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Network Optimization
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Network Optimization Overview
ƒ Network Evolution
ƒ Volume Realities
ƒ Plan for Change
ƒ Next Steps
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Network Evolution
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Post Office Served as Main
Distribution Hubs
1970
Postal Reorganization Act
~ 2,000 Mail Processing
Locations
1980 – 1990
Increased Use of
Automation
1990 – 2000
Letter Mail Sequenced
Increased Facility Footprint
1993 – Last time USPS
was at 170B pieces
Since 1993 – 140 facilities
constructed or expanded with
capital cost exceeding $10M
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A Decade of Network Redesign: AMP
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FCM: 104 B
Total: 207 B
2001
FCM: 98 B
Total: 206 B
PAEA
2006
2004
Network Integration & Alignment (NIA)
FCM: 98 B FCM: 96 B
Total: 213 B Total: 212 B
2007
Evolutionary Network
Development (END)
FCM: 92 B
Total: 203 B
2008
Time Definite Surface Network (TDSN)
FCM: 84 B
FCM: 78 B
Total: 177 B Total: 171 B
2009
2010
FCM: 73 B
Total: 167 B
2011
Network Network Distribution Plan
Centers (NDC)
Economic Optimization
Recession
Continued First Class Decline Down ~ 25% since 2006
• Single Piece Down ~ 35% since 2006
•
ƒ
Plant network ‐ Excess Capacity
•
Unprecedented increase in AMP activity
200
138
150
100
- Origin Consolidation
- Destination Consolidation
•
Minor Service Standard Adjustments within current business rules
57
50
0
4
1
2
2007
2008
2009
Consolidations Implemented
2010
2011
Current Study Activity
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®
Network Optimization Overview
ƒ Network Evolution
ƒ Volume Realities
ƒ Plan for Change
ƒ Next Steps
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Network Design – Volume Reality
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Significant
Significant DECLINE
DECLINE in
in First-Class
First-Class Mail
Mail
110
102
Short-term
Longer-term
Pieces (billions)
100
90
98
86
85
83
80
78
• Excess capacity in Origin
& Dest. processing facility
• Excess capacity in
transportation
70
60
54
50
40
Continued decline in FirstClass single piece volume
impacts:
41
2006
2010
First-Class Actual
First-Class Projected
2013
2015
2018
2020
Shift to standard mail will
increase % of destination
entry mail.
Standard - Actual
Standard - Projected
Source: USPS Revenue & Volume Forecasting
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Network Design – A New Reality
Beyond 2011 Network Realities
ƒ First‐Class Mail drives the network requirements •
Current operating windows in place support overnight service
ƒ Total First‐Class contribution will continue to erode and will not support the network infrastructure moving forward
ƒ First Class Network Redesign is necessary to develop an infrastructure to support the mail volume realities of the future
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ƒ Network Evolution
ƒ Volume Realities ƒ Plan for Change
ƒ Next Steps
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Plan for Change ‐ Objective
ƒ Define the most efficient mail processing network and infrastructure to match the current and projected workload
• Determine optimal plant locations based on volume and current facility infrastructure
• Develop an operating plan to fully utilize equipment based on a full operating day
• Determine service standards based on the redesigned network
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Plan for Change – Current Operations
ƒ Network infrastructure is driven by operating windows which are constrained to meet current First‐Class Mail overnight service commitments
Example:
More
More Machines
Machines
needed
needed for
for
limited
limited window
window
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Plan for Change – FC Business Rule Changes
ƒ Revise First‐Class Mail service standards and entry times to realize full facility consolidation opportunities through operating window changes
•
Longer processing windows allows significant equipment and facility consolidation
ƒ Network impact is significant
- ~50% reduction in equipment
- Required network of ~175 Plants
ƒ Reduce network transportation as a result of facility consolidation
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ƒ Network Evolution
ƒ History of Network Redesign
ƒ Plan for Change
ƒ Next Steps
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Plan for Change – Timeline
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File Service Standards
Case with PRC
Earliest Date for
A PRC Opinion
Publish Final Rule,
Earliest revision to
Service Standards,
Earliest
Implementation
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