Friday, September 2, 2011

The New Postal Service: Constraints Slows Service

A comment to the Post on the impact of the new network on First Class Presort Mail explains both why drop shipped First Class mail won't work and how operating and capital constraints will degrade service for any mail that requires cross dock transfers before destination sortation and sequencing is completed.

uncommonsense said...

The reason for increasing the delivery standard is so that the machines can run most of the day. The network consolidations can only happen if the USPS uses the machines they have to finalize delivery point mail 16 hours a day or so instead of only doing it after midnight like they do now.
If the zone you are wanting to have delivered to finalizes its product @5 in the afternoon any mail arriving after 3 in the afternoon likely won’t be finalized for another 24 hours.
Whether or not a drop shipment can be delivered the next day will be highly dependent on what time of day the destination zone of mail in that drop shipment is finalized. They are likely to run the zones farthest from the plants first and the zones nearer the plant last. This means that for mail destined to be delivered near a plant a drop shipment is likely to be able to be delivered the next day while zones distant to the plant will likely not make it

Based on this comment it would appear that under the new scheme
  • Sequencing of mail will be spread out over a 16 hour period.  Some of this mail will be sequenced in the early evening and other mail will be sequenced late at night.   So all of the mail has to be ready for sequencing by 6 pm or it is possible that it will not go out for delivery the next day.
  • Origination sortation starts 8 am
  • Critical dispatch times for origination mail may be early to mid-afternoon.
  • Destination sortation up through sequencing could start around noon finish up as early as 4 or 5 pm.
How does it affect mailers?
  • Most commercial mailers will see their mail take an additional day longer than it does now.  Some drop-shipped mail may avoid delays if they are shipped from the mailer earlier so that it arrives by noon.   It would appear that all classes of mail will likely add a delivery day.
  • Deliveries to zones that are further from a processing plant may take an additional two days especially if drop shipments or transportation from other Postal facilities run late.
  • Parcel shipments not dropped at delivery units will take an additional day just like letter and flat mail.
  • Unclear how it will affect delivery of drugs, perishables, ballots, election materials, and live bees, plants, crickets, and baby chicks.
How does it affect mail's competitive position?
  • Time sensitive periodicals and advertising will likely seek alternative delivery options.   Businessweek's switch to alternative delivery will likely be emulated by other weeklies.
  • Mailers will have to adjust the time allotted to taking a concept to the point that it is tendered to the Postal Service if they have a specific delivery period in mind.
  • Printers will have to work with tighter printing schedules.  Reducing Postal Service costs could raise printing costs if mailers demand that printers cut the printing time in order to meet an in-home date commitment.
  • Coordinating web and mobile based advertising will need more planning. 
  • The extra two to four days for handling transactions by mail will increase the value of electronic bill presentment and payment.   Incentives for bill presentment and payment can be expected to grow and charges for hard copy bills and payments may become more common.
  • Services that accumulate documents traditionally found in a mailbox will see demand grow faster than their business cases developed before the change expected.  This may allow Volley, Manila, and Zumbox to show a profit before investors or their parent company expected.
Drivers of  the Operating Plan

The operating plan is driven by a number of capital, regulatory, and labor contract constraints.  These include:
  • The Postal Service's poor financial condition:
    • The New Postal Service needed to create a network that minimizes capital spending.  This includes spending on new plant and equipment as well as spending moving equipment from one plant to another.
      • Without the severe capital constraint, similar or nearly similar networks could be designed with more equipment per facility that processes mail in less time but uses the equipment for fewer hours per day.   This would allow mail to travel greater distances between facilities and make service commitments better than what the new network generates.  Corporatized postal operations are using this model rather than the one that the Postal Service chose.
    • The network focuses on cost savings only.  Optimization models are designed to minimize costs given the volumes that a network is expected to handle.   They assume that the volumes of mail they are designed to optimize reflect the volumes that would exist with the slower service standards.
      • The Postal Service has not released any information about the impact on mail volume demand of adding a day to service standards.
  • Regulatory Constraints
    • The postal service cannot change prices to allow products that create peak load costs to bear those costs.  
      • As a previous post noted, the Postal Service could have maintained current processing schedules,(i.e. originating mail in the early evening, destination sortation late in the evening, and sequencing after midnight) if it shifted the increased single piece mail rates to reflect peak load costs.
        • Most foreign postal administration prices incorporate peak load costs in their pricing which allows them to offer overnight service over geographic territory at least as large as what UPS ground offers for parcels.
  • Full Time Positions
    • Full time positions require mail processing be spread out over more time than is optimal for service.   In order to operate a network designed to minimized time between acceptance and delivery spent in a plant and maximize the distance between facilities, work schedules of employees need significantly greater flexibility than what the Postal Service has in its contracts.
      • Both FedEx and United Parcel Service use mostly part-time employees to sort parcels and load vehicles.   This allows them to cut the time it takes to sort parcels at origin so that they can get on the road quickly.   The same is true at destination and intermediate sortation facilities.   By minimizing time in plants, United Parcel Service and FedEx can maximize the service areas that they can provide by ground transportation in one to three days.  
    • Networks that can use a higher percentage of part time positions would likely have more employees, and larger facilities.  Increase in the percentage of part time employees could also result in less centralization of sortation than the network proposed does. To the extent that very large faciities are difficult to manage, large metropolitan areas may have more facilities than a pure optimization would suggest.


Anonymous said...

Mailers and mail originators understand that this "Network Optimization," combined with the end of 6-day delivery, if Congress decides to grant it, spell the end of USPS as we have known it in modern times.

While it can be argued that USPS must make these changes, in reality both will achieve less cost savings than projected (since employees don't go away immediately, but over several years). And the severe downgrade in service that will inevitably result will move the Postal Service into the category of "unreliable service provider."

Only those who enter at the DDU (delivery office) will experience decent delivery, and more mail will and should be moved there. USPS will only be a last-mile vendor of reliable delivery.

And Congress and the govt. shares in the responsibility with the unfortunate PAEA prepayment requirement of Retiree Health Benefits. And no agency wants to return any overpayment, like FERS, or face consideration of a CSRS fix.

uncommonsense said...

Actually service for mail entered at the DSCF (plant at which the mail is finalized for delivery) will be better than the service for mail entered at the DDU. Any mail entered at the DDU that is able to be processed on automation will make a trip to the DSCF for processing before coming back to the DDU for delivery. This will result in poorer service performance for mail dropped at the DDU than mail dropped at the DSCF.
I know this seems illogical but there is a good reason for it. The USPS will ship the mail back to the plant because it costs significantly less to have a machine comingle the mail into delivery order at the rate of 5 pieces per second than it does to pay a carrier by the hour to comingle the mail into delivery order at a rate 15 times slower. The labor savings is many times the extra transportation cost.
The USPS should actually give less of a discount for mail dropped at the DDU than for mail entered at the DSCF because it costs it more to deliver. Encouraging automatable mail to be dropped at the DDU is the wrong thing for the USPS to do financially.

uncommonsense said...

A couple comments I would like to make.
1) I expect many of the parcel delivery standards could be maintained near what they are now even with fewer plants. Much depends on the type of transportation used between plants for parcels. Parcels are not sequenced in plants and consequently don’t suffer quite the same processing constraints as delivery sequenced mail.
2) I don’t think that deliveries farther from the plant will ever require an additional 2 days. It will be one day of delay over current standards. The chance of preventing that one day of delay by drop shipping at the plant is just remote. I actually expect the percentage of mail “on time” with the new extra day standard will be higher than the current percentage “on time” rate. It probably will take a few months to get there though as the kinks are worked out of a new system.
3) Most 3 day first class mail won’t even need an extra day of service. With 60% less plants each plant is going to have significantly more mail destined for every other plant than it does currently. Thus most if not all “intermediate” plants will no longer be needed. Each originating plant will likely have enough mail for every other plant to justify finalizing sort to the DSCF when mail first enters the system. This will avoid the extra day that hitting an intermediate plant currently causes for 3 day mail.

Anonymous said...

Given the low morale of postal employees in light of the uncertainty of their continued employment, debating mail entering at a DDU or DSCF is akin to shuffling deck chairs on the Titanic.

Do you actually think postal employees give a rat's ass about mail delivery? If you do, you're living in Candy Land.

Clerks in the office I'm familiar with routinely "roll over" mail (including 1st Class) from one day to the next to the next to the next until carriers are delivering expired sale coupons. That's postal reality.