GAO: Mail Processing Network Initiatives Progressing, and Guidance for Consolidating Area Mail Processing Operations Being Followed
Deteriorating financial conditions and declining mail volume have reinforced the need for the U.S. Postal Service (USPS) to increase operational efficiency and reduce expenses in its mail processing network. This network consists of interdependent functions in nearly 600 facilities. USPS developed several initiatives to reduce costs and increase efficiency; however, moving forward on some initiatives has been challenging because of the complexities involved in consolidating operations. In response to a conference report directive, GAO assessed (1) the overall status and results of USPS’s efforts to realign its mail processing network and (2) the extent to which USPS has consistently followed its guidance and applied these criteria in reviewing Area Mail Processing (AMP) proposals for consolidation since the beginning of fiscal year 2009. To conduct this assessment, GAO reviewed USPS’s Network Plan, area mail processing consolidation guidance and proposals as well as other documents; compared USPS’s actions related to consolidation of area mail processing facilities with its guidance, and interviewed officials from USPS, the USPS Office of Inspector General, and employee organizations. GAO provided USPS with a draft of this report for comment. In response, USPS provided technical comments that were incorporated where appropriate.
USPS has realigned parts of its mail processing network since the beginning of fiscal year 2009 and continues to seek additional opportunities to achieve its goal of creating an efficient and flexible network and realize cost savings. Specifically, USPS:
(1) eliminated all functions of the Airport Mail Centers, closed 9 of these facilities, and now uses the remaining 12 for other purposes, resulting in a realized cost savings of about $12.2 million in fiscal year 2009;
(2) reorganized the functions of the 21 Bulk Mail Centers into newly developed Network Distribution Centers, resulting in a realized cost savings of about $17.7 million in fiscal year 2009; and
(3) implemented 23 proposals to consolidate AMP operations and facilities and approved another 6 AMP consolidation proposals. USPS estimated an annual cost savings of about $98.5 million for the 29 approved and implemented AMP proposals.
Additionally, USPS officials stated that they plan to integrate the Surface Transfer Center functions into the Network Distribution Center network to further eliminate redundancy in transporting mail. USPS has developed specific program targets for the ongoing reorganization efforts of the Network Distribution Centers and estimated a cost savings of about $233.8 million for fiscal years 2010 and 2011 from reduction in work hours and transportation costs.
On the basis of GAO’s analysis of 32 AMP proposals that were implemented, approved, or not approved since the beginning of fiscal year 2009, USPS has followed its realignment guidance by completing each step of the process and consistently applying its criteria in its reviews. GAO’s analysis found that it took about 6 months on average–a month more than USPS’s target of 5 months–to complete the review process from initiating an AMP proposal to making a decision. USPS officials noted the importance of the AMP decisions and the need to sometimes take longer than what the guidance suggests to ensure the correct decision. GAO also found that USPS consistently notified stakeholders when key steps of the AMP process were completed, such as when an AMP proposal was initiated, or public meetings were held. For each of the AMP proposals that GAO reviewed, USPS also consistently evaluated its four criteria related to AMP consolidations: (1) impacts on the service standards for all classes of mail, (2) issues important to local customers, (3) impacts to USPS staffing, and (4) savings and costs associated with moving mail processing operations.
OIG Audit: USPS Can't Rationalize 'Network Rationalization'
APWU News
Echoing APWU criticisms, a recent audit by the USPS Office of the Inspector General (OIG) concluded that after more than five years of initiatives aimed at streamlining the mail-processing network, the Postal Service has failed to establish criteria for identifying consolidation opportunities. The USPS has made only limited progress in implementing Area Mail Processing consolidations in the Processing & Distribution network, the Jan. 7 report says.
“Stakeholder opposition” and resistance to service downgrades were the primary factors that delayed or resulted in the disapproval of Area Mail Processing (AMP) studies, the report concludes. Although the economic downturn is a problem, additional challenges include “facilities with long-term leases, workforce inflexibilities, facility data consistency and reliability, and lack of a comprehensive network plan,” the audit says.
There is a “lack of specific criteria” the Postal Service can consistently apply nationwide, the report notes. “Additionally, the Postal Service has cancelled some AMPs without providing their rationale.”
The OIG’s Audit Report on the Postal Service’s Network Rationalization Initiatives [PDF] is a study of the “effort to streamline mail processing and transportation infrastructure” between Fiscal Years 2005 and 2009. The OIG says that the USPS has made progress, but acknowledges that stakeholders are likely to question the credibility of the program.
“We have questioned the validity of the so-called ‘right-sizing’ programs from Day One,” said APWU President William Burrus. “The plans have had many different names, from ‘Evolutionary Network Design’ to ‘Network Integration Alignment,’ to ‘optimization’ to ‘realignment.’ Now the OIG has found that the latest version, the ‘Rationalization Initiative,’ can’t be rationalized.”
The audit reports that 13 AMP consolidations have taken place, including two facility closures during the period in question. Sixteen others have been “approved,” while 39 proposed consolidations have been cancelled. Another 30, some of them announced nearly four years ago, are listed as “active,” which means a final decision has not been made.
“Between FY 2005 and 2009, the Postal Service made progress in its efforts to streamline its mail processing and transportation infrastructure; however, management has been unable to adjust resources to fully offset mail volume declines, resulting in a deteriorating financial condition,” the report says.
In response to a decrease of approximately 35 billion pieces during the period, the report says the USPS has:
Reduced approximately 205.2 million work hours — the equivalent of 117,273 employees — with the majority in mail processing and customer service functions.
Reduced 37 million highway contract route (HCR) miles, (but overall transportation expenses increased by $1.5 billion).
Closed 68 Airport Mail Centers and 12 Remote Encoding Centers.
Realigned the Bulk Mail Center (BMC) operations with no BMC closures, and
Consolidated 13 Processing & Distribution Centers, including two plants that have been closed.
Postal management agreed with the OIG findings, the report concludes, and agreed “to re-evaluate and document the criteria used to identify consolidation opportunities annually.”
“USPS consolidation programs have not been designed with service in mind,” said APWU Vice President Cliff Guffey. “The APWU will continue to point out the negative effect closures and consolidations will have on mail service to the public.”
After a lull for most of 2008, postal management began initiating AMP studies in great numbers at the end of the year and through 2009.
USPS To Move Some Newark Mail Processing Operations To Kearny P & DC
Newark, NJ — As a result of a study begun in June 2009, the Postal Service has made the decision to move some mail processing operations from the Newark Main Post Office to the USPS Dominick V. Daniels Processing & Distribution Center in Kearny. Local mail service will not be affected by the move.
Northern New Jersey District Manager Priscilla M. Maney said, “Given the drastic decline in mail volume the Postal Service has experienced, with a decline of 26 billion pieces this past year, we must take action to reduce the size of our mail processing network. Consolidating operations and placing our people where we need them is necessary if the Postal Service is to remain viable to provide mail service to the nation.”
“I understand our employees’ concern over this move,” Maney added, “but the consolidation makes sense given the fiscal realities. The Dominick V. Daniels Processing & Distribution Center has the capacity to handle the additional workload and we can realize significant savings by shifting operations there.”
The transition will be completed by July 2010. Some employees may be reassigned to the USPS Dominick V. Daniels Processing & Distribution Center or to other vacant positions as a result of the move.
“I am confident the transition will be smooth and transparent to our customers and they will continue to receive the same excellent service they always have,” said Maney.
Full retail services will still be available at the Newark Main Post Office. The Newark Main Post Office Business Mail Entry Unit will remain open for large volume business mailers
source: USPS