operational efficiency.

     Two contracts were awarded to enhance the operation of the automated flats sorting machine (AFSM) 100. Under these contracts, 1,627 feeder enhanced destacker retrofit (FEDR) systems and flats identification code sort (FICS) systems will be installed on 537 AFSM 100 machines. Firm, fixed-price contracts were negotiated in the amount of $74 million for FEDR and $117.4 million for FICS. The enhancements will improve customer satisfaction and lower maintenance and operations costs.

     The Postal Service streamlined and consolidated its contact center operations. Over time, contact centers for communicating with various customer groups had grown into disparate and disjointed systems. The purchase team concluded that these operations could be integrated into a single, more efficient outsourced network managed by one supplier. In 2003, a major contract was awarded for $255 million for the new Contact Center Network Solution. Supply Management anticipates average operational savings of more than $35 million annually.

     Since early 2003, the Postal Service has ensured the movement of military mail for American troops during Operation Iraqi Freedom. The best qualified air suppliers were selected to provide charter airmail service for U. S. troops serving in this operation. These suppliers are currently operating daily between Newark, NJ, Bahrain, and Kuwait, connecting with foreign airlift service to Baghdad. Through September 30, the

Postal Service has moved approximately 41 million pounds of mail to the troops stationed in Iraq.

     The Supply Management Operations organization is responsible for managing thousands of line items required for daily operations, providing Supply Management support to the areas through four material service centers and one Material Distribution Center. The Operations catalog includes more than 25,000 stocked items and 5,000 items ordered directly from suppliers plus more than 900,000 items available through electronically accessible commercial catalogs. Operations issued $336 million in parts, supplies, printed material, and equipment in 2003. Spare parts availability averages 99.95 percent for major mail processing equipment.

     Supply Management Operations participated with other portfolios to achieve more than $212.9 million in SCM cost reductions, plus an additional $9.1 million in internal cost improvements. Operations experienced a 116 percent growth in credit card holders, 122 percent growth in transactions and a resultant 5 percent increase in revenue to $1.8 million due to volume rebates from the credit card company. In support of Retail Operations, item managers assisted in the planning, coordination, and destruction of $370 million in obsolete and spoiled stamps. Operations reduced costs for several customers — most notably the National Test Administration Center and Mail Transport Equipment Support System — by integrating requirements with existing capabilities in item management, distribution, and systems.

     Wholesale inventories were reduced by 11.1 percent during the year. More than 1,300 new items with a value of $6.4 million were added to support new major programs. Reallocation of equipment, in lieu of new purchases, resulted in a cost avoidance of more than $80 million.