Sunday, November 8, 2009

150 plants and 400,000 employees

On November 5th, former Deputy Postmaster General Michael Coughlin suggested that the Postal Service in order to survive must have a much smaller footprint with possibly 150 plants and 400,000 employees. He made his remark in response to a question of Representative Danny Davis at the hearing of the Federal Workforce, Postal Service and the District of Columbia Subcommittee of the House Committee on Oversight and Government Reform.

While the hearing was about potential sources of new revenue, the question and the answer suggested that revenue generating options suggested by the panel will not generate the $3-5 billion in additional revenue that the Postal Service will need to be truly a viable enterprise. His answer further suggested that the Postal Service's current approach to cutting costs, while more effective than they have been in the past does not do enough to shrink the operating network down to either current levels of demand or even lower levels that are expected in the years to come.

Given former DPMG C0ughlin's experience, his response should be a considered a serious hypothesis about what a true redesign of the Postal Service would look like. His response raises an important question that opponents of shrinking the network will raise. Can the Postal Service maintain service levels if the network of processing plants shrinks to less than half of its current size?

To answer that question in the affirmative, and it can be answered that way, requires a major rethinking of the design of processing and transportation networks. If the Postal Service was to shrink to 150 processing facilities, two thinks would clearly change, the distance (and travel time) between processing facilities and delivery units would grow, and the time that mail is handled within each of the facilities must shrink.

For example, if the originating and potentially delivery facility moves from 10 miles to 90 miles from the delivery unit, then the time available for processing originating mail from open dump and cull to delivery point sequencing drops by 4 hours, assuming an average travel speed of 40 miles per hour. Fewer processing facilities means that facilities will be further apart, so critical dispatch times will likely be earlier to ensure on-time arrival.

Therefore the primary driver of 150 facility network would involve designing a facility that can handle turn-around times half of what they are today. Lower volume levels aid in cutting total sortation time. But new thinking about the use of automation and material handling systems must focus on reducing time as much as labor expenses. The 150 facility network would likely require larger facilities on average that can handle all of the sortation and material handling equipment that would be needed to cut handling time within each processing facility.

The 150 facility network would also require removing two key assumptions that drive all current network modeling. 1) Existing facilities must be used. The 150 facility network will likely have major processing facilities in locations further from population centers than current plants, with locations driven by access to the interstate highway system or major air facilities. It is possible that larger urban centers will retain some DPS sortation but only if it reduces total handling time. 2) The standard work shift within a plant is eight hours. The 150 facility network will likely have work for no more than 1 full time and 1 part time work shift. To the extent that DPS sortation remains close to delivery units, then that shift will likely also be part time. The proportion of full-time jobs could rise if divisions between crafts and all restrictions that prevent a person from having two different "jobs" within eight hours were eliminated.

The shift to a smaller network could have some significant management benefits. A smaller network is simpler to manage. While every node must operate as precisely as the finest Swiss watch, controlling variations from best practices would take less time to implement. Reducing time in plants requires a 6-Sigma, zero-defects, or whatever the current buzz-word is for eliminating errors that increase time and costs can be more quickly implemented in 150 facilities than in 350.

The shift to a network that is as much focused on reducing in-plant time reflects current mailer demand to both improve mail delivery reliability and reduce the time it takes to turn an idea into a delivery. Most importantly, the Postal Service has to be as reliable as e-mail when it promises a delivery date for all of its advertising customers to ensure that their direct mail campaign most effectively complements their broadcast, e-mail or Internet display advertising campaign.

There is one major drawback to implementing a 150 plant Postal Service, which is greater than the logistical and management challenge of shrinking the network; the elimination of 200,000 postal jobs at a rate between 20,000 and 40,000 per year in an implementation plan. Shrinking the network at that rate would create a far louder political outcry than even the first round of base closings. Shrinking the network at that rate would also create significant severance or early retirement costs and the Postal Service does not have the cash to pay them.

So this leads one back to Representative Davis's implied question: Can the Postal Service be saved? DPMG Coughlin's response illustrates that saving the Postal Service will require serious and unpleasant steps. The scale of the change that he suggests, as well as the limitations of revenue generating ideas of all stakeholders, should force Congress to think more boldly as they try to find a new business model and regulatory framework that can save the Postal Service.

22 comments:

Jack O'neill said...

The post office can be saved provided they cut the people who have ZERO/ZILCH/NOTHING to do with mail delivery out of the Postal System. Do you need multiple levels of management that sit on their butss day in and day out and do nothing but hassle mail carriers about scans and the absolutely stupid ways they have to deliver mail out to the customer? Managers who have never deliverd mail or delivered mail for less than 2 years have no idea how to do the job. Cut the fat out of the budget, stream line operations, make pay cuts starting with the largest salaries getting vut the most and the smallest getting the least that way percentage wise every pays the same, and stop giving out these outlandish bonuses. If the postal system did that it could easily be saved.

But will anyone be willing to step up and do that?

Clerk in MO said...

I totally agree with Jack O'Neill. The cuts need to start at the top and work down, not at the bottom. We can not do more with less, and eliminating processing plants is not the answer. That would mean mail would be late leaving the plants everyday, and the carriers have a difficult time now trying to get back to the office before dark. In my city, that is very rare that they can get back before dark. With all the route changes and eliminating of routes. Other routes are now larger not to mention they have to carry part of another route. They don't stand a chance at getting back to the office before dark. Now, if some of the procesing plants are eliminated, that will have a huge impact on delivery. We need to let our Senators and Representatives know what really happens inside the USPS. It's time the cuts are made at the top with all those who are clueless about how the mail really gets out. Time to elminate a lot of office jobs, they don't touch the mail therefore they are useless. Time to cut those six figure salaries.

Joan Levy said...

That will never happen. In the Post Office where I work we had approximately 200 clerks 10 years ago. Today we have 65 with the same of amount of management personnel as we had 10 years ago. There is definitely something wrong with this. If the network is reduced to 150 plants and 400,000 employees you can bet that the reduction will come from the bargaining unit employees not from management. Lines will still be out the door and mail will still be delayed but scans will be scrutinized and changed as needed and volumes will be modified to justify the continued downsizing of employees who actually keep the mail moving and try to keep the lines moving.

Clerk in CT said...

Agreed, and Amen.

Alan Robinson said...

I agree with all comments suggesting that management cuts would have to come as well. Current management structures and divisions may have to be broadly changed. With 150 plants you could alomst imaginge cutting the areas from the 8 or 9 to 3 or 4.

Cutting the plants to 150 would upset a lot of management apple carts, lines of authority, and will force new thinking about how managers at all levels are judged regarding revenue, costs, service, and customer satisfaction.

Anonymous said...

Ross Perot suggested this many years ago and stept on a few toes including the SO called Postal UNIONS!Which is the absolutly worst of the 3 Real Unions I've ever been in.Do you really belive that the Unions are there for the Craft?GET REAL and open your EYES!!!NOW,AS FOR POSTAL MAGAGEMENT,CAN You HONESTLY CASH YOUR PAY CHECK AND THINK YOU HAVE REALLY EARED THAT TYPE OF PAY AND ENCENTIVES?WHAT GOES AROUND COMES BACK AROUND!!!YOU ARE GOING TO MEET THE SAME PEOPLE ON YOUR POSITIVELY DOWN FALL!!!YOU GUYS MAKE ME SICK TO MY STOMACH!!!ONLY GOD CAN HELP YOU NOW!!!! JERRY RAY SCOTT,GARLAND TEXAS RETIRED CRAFT EMPLOYEE

Barnee said...

Cut management. Get down to 4 Areas (N,S,E,W). Get rid of ridiculous management levels who don't touch mail but make twice as much as the workers. Then consolidate plants to become more efficient.

Anonymous said...

So much for innovative solutions! Former PMG Caughlin's big idea doesn't deserve too much attention. RIF through attrition would work just fine. In four years over 300,000 postal employees would be eligible to retire. Caughlin did not propose anything of value in line with the purpose of the hearing: creative ideas for enhancing the Postal Service and create new lines of revenue. The current Postal Service can restructure its network to be more efficient, but it has to be a long-term plan. (5-10 years). When redesigning new processing facilities resources should be allocated for an increased operation that deals with consolidation and mail preparation.

OG

Anonymous said...

Postal management has proven time and again that they cannot deal with change effectively. Reducing processing facilities would drastically change delivery dates. We can no longer meet on-time criteria now with the elimination that has occurred. Carriers sit around waiting for DPS to show up because of current conslidation. We'd have to hire another layer of managers to figure out that the current managers can't work out a viable delivery system. Congress should be able to relate to that!

David Ellis said...

1. I detect some union bias in many comments. That's unfortunate and solves nothing.
2. The USPS is a vital entity to the economy of the US. It needs to remain as a fixture for the American people and the business community.
3. Get rid of ALL area offices. Have all Districts realigned as needed, then have the survivors report directly to headquarters.
4. Supervisors and managers workload has not changed with the shrinking business. Get rid of a lot of the reporting systems that keep supervisors from being on the street. Managers need to share duties and responsibilities on the workroom floor in many facilities, where it doesn't happen now.
5. I doubt if the Postal Service can survive without returning to some form of Congressional subsidies (pre 80's). It's a great institution that serves the national well, and keeps communication affordable. Without the Postal Service the cost of doing business will go through the roof.

dve

dryMAILman said...

Why not eliminate the 200,000 people that worked on Lockheed Martin's 'operationally infeasible' Delivery Point Packager (DPP)? This would save us from their current Fraudulent Spending Spree: Northrop Grumman's Flats Shuffler Shredder (FSS). All those laid off would have no problem obtaining jobs in the private sector (Lockheed Martin/Northrop Grumman) or obtaining campaign funding (again from Lockheed Martin/Northrop Grumman) to become elected officials. We already have walk sequenced flats! Stay tuned for more evidence and a plan of action.

http://www.youtube.com/watch?v=sID1lRTnXDY

Anonymous said...

As others have stated, craft employees (who actually do the work of moving the mail) are being cut while management personnel are increasing or staying the same. Management is trying to "save the service" on the backs of what few employees are left - exercising tighter control on employees, over-burdening them with work, etc. How can the Post Office afford to put GPS tracking devices in carrier vehicles all across the country? GPS serves no real function in getting the mail moved and delivered - it is just a way of hyper-controlling a workforce that would be just fine if left alone to do it's job. And while the Post Office is tightening it's grip on good employees, the business is slipping through it's fingers. If the Post Office is to survive, it needs to work harder at trusting and respecting it's employees - allowing them to do their jobs (without management interference) while it goes out and recaptures the business it lost through stupid decisions like work-sharing with mailers and with it's competition. USPS now provides "last mile" deliver for both FedEx and UPS but would be bringing in far more revenue if it was taking in all this business for itself. Does anyone really think that UPS and FedEX can take in a package, pay USPS to deliver it for them, and not be making a profit for themselves? But the USPS dug it's own hole years ago by eliminating it's transportation infrastructure and relying, now, on UPS and FedEx to move most of the mail. Now, USPS cannot compete with them without killing itself. IMHO, Postal management is now trying to save the business by taking action to destroy the business. I can't imagine how they think it can work.

Anonymous said...

I work at a sorting plant outside Chicago. On Saturdays we cull all the mail coming in to us then send it to Palatine, IL. They finish sorting it and send it back to us so thst we can sort it again and finally deliver it. We have the capability to do all this sorting ourselves without shipping it to another facility and could save time and money. We used to do all of our own sorting until a few years ago management felt the need to try and consolidate all the sorting to one huge facility instead several smaller ones. What if the one "super" facility has a major equipment failure or a power failure? Or a blizzard, which happens occasionally in Illinois.
The smaller sorting facilities were built for a reason that current management doesn't seem to comprehend.
If they really want to save money, they need to do 2 things. 1- Eliminate all management bonuses. How can they justify a bonus when the post office is losing money? 2- Make the huge bulk mailers pay their fair share of the costs to mail their products. How can the post office justify only charging 15 to 20 cents per piece when a first class piece would cost 44 cents?

Anonymous said...

NO other cost-saving measure should even be considered until the numbers in mgmt. are vastly reduced.

There were to many before all the craft positions were cut, and now, since no mgmt. positions have been cut, the ratio is even worse.

Take a look at the USPS organizational chart. Compare it to the UPS chart.

If that doesn't show the root of the problems facing the USPS, nothing will.

Anonymous said...

A dinosaur describing the future

Anonymous said...

If the U S Postal Service really wants the remaining individuals to take an early retirement they need to eliminate the 2 percent penalty for Civil Service. If they did this they would get more people to take an early retirement. That last offer was a joke. The only ones who took that offer were the individuals who could already retire. Once that objective is achieved then they can restucture and eliminate management positions and put them back to work as letter carriers, mailhandlers, or clerks.

Anonymous said...

WHY WOULD YOU SEND THE BOSSES BACK TO THE CRAFT WHEN THEY WERE PROMOTED BECAUSE THEY WOULD'NT WORK IN THE FIRST PLACE??

stephen said...

At my office, we have a supervisor who smokes most of the day, but in between puffs, she walks the floor berating people for not holding the flats in your arm right, not casing fast enough,putting mail on top of your case,not identifying each piece of mail that is being held for vacation or hold for order,talking too much , when in fact, she is the one doing all of the talking.she is surly and abusive to all of the employees and a lot of the customers when she happens to be up at the window. and she is paid over 70 thousand for this job. and she never carried any mail but she thinks she knows it all

Anonymous said...

This isn't rocket science...offer a DECENT amount of cash, plus eliminate the 2% penalty, and my guess would be people running for the doors! Des Moines IA clerk

uncommon sense said...

Why do companies consolidate operations? The short economic answer is to cut costs by increasing plant utilization rates.
The 150 plant scenario laid out here would decrease plant utilization rates. That is a sure way to increase costs rather than decrease them.
The only way a 150 plant scenario saves money is if it increases plant utilization rates. The only way for that to occur is to decrease some current service levels. That is probably not a good idea.

Anonymous said...

I dont know why everyone says we have no mail!! At our plant we have been buried for months and maxing out on overtime and still leaving first class mail behind everyday!!! We should get rid of all of the management that is hiding this sort of thing!

Anonymous said...

Michael Coughlin wanted to be PMG but was passed over - twice even after dimbulb Tony Franks endorsement!
Coughlin was the 'architect' of the workforce reduction which was biulled as a non-RIF that turned out to be a RIF cuz he didn't bother to read the OPM rules. And USPS ended up with more HQ employees than ever when he was all done.
You can thank Coughlin for the fact USPS contracts out to its competitors (UPS, FedEX) to air lift the same products USPS is competing with them for (First Class Packages, Priority and Express Mail).
In 1991, Coughlin told the chairman of the postal subcommmittee he was throwing in the towel on a multimillion-dollar proposal to operate its own fleet of 50 to 60 red-white-and-blue cargo airplanes.
What a forward thinking move that was! So during the peak season for that product line we get to hear UPS and FedEx say 'sorry postal service , we're already cubed out with our product, no room for yours!'

Coughlin now works for a company that he used to approve contracts for as a USPS DPMG.

Sorry Mike, some of us remember your real performance before you tried to reinvent yourself. Go back to tijknering with the fax business.