Chapter 4 Our Operations

Resources and Support

SUPPLY MANAGEMENT

The Postal Service attributed nearly $1.06 billion in cost benefits to supply chain management activities over the last 10 years. This was accomplished by standardizing product requirements, improving purchase planning and inventory management, leveraging volume purchases, participating in strategic partnerships with suppliers, and streamlining business processes. The following initiatives highlight 2007 supply management activities:

Priority and Express Mail Packaging: The Postal Service implemented a Cradle to Cradle certification program for suppliers of Priority Mail and Express Mail packaging — the first time this certification has been earned by a delivery/logistics provider. Cradle to Cradle certification is awarded to products that eliminate waste through ecologically intelligent design.

Total Solid Waste Management: The Total Solid Waste Management program is an environmentally responsible program that generates disposal revenue by selling recyclables and minimizes cost by reducing trash volume. The Postal Service generated over $6.5 million from more than 8.6 million pounds of recyclables. The program won the 2007 White House Closing the Circle award for leadership in federal environmental stewardship and has increased awareness of this untapped resource.

Enhanced Spare Parts Initiative (eSPIN): Deployment of eSPIN was completed in 2007. The system optimizes spare parts planning, ordering and inventory across the entire distribution network, and links 467 maintenance offices with the Postal Service’s Material Distribution Center. Balancing spare parts among sites and pooling critical spare parts at strategic stocking locations allows 2-hour deliveries and reduces inventory and mail processing equipment downtime.

Supply Chain Relationship Management System (SCRMS): SCRMS provides postal contracting officers the ability to monitor supplier performance, develop actionable improvement targets, make better business decisions, and improve supplier relationships. Over 90 key postal suppliers currently participate.

Postal Information Technology Network (PITN): The PITN project combined the networks for Postal Inspection Service sites with the 400 largest mail processing sites. The contract, awarded to Verizon Business, allows the Postal Service to leverage volume to reduce costs.

Terminal Handling Services (THS): Air transportation handling services costs were reduced an average of 7.5 percent through the re-baselining of volumes and elimination of pricing adjustments related to scanning requirements. The liquidated damages scheme also was revised to motivate suppliers to provide timely service, and a 3 percent increase in supplier personnel costs was avoided by extending THS contracts.

Tilt Tray Sorters: The Carrousel and Over/Under Sorter Transport Systems at six bulk mail centers were restored and modernized with Tilt Tray Sorter technology that improved efficiency and reduced energy consumption. Cost avoidance totaled $22 million.

Major Purchases

Flats Sequencing System (FSS): Northrop Grumman was awarded a 3-year contract for $874.6 million to build 100 FSS machines — the next generation of automated flat mail sorting equipment. The Postal Service employed specialized strategies such as early supplier involvement and value analysis to meet its cost reduction and business transformation objectives for this purchase.

Biohazard Detection Systems (BDS) Cartridges, Operations, and Maintenance: Northrop Grumman was awarded a contract that will save $20 million annually or as much as $100 million over the life of the 5-year contract. The contract is for the operation, maintenance and consumable requirements of the BDS program.

ReadyPost: ReadyPost products include envelopes, shipping containers and packing materials sold at Post Offices. The final 2-year option period of the current ReadyPost contract with Hallmark Custom Marketing was exercised on July 1, 2007. The contract has improved management controls, reduced transportation costs, and increased revenue from ReadyPost. The Postal Service has plans to restructure the pricing and grow the retail product business into the future.

Carrier Route Vehicles: The Postal Service purchased 5,856 vehicles to complete its 3-part acquisition plan to deploy 15,000 postal-owned vehicles to rural routes. These vehicles are alternative fuel E-85 capable and comply with the Energy Policy Act (EPAct) of 2005 mandate.

Corrugated Fiberboard Pallet Box (CFPB): CFPBs are used in mail processing and mail transport equipment transfers between postal sites. They also are used to maximize utilization of trailer space. International Paper and Rand Whitney were awarded contracts to produce and deliver CFPBs to over 300 postal locations on a direct vendor delivery basis.

Satellite Network Services: A new contract was awarded to Verizon Business to upgrade 5,000 remote locations from dial-up service to satellite connectivity. This program improves the speed and reliability of communications. The contract performance period is two years with two 3-year options.

Commercial Air: The Postal Service continued to rationalize the supplier base and performed value chain mapping to align requirements to expected value. These actions resulted in $52 million in cost avoidance.

Supplier Diversity

The Postal Service continued to act on longstanding commitments to Supplier Diversity. Annualized contract values with small businesses exceeded $3.46 billion; contracts with minority-owned businesses were nearly $350 million; and, contracts with women-owned businesses were $565 million. The new Supplier Diversity Corporate Plan was issued in 2007. The plan continues its focus on improving supplier relationships and outlines activities that align with the Postal Service’s Supplying Principles and Practices.

In recognition of the Postal Service’s efforts to establish and maintain a strong competitive supplier base that reflects the diversity of the supplier community, DiversityBusiness.com named the Postal Service as the Top Organization for Multicultural Business Opportunities and one of America’s Top Diversity Advocates. This recognition was bestowed on the Postal Service for its volume, consistency, and quality of business opportunities granted to minority and women-owned businesses.