The Postal Service achieved over $892 million in cost benefits through supply chain management activities, including renegotiations that targeted over 500 existing contracts. Benefits include cost reductions, cost avoidance, and revenue generation activities. Results were achieved by collaborating with suppliers and business partners to identify opportunities to reduce contractual spend through price and scope reductions and implementing process improvements. Additionally, the Postal Service focused on initiatives to implement asset management integration, initiate organizational changes, standardize and streamline processes, support sustainability, improve workforce strategies, and enhance supplier relationships and diversity.
Major negotiation efforts included awarding 19 Mail Transport Equipment Service Center (MTESC) contracts to five suppliers. These contracts support the Network Operations MTESC optimization efforts and total over $312 million. These contracts will achieve a savings in excess of $36 million over the next three years.
The Postal Service leveraged the competitive market to optimize the network for air transportation within the Hawaiian Islands. A lower overall network cost of $216.9 million was the result, which translates to an average savings of 8.6 percent over eight years. This optimization was achieved by having suppliers submit alternate proposals allowing them the flexibility to offer various combinations of air, ground, and terminal handling services.
Contract awards were made to four suppliers for Enterprise Technology Services. These awards enable the Postal Service to consolidate, streamline, and reduce the cost of future information technology services in three major areas: professional services, enterprise-wide business solution development, and a new service area, virtual development centers. Savings each year are estimated to total more than $8 million in professional services and approximately $16 million in enterprise-wide business solution development.
The Postal Service completed its negotiations to extend the Transit Time Measurement System External First Class contract for five years. The contract satisfies the requirements for the Postal Service to provide a system of objective external performance measurement for market dominant products. The anticipated overall cost savings provided by this extension, which provides both long-term quality support and program stability, exceeds $14 million.
Earlier this year, the Postal Service completed negotiations to extend the Customer Contact Network Solutions (CCNS) contract for 21 months. CCNS provides call center services to postal customers. This extension gains pricing and program flexibility as it completes enhancements to usps.com and customer contact centers. The anticipated annual cost reduction exceeds $10 million.
The Postal Service introduced a line of greeting card/stationery products. In support of this effort, a contract was awarded to run a pilot test at select retail units. After the minimum one-year test period, the Postal Service will assess the results against the agreed upon performance metrics and, if successful, will move toward full implementation. By combining the ReadyPost and the greeting card/stationery products programs, the Postal Service could achieve an annual benefit of $10 million.
The Postal Service awarded a contract for a commercial-off-the-shelf enterprise service planning solution, Solution for Enterprise Asset Management (SEAM), a centralized Web-based application that will improve the visibility and management of inventory and assets. SEAM will be implemented in three phases. Phase 1A (April 2010) will deploy auto-replenishment and planning for some consumer retail merchandise products to sites that use the Point of Sales terminals. Phase 1B (June 2010 to December 2010) will deploy fulfillment and service management for vehicles and vehicle spare parts to 317 Vehicle Maintenance Facilities and auxiliary sites. Phase 1C (November 2010 to September 2011) will deploy planning, replenishment, and fulfillment functionality for the remaining consumer retail merchandise products and accountable paper to retail locations.
As part of the renegotiation efforts, the Postal Service was tasked with reducing inventory spend of service parts by $10 million. Using different demand management techniques, such as more reactive forecast algorithms, planning parameter adjustments, lead-time management and analytical reporting, service part spend was reduced by $27 million.
Three significant organizational change efforts were initiated in support of ongoing efforts to reduce costs, improve efficiencies, and to more fully integrate supply chain management. Area Distribution Networks transportation contracting offices are consolidating from 11 field transportation offices into five with one satellite branch. The overall impact of the consolidation is a reduction of 27 positions and an estimated cost savings of $11.7 million.
Field District Purchasing Specialist positions will be eliminated and replaced with a Purchasing Shared Service Center structure. Benefits include standardizing, simplifying requirements, assisting in controlling expenditures, leveraging leading buying practices across district purchases for lower costs, and reducing buying process cycle times. The overall impact will be a reduction of 18 positions with an annual cost savings estimated at $1.1 million.
The third change supports Asset Management Integration (AMI) objectives, including consolidating the stamp fulfillment distribution network and deploying technology to improve inventory tracking and visibility, implementing forecasting and automatic replenishment capabilities, as well as standardizing asset tracking. This change includes consolidating 80 field Stamp Distribution Offices (with the exception of Hawaii, Puerto Rico, and Alaska) and Accountable Paper Depositories into six Stamp Distribution Centers, and the realignment of the two Stamp Service Centers. This change includes the elimination of Field District Material Management Specialist positions with two new functions: an asset accountability function, focusing on core material management responsibilities with an expanded scope for retail and marketing assets, and an asset planning function, focusing on managing the automatic replenishment of retail inventory based on sales. The overall impact of the AMI reorganization will be a reduction of 170 positions with an annual cost savings estimated at $8.8 million.
The Postal Service won the 4th annual Gene Richter Award for Leadership and Innovation in Technology from the Institute for Supply Management for implementing the necessary training and change management to make optimization enabled sourcing technology a success for both the Postal Service and its suppliers. This technology allows suppliers to submit multiple bids on proposed contracts based on a variety of different bundling options and provides the capability to evaluate a wider range of bids and potential solutions to determine the best possible deal.
Building on the success of optimization and reverse auctions, the Postal Service completed a competitive purchase of technology that combines these two sourcing capabilities along with the electronic solicitation process into a single solution. Training and deployment of eSourcing was completed this year. eSourcing provides centralized supplier registration to facilitate improved sourcing processes.
Online purchasing is going to improve for 60,000 postal eBuy users when they begin using eBuy2 early next fiscal year. Features of the new system include side-by-side comparisons (with photos) to help users find what they need at the best value, improved search and reporting capabilities, expanded use of Energy Star and other “green” indicators, and stronger financial controls.
The Postal Service has designed a new Semi-Annual Capital Property Review process to close gaps identified by the postal SOX Team. The review process provides those with postal intranet access the ability to view summary and detailed information on selected capital assets, and to identify the accountable organizations by finance number. The online data offers a level of convenience, visibility, and compliance not previously available. The Semi-Annual Capital Property Review requires personnel to conduct an inventory of randomly pre-selected capital assets every six months. This new review process is also notable in that it will, for the first time, ensure that every capital asset meeting specific criteria will be verified by location and description over a four-year period. A total of 54,185 assets were verified across 9,743 finance numbers with an original acquisition value of $4.3 billion. The reviews reinforce the need to keep accurate records and tighter controls of assets.
The White House recognized the Postal Service for its environmental stewardship with a Closing the Circle Award for its Green Purchasing Program. This program started with the formation of a cross-functional Green Purchasing Team, including supplier representation. This team was recognized for developing and implementing the first Postal Green Purchasing Plan (2008 – 2010), which provides the business practices and tools necessary to help conserve natural resources, reduce and eliminate waste, protect the environment, and ensure a safe workplace.
The Postal Service also received honorable mention for its Lead-Free Wheel Weight program. This program has the potential to prevent 17 tons of lead from entering the environment by outfitting Postal Service vehicles across the country with lead-free wheel weights.
Several other key initiatives were implemented to further sustainable business practices, including a new Excellence in Sustainability Award Category to the Postal Service’s Supplier Performance Award program, a Green Purchasing intranet Web page, and a Green Assessment Survey tool to benchmark current contract management practices that support green purchasing, sustainability, compliance, and leadership objectives.
The Postal Service continues to collaborate with suppliers and other business partners to reduce costs and to identify opportunities to create new business, improve service and efficiency, and promote sustainability. Two suppliers from the Postal Supplier Council assisted in initiating a Supplier Sales Lead Program Pilot that is identifying company decision-makers for future meetings with postal account representatives. In addition, the Postal Service continually participates in supplier outreach events, many targeting small, minority, and woman-owned businesses. These events often draw thousands of participants and typically include one-on-one discussions with high potential suppliers. Reciprocal discussions include building business through the use of mailing products and services, and have resulted in the identification of hundreds of sales leads.
The supplier portal at usps.com was re-designed to further improve collaboration between the Postal Service and its business partners. This includes access to the eSourcing supplier registration portal along with a new single convenient portal location uspsbuildingpartnerships.com for existing supplier subcontract reporting. This year a new electronic newsletter, re:supply, was launched specifically for the postal supplier community. It provides current and relevant information about Postal Service business trends and policies.
Supply Management’s “Improving Workforce Strategies” program tied for third place in the “Develop Leaders! Talents in Supply Chain Management” competition involving more than 50 international companies. The award from the Supply Chain Management Institute was for excellence in Postal Service programs that promote the professional development of supply management employees. A new competency model was approved and an online self-assessment of proficiency in Suppy Management competencies was implemented. The Supply Chain Academy, which provides online access to over 550 courses and to a best-in-class supply chain library, was updated and expanded.
The Postal Service continues to act on longstanding commitments to supplier diversity. Annualized contract values with small businesses exceeded $3 billion, contracts with minority-owned businesses were nearly $371 million, and contracts with women-owned businesses reached $696 million. The Postal Service continued to improve subcontract management by institutionalizing the Supply Chain Relationship Management System’s reporting module for suppliers, and by providing training and improving communications through enhanced subcontract management reporting instructions and forms.
For the fifth consecutive year, the Postal Service was named the No. 1 federal agency for multicultural business opportunities. This award represents the voices of more than 650,000 U.S. women- and minority-owned businesses. According to DiversityBusiness.com — the nation’s leading multicultural business-to-business Web site and sponsor of the survey — the list has become the “most recognized and respected compilation of government agencies that truly differentiate themselves in the marketplace at a time when diversity has never been more important.” The Postal Service has ranked among the top 10 agencies for the last eight years in promoting multicultural business opportunities.
In its June/July 2009 edition, Diversity/Careers magazine spotlighted the Supplier Diversity program and its business relationship with Code Plus, a woman-owned postal supplier. Diversity/Careers is an industry-leading magazine that provides business-related news and insights to women- and minority-owned businesses. The Postal Service’s Supplier Diversity program was also recognized by several industry and trade associations for its continued participation in business fairs, workshops and seminars that provide access to small, minority- and women-owned companies.
