C. POSTAL SERVICE FACILITIES WORKLOAD

3. Supply Management

To increase customer satisfaction and reduce costs, the Postal Service has implemented supply chain management (SCM) as a core business practice. SCM furthers competitive and business objectives by focusing resources on lowering overall costs. It is a key enabling strategy of Postal Service Transformation. Now functioning throughout the organization, SCM has contributed over $2.1 billion in cost savings, cost reductions, cost avoidances, and revenue generation in the form of rebates since 2000. In 2005 nearly $781 million in cost benefits were attributed to SCM activities.

Under SCM, cross-functional collaboration within the Postal Service and collaborative partnerships with key suppliers, have assured the quality of purchased products and services, even as new cost efficiencies have been achieved. In attaining these results, the Postal Service has focused on leveraging volume through strategic sourcing requirements, instituting standardized requirements based on historic demand, executing commodity strategies, expanding eBuy (the organization's paperless requisitioning and ordering system), and participating in strategic partnerships.

A. SCM INITIATIVES

During 2005 the Postal Service awarded a 5-year contract for computer data storage as part of the electronic information back-up, disaster recovery, and business continuity efforts. The Postal Service also awarded a contract for 210 automated flat sorting machine 100 automatic induction (AFSM-ai) systems. The AFSM-ai system is an enhancement to the AFSM100 flat sorting machine that automates the preparation and feeding of flat-shaped mail. A cross-functional team worked with the vendors to apply SCM techniques to improve efficiencies and reduce costs.

Contracts were awarded for new mail transport equipment (MTE) totaling $170 million in 2005. The team implemented a combination of SCM strategies including: the forward purchase of 20 million pounds of plastic resin used in manufacturing mail trays, avoiding a significant price increase; the use of a sophisticated "optimization" software tool to award three contracts for 35 thousand new wire containers; value chain mapping to analyze the numerous transportation supply links, including those at the subcontract level; and in-depth supply market analysis to source 22 million mail trays.

Over the next few years, the Postal Service will continue to deploy new Postal Automated Redirection System (PARS) equipment throughout the organization. Existing Flats Forwarding Terminal (FFT) label characteristics were redesigned so that the labels could be used on both FFT and PARS equipment.

The Postal Service implemented a national contract for tire re-treading. Prior to awarding this national contract, tires were re-treaded through local suppliers, with each vehicle maintenance facility having the authority to interpret and implement re-tread policies for its own operation.

The Postal Service successfully implemented a Total Solid Waste Management program. Total Waste Management reduces trash removal fees, generates revenue from recycling, improves operational efficiencies, and reduces administrative cost. The SCM strategies employed in this initiative wereas follows: analysis to right-size containers and determine frequency of scheduled pick-ups; reverse auction and optimization tools to select strategic partners; and redesigning processes to enable collection, sorting, storing, and hauling of recycling material.

In early 2005, the Postal Service recognized eight external suppliers with Quality Supplier Awards. These suppliers were recognized primarily for their partnering to achieve positive bottom line and performance results through successful supply chain management efforts.