Association for Postal Commerce
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NETWORK PLAN SEEN LACKING DETAILS BY SOME, REASONABLE APPROACH BY OTHERS

The following is a perspective by PostCom Vice President Kate Muth for the PostCom Bulletin.

For some people, the Postal Service’s Network Plan, submitted to Congress last week, does not offer enough details about realignment and consolidation. They say the plan lacks specifics, such as where consolidations are likely to take place and a general timeline for consolidations. In some ways, these critics say, the Network Plan does not look too different from the Transformation Plan.

Others, however, believe the Network Plan makes clear that the USPS’ proposed Time Definite Surface Network (TDSN) is “the plan.” And because the Postal Service has not yet issued a request for proposals on the TDSN, it really can’t reveal too many details about it. The TDSN is a proposal to transform the Bulk Mail Centers, which were built in the 1970s primarily to support the distribution and transportation of Standard Mail. As the USPS says, when the BMCs were built, nearly all customer mail volume was entered at origin locations, so BMC facility and transportation utilization was very efficient. But mailers now bypass the BMCs and enter their mail at destination facilities. In FY 2007, 52 percent of Parcel Post was dropped at delivery units and 45 percent of Standard Mail was dropped at destination mail processing plants, thus bypassing BMC processing completely. Consequently, BMCs have excess distribution capacity.

The Postal Service is considering a solution that would move the distribution and transportation of this mail volume into a contractor’s transportation and processing network before it is ultimately delivered by the Postal Service, thus freeing up the BMCs for other postal operations. “Outsourcing may also provide an opportunity to realize
significant cost avoidances in support of future FSS [flats sequencing system] deployments by permitting existing BMC facilities to house this new equipment. This outcome has the potential to result in a more cost-effective and service-responsive Time-Definite Surface Network for postal customers. It also is anticipated that outsourcing may
result in a more consistent and predictable postal mail processing cost environment,” the USPS says in its Network Plan.

While stakeholders will reserve judgment until an RFP on a Time Definite Surface Network is issued, some believe the concept makes sense.

The Network Plan submitted to Congress illustrates the sometimes-contradictory world that the Postal Service operates in. As an independent establishment of the executive branch, the Postal Service is part of the federal government. Congress is charged with oversight. Yet, the Postal Service has a mandate to act like a business and to be self-supporting. Now, it even has the right to earn and retain profits, which it can only do if it is competitive. The oversight arm (Congress) demands a network plan, because the USPS doesn’t have shareholders, which would demand a strategy of some kind.

Congress included the Network Plan in the new postal law because it had concerns over the years that the Postal Service did not have a plan for rightsizing its network and workforce that reflected the changes in the USPS’ business model. Further, Congress wanted the Postal Service to lay out clearly how it would meet and measure the new service standards required by the new law.

In the business world, shareholders would demand such a plan of a corporation. As noted, Congress demands this plan of the Postal Service on behalf of stakeholders, but Congress also has proved to be an impediment to network changes over the years. Members want the Postal Service to be efficient and to cut costs so the price of a stamp remains low, but they doesn’t necessarily want a plant closing in their district. Thus, the Postal Service often finds itself hamstrung in improving network efficiencies.

A good portion of the “network rationalization” section of the Network Plan explains the Postal Service’s Area Mail Processing (AMP) guidelines for considering closures and consolidations. This is not surprising, given the political sensitivity of this topic. Indeed, it’s a good move by the Postal Service as the detailed explanation of AMP reveals the process to be both thorough and transparent.

The plan also explains the improvements the USPS has seen in service and costs through changes in the air network, which includes a streamlining of the commercial air network and the closure of some airmail centers. The USPS now has two major air cargo carriers to provide airlift for Express Mail, Priority Mail and some First Class Mail. The USPS has reduced the number of commercial airlines transporting mail from 55 to seven and the amount of mail transported by commercial airlines has decreased from 2.9 billion pounds in 2001 to 368 million pounds in 2007. Delivery service has improved in that time because the USPS requires scanning by the airlines and can now contract with the highest-performing carriers based on scans.

As the President’s Commission on the United States Postal Service noted in its report from a few years ago, the Postal Service has more facilities than it needs and the streamlining of this distribution network could pave the way for the potential consolidation of sorting facilities and the elimination of excess costs. The Postal Service says in its Network Plan that is has always revised its distribution network to meet changing conditions and to meet its operational needs

“The need to analyze opportunities for network rationalization has been a high priority of the United States Postal Service,” the Postal Service said in the plan.

The mailing industry supports the Postal Service in its efforts to rationalize its infrastructure. Mailers understand that it is the USPS’ greatest opportunities to shed costs, improve efficiencies and service, and to remain viable. As the USPS says in the report to Congress, the organization is striving for “an efficient and flexible network that results in lower costs for both the Postal Service and its customers, improves the consistency of mail service, and reduces the Postal Service’s overall ‘environmental footprint.’”

Mailers also support this statement the Postal Service makes in the Network Plan: “As Congress has recognized in PAEA § 302(c)(1)(C), network consolidation decisions must be made by postal managers who, by virtue of their knowledge and experience, are uniquely qualified to make them. The long-term viability of the Postal Service and thus, the general interests of the mailing public, are not served -- nor is the Postal Service able to satisfy the § 302(c)(1)(D) mandate that it act expeditiously – when unnecessary barriers to effective and timely implementation of critical decisions are imposed.”

This doesn’t mean mailers will blindly follow a poor plan. As both partners and stakeholders in the system, they’ll insist on ongoing communications and sufficient notice about changes. The postal system doesn’t work without a viable USPS. It also doesn’t work without mailers.

The entire Postal Service Network Plan can be found on the PostCom website, www.postcom.org, or by contacting PostCom for a copy at 703-524-0096.