U.S. Postal Service
Mail Delivery Efficiency Has Improved, but Additional Actions Needed to Achieve Further Gains Gao ID: GAO-09-696 July 15, 2009The U.S. Postal Service (USPS) is facing significant financial problems as mail volume is declining, 4.5 percent in fiscal year 2008 and 11 percent projected for fiscal year 2009. USPS lost $2.8 billion in fiscal year 2008 and projects a $6.4 billion loss in fiscal year 2009 (possibly more if it cannot cut an ambitious $5.9 billion in costs). As one way to cut costs, USPS is trying to improve the efficiency of mail delivery, which generates close to one-third of USPS's $78 billion in expenses. Recognizing the sizeable impact of delivery on USPS's finances and operations, you requested a GAO review. This report addresses (1) how USPS monitors delivery efficiency; (2) characteristics of delivery units that affect their efficiency; and (3) the status and results of USPS's actions to improve delivery efficiency, in particular USPS's Flats Sequencing System (FSS). To address these objectives, GAO interviewed stakeholders and USPS officials, reviewed delivery documentation, conducted fieldwork, and analyzed delivery data.
USPS delivery managers have written guidance and information systems to help them monitor delivery efficiency--determining whether units and carriers are using the best work practices. These tools help set carrier and unit expectations and evaluate performance. Specifically, written guidance provides a monitoring framework and information systems track different metrics, such as deliveries and overtime, used for evaluation. However, there is no single measure of delivery efficiency, and managers use various metrics (e.g., carrier office and street efficiency indicators) to measure effectiveness. Through visits, interviews, and analysis of city delivery operations, GAO found efficiency varies by delivery unit, and certain factors affect a unit's efficiency. These factors can include the experience, training, and local knowledge of a delivery manager; timing of mail received from the processing plant; availability of qualified carriers; unit size or location; and how recently routes were adjusted. In the less efficient delivery units (as determined by USPS's rankings), USPS was taking actions to alleviate some issues, including replacing managers, allocating additional resources, and providing training. Although USPS has taken actions to improve delivery efficiency, the agency has limited information to measure the results. These actions include: ? Flat Sequencing System--this cornerstone effort is a $1.5 billion investment in equipment for sorting flat mail (e.g., large envelopes, catalogs, circulars, and magazines) into the correct sequence for delivery; ? Adjusting City Carrier Routes--aligning carrier routes to match changing workload, including using technology to set an optimal route structure; ? City Delivery Pivoting Opportunity Model--a scheduling tool that helps delivery managers deal with daily unstaffed routes by aligning available staff and resources with delivery needs; and ? Others--such as managing its delivery vehicle fleet and utilizing a tool to manage growth in the number of addresses in a cost-effective way. These actions, combined with recent mail volume declines, have helped USPS eliminate nearly 10 million delivery workhours while absorbing 2.7 million additional deliveries between fiscal years 2006 and 2008. USPS expects to eliminate 37 million delivery workhours in fiscal year 2009 (saving approximately $1.4 billion) compared to the previous year. The future savings, however, may be limited by USPS's lack of specific cost-saving targets and results for most of these actions (USPS officials report it is too difficult to isolate the results of actions). Without such information, USPS is unable to assess the contribution and performance of each action and focus on those with the greatest savings potential. Also, while we are encouraged by USPS's efforts to coordinate with employees, their unions, and mailers to promote more efficient delivery, continued focus will be needed to help address ongoing challenges related to declining volumes, technical issues (e.g., FSS failed a key engineering test), and financial and operational issues (e.g., the impact of these actions on postal stakeholders and future USPS investment decisions, particularly if delivery frequency is reduced to 5 days a week).
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-696, U.S. Postal Service: Mail Delivery Efficiency Has Improved, but Additional Actions Needed to Achieve Further Gains
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
July 2009:
U.S. Postal Service:
Mail Delivery Efficiency Has Improved, but Additional Actions Needed to
Achieve Further Gains:
GAO-09-696:
GAO Highlights:
Highlights of GAO-09-696, a report to congressional requesters.
Why GAO Did This Study:
The U.S. Postal Service (USPS) is facing significant financial problems
as mail volume is declining, 4.5 percent in fiscal year 2008 and 11
percent projected for fiscal year 2009. USPS lost $2.8 billion in
fiscal year 2008 and projects a $6.4 billion loss in fiscal year 2009
(possibly more if it cannot cut an ambitious $5.9 billion in costs). As
one way to cut costs, USPS is trying to improve the efficiency of mail
delivery, which generates close to one-third of USPS‘s $78 billion in
expenses.
Recognizing the sizeable impact of delivery on USPS‘s finances and
operations, you requested a GAO review. This report addresses (1) how
USPS monitors delivery efficiency; (2) characteristics of delivery
units that affect their efficiency; and (3) the status and results of
USPS‘s actions to improve delivery efficiency, in particular USPS‘s
Flats Sequencing System (FSS). To address these objectives, GAO
interviewed stakeholders and USPS officials, reviewed delivery
documentation, conducted fieldwork, and analyzed delivery data.
What GAO Found:
USPS delivery managers have written guidance and information systems to
help them monitor delivery efficiency”determining whether units and
carriers are using the best work practices. These tools help set
carrier and unit expectations and evaluate performance. Specifically,
written guidance provides a monitoring framework and information
systems track different metrics, such as deliveries and overtime, used
for evaluation. However, there is no single measure of delivery
efficiency, and managers use various metrics (e.g., carrier office and
street efficiency indicators) to measure effectiveness.
Through visits, interviews, and analysis of city delivery operations,
GAO found efficiency varies by delivery unit, and certain factors
affect a unit‘s efficiency. These factors can include the experience,
training, and local knowledge of a delivery manager; timing of mail
received from the processing plant; availability of qualified carriers;
unit size or location; and how recently routes were adjusted. In the
less efficient delivery units (as determined by USPS‘s rankings), USPS
was taking actions to alleviate some issues, including replacing
managers, allocating additional resources, and providing training.
Although USPS has taken actions to improve delivery efficiency, the
agency has limited information to measure the results. These actions
include:
* Flat Sequencing System”this cornerstone effort is a $1.5 billion
investment in equipment for sorting flat mail (e.g., large envelopes,
catalogs, circulars, and magazines) into the correct sequence for
delivery;
* Adjusting City Carrier Routes”aligning carrier routes to match
changing workload, including using technology to set an optimal route
structure;
* City Delivery Pivoting Opportunity Model”a scheduling tool that helps
delivery managers deal with daily unstaffed routes by aligning
available staff and resources with delivery needs; and;
* Others”such as managing its delivery vehicle fleet and utilizing a
tool to manage growth in the number of addresses in a cost-effective
way.
These actions, combined with recent mail volume declines, have helped
USPS eliminate nearly 10 million delivery workhours while absorbing 2.7
million additional deliveries between fiscal years 2006 and 2008. USPS
expects to eliminate 37 million delivery workhours in fiscal year 2009
(saving approximately $1.4 billion) compared to the previous year. The
future savings, however, may be limited by USPS‘s lack of specific cost-
saving targets and results for most of these actions (USPS officials
report it is too difficult to isolate the results of actions). Without
such information, USPS is unable to assess the contribution and
performance of each action and focus on those with the greatest savings
potential. Also, while we are encouraged by USPS‘s efforts to
coordinate with employees, their unions, and mailers to promote more
efficient delivery, continued focus will be needed to help address
ongoing challenges related to declining volumes, technical issues
(e.g., FSS failed a key engineering test), and financial and
operational issues (e.g., the impact of these actions on postal
stakeholders and future USPS investment decisions, particularly if
delivery frequency is reduced to 5 days a week).
What GAO Recommends:
GAO recommends that the Postmaster General establish cost-saving
targets and track results for each of the major USPS initiatives to
improve delivery efficiency. In commenting on a draft of this report,
USPS generally agreed with GAO‘s findings. However, USPS did not agree
to fully implement GAO‘s recommendation for all major USPS delivery
initiatives.
View [hyperlink, http://www.gao.gov/products/GAO-09-696] or key
components. For more information, contact Phillip Herr at (202) 512-
2834 or herrp@gao.gov.
[End of section]
Contents:
Letter:
Background:
USPS Has a Variety of Tools for Monitoring Delivery Efficiency:
Differences in Management and Operations Result in Varying Degrees of
Efficiency throughout USPS's Delivery Network:
USPS Actions Have Improved Delivery Efficiency, but Lack of Performance
Information and Implementation Challenges May Limit Future Savings:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Objective, Scope, and Methodology:
Appendix II: Comments from the U.S. Postal Service:
Appendix III: Geographic Coverage of USPS's Nine Area Offices:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Cost and Delivery Information for City, Rural, and Contract
Delivery Routes, 2008:
Table 2: Tools and Systems for USPS Delivery Managers to Use in
Monitoring Delivery Efficiency:
Table 3: Key Delivery Metrics USPS Uses to Monitor Delivery Efficiency:
Table 4: Key FSS Developments:
Table 5: Changes in Carrier Delivery Routes and Modes, 2000-2008:
Figures:
Figure 1: Overview of Mail Flow:
Figure 2: Total Mail Volume, by Year:
Figure 3: Selected USPS Carrier Activities:
Figure 4: Office Efficiency Indicator for Select City Delivery Units,
2008:
Figure 5: Delivery Sequenced Letter Mail Volume Trends for City
Delivery:
Figure 6: Differences in Average Daily Flat Mail Volumes That Will Need
to be Manually Sorted on City Carrier Routes Receiving FSS Mail:
Figure 7: Annual Percent Change in Volume of Domestic Flat Mail, 2003-
2008:
Figure 8: Summary of the Interim and Modified Interim Alternate Route
Adjustment Processes:
Figure 9: Hypothetical Example of City Carrier "Undertime":
Figure 10: Mean Overtime Workhours as a Percentage of Total Workhours,
by Year, for Selected City Delivery Units:
Figure 11: Mean Office Efficiency Indicator Performance, by Year, for
Selected City Delivery Units:
Figure 12: USPS's 9 Area Offices:
Abbreviations:
CDPOM: City Delivery Pivoting Opportunity Model:
COR: Carrier Optimal Routing:
DOIS: Delivery Operations Information System:
DPS: Delivery Point Sequence:
FSS: Flats Sequencing System:
GPS: Global Positioning System:
IARAP: Interim Alternate Route Adjustment Process:
MIARAP: Modified Interim Alternate Route Adjustment Process:
NALC: National Association of Letter Carriers:
NDCBU: Neighborhood Delivery Collection Box Unit:
NRLCA: National Rural Letter Carriers' Association:
OEI: Office Efficiency Indicator:
OIG: Office of Inspector General:
PRC: Postal Regulatory Commission:
SEI: Street Efficiency Indicator:
USPS: U.S. Postal Service:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 15, 2009:
The Honorable Thomas R. Carper:
Chairman:
The Honorable John McCain:
Ranking Member:
Subcommittee on Federal Financial Management, Government Information,
Federal Services, and International Security:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Stephen F. Lynch:
Chairman:
The Honorable Jason Chaffetz:
Ranking Member:
Subcommittee on Federal Workforce, Postal Service, and the District of
Columbia:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Danny Davis:
House of Representatives:
The U.S. Postal Service (USPS) is facing significant financial problems
because mail volume is declining significantly--by 9.5 billion pieces,
or 4.5 percent, in fiscal year 2008[Footnote 1] and a projected 22.7
billion pieces, or 11 percent in 2009. As a result, USPS lost $2.8
billion in 2008 and expects to lose over $6 billion in 2009, although
this number could be higher if USPS does not achieve its ambitious cost-
cutting goal of $5.9 billion--or over two-and-a-half times more than it
reported cutting in 2008. We have recently testified on multiple
occasions regarding USPS's escalating financial problems.[Footnote 2]
A key portion of USPS's cost reduction efforts are linked to delivering
mail more efficiently--which USPS defines as using the best work
practices and least amount of time. Mail delivery is USPS's largest
cost segment and generated close to one-third of its nearly $78 billion
in total expenses in 2008. That year, over 350,000 full-and part-time
mail carriers accounted for approximately 45 percent of USPS's salary
and benefit expenses. Delivery is labor intensive and includes carriers
manually sorting certain mail into the sequence that it will be
delivered, and delivering mail to and collecting it from most of the
nation's 149 million residential and business addresses 6 days a week.
[Footnote 3] Moreover, this delivery network is growing by more than 1
million addresses each year, resulting in additional personnel, fuel,
and vehicle costs. Declines in volumes, however, have put additional
pressure on USPS's ability to contain its costs because USPS has high
overhead costs that are hard to reduce the in short term when volumes
decline. The Postal Regulatory Commission (PRC) recently testified that
only half of USPS's delivery costs vary with volume. As such, when
volumes decline, mail delivery costs are harder to reduce compared to
other USPS costs that vary more with mail volume. USPS has recently
testified that it cannot afford to continue delivering mail 6 days a
week and has requested that Congress eliminate the long-standing
appropriation provision mandating 6-day delivery so USPS can shift to 5-
day delivery.
USPS has taken steps to deliver mail more efficiently, including
adjusting delivery routes to reflect declining volumes and investing in
more efficient mail-sorting technologies. Specifically, USPS has
approved $1.5 billion to acquire and deploy 100 machines--called the
Flats Sequencing System (FSS)--that will automatically sort flats
(e.g., large envelopes, catalogs, circulars, and magazines) and
sequence them in the exact order of carrier delivery (USPS currently
has equipment that does this for letter mail).[Footnote 4] This
investment is expected to reduce the time carriers would otherwise
spend manually sorting mail in the office--a labor-intensive and costly
activity--and enable them to spend more time delivering mail. USPS has
begun deploying FSS machines and expects the first phase to be
completed by October 2010.
Because of concerns about USPS's financial condition, you asked us to
report on USPS's delivery efficiency, recognizing the sizeable impact
of delivery on USPS's finances and operations. This report addresses
(1) how USPS monitors delivery efficiency; (2) characteristics of
delivery units that affect their efficiency; and (3) the status and
results of USPS's actions to improve delivery efficiency, in particular
FSS. We also briefly discuss USPS's proposal to reduce delivery to 5
days each week.
To address these objectives, we reviewed USPS documentation and
interviewed USPS headquarters officials on issues related to USPS's
delivery operations, monitoring processes, efficiency initiatives, and
problems, as well as FSS implementation. We analyzed a broad range of
delivery performance data to determine the extent to which (1)
variation existed in efficiency across delivery units, (2) meaningful
trends existed within these data, and (3) route adjustments were
performed and whether savings were achieved. We assessed the
reliability of the data used in our analysis of delivery efficiency and
found it sufficiently reliable for our purposes. We focused our work
primarily on city delivery, rather than rural delivery, because city
delivery accounts for 75 percent of delivery operations' salary and
benefit cost. To gain a better understanding of delivery, we visited 2
area offices, 7 district offices, and 21 delivery units, which
encompassed 7 states plus Washington, D.C., providing geographic
dispersion.[Footnote 5] As part of this analysis and USPS delivery
performance indicators, we selected:
* the highest, middle, and lowest performing areas;
* the highest and lowest performing districts within each area; and:
* the highest and lowest performing delivery units within each
district.
We consulted with USPS to ensure that the delivery units we selected
had a sufficient number of city carrier routes to do meaningful
fieldwork, and made adjustments based on this information and other
travel considerations. We interviewed USPS officials at each location
who managed delivery operations to obtain insights into the
performance, monitoring, and management of delivery units as well as
their views on the effectiveness of major delivery efficiency
initiatives which USPS identified. In addition to these locations, we
visited the first USPS mail processing facility to install an FSS
machine and two delivery units that receive FSS delivery sequenced
flats. We interviewed responsible USPS mail processing and delivery
officials regarding FSS operations and its impact on delivery
efficiency. To obtain stakeholder views regarding USPS's efforts to
improve delivery efficiency, we interviewed officials from PRC,
National Association of Letter Carriers (NALC), National Rural Letter
Carriers' Association (NRLCA), and major mailers--who have collaborated
with USPS on technical matters associated with FSS implementation, such
as rules for preparing flat mail that will be sorted on FSS machines.
We conducted this performance audit from July 2008 to July 2009, in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. Appendix I contains a
detailed discussion of our scope and methodology. We requested comments
on a draft of this report from USPS, and its comments, which are
reproduced in appendix II, are discussed later in this report.
Background:
Providing mail delivery service is central to USPS's mission and role
in providing postal services to "bind the nation together through the
personal, educational, literary, and business correspondence of the
people."[Footnote 6] USPS is required by law to provide prompt,
reliable, and efficient services to, as nearly as practicable, the
entire U.S. population.[Footnote 7] USPS is further required to
maintain an efficient mail collection system. Provisions in USPS
appropriations mandate 6-day-a-week delivery and certain levels of
rural mail delivery.[Footnote 8] USPS establishes delivery service
within this framework and manages the associated facilities,
transportation, and employee network. Figure 1 illustrates some of the
key steps in the flow of mail from collection to delivery.
Figure 1: Overview of Mail Flow:
[Refer to PDF for image: illustration]
Mail collection:
Delivery Unit:
Inter-plant processing and distribution[A]:
* Mail is sorted and processed;
Delivery Unit:
* Carriers perform in-office functions, mostly sorting mail;
Delivery:
* Carriers perform on-street duties including delivering and collecting
mail.
Source: GAO analysis of USPS operations.
[End of figure]
AA significant portion of mail is deposited by mailers directly at
delivery units or processing and distribution facilities.
The efficiency and cost of delivery operations depicted in figure 1
depend on a variety of factors, including the following:
* Mail volume and type. The amount of mail and type (e.g., letters
versus packages), including the extent to which mail is compatible with
USPS's automation equipment or needs to be manually sorted by carriers
prior to being taken to the street for delivery.
* The type of carrier route. Most customers receive their mail via one
of three different types of carrier routes: city, rural, or contract
carrier. Carriers in each type of route have their own roles,
responsibilities, and compensation systems. For example, most city and
rural carriers are USPS employees but members of different unions,
while contract carriers are not USPS employees, but can perform
delivery services as part of their contractual agreement with USPS.
[Footnote 9] Table 1 illustrates how the type of carrier route can
affect delivery costs.
Table 1: Cost and Delivery Information for City, Rural, and Contract
Delivery Routes, 2008:
Type of route: City delivery;
Salary and benefits (billions): $17.4;
Number of routes: 161,648;
Possible deliveries (millions): 87.3;
Average deliveries per route: 540;
Number of carriers: Career[B]: 211,661; Noncareer[C]: 14,758;
Average annual national cost per address (estimate)[A]: $209.
Type of route: Rural delivery;
Salary and benefits (billions): $5.9;
Number of routes: 76,575;
Possible deliveries (millions): 39.1;
Average deliveries per route: 511;
Number of carriers: Career: 68,900; Noncareer: 58,072;
Average annual national cost per address (estimate)[A]: 161.
Type of route: Contract delivery;
Salary and benefits (billions): $0.3[D];
Number of routes: 7,889[E];
Possible deliveries (millions): 2.6;
Average deliveries per route: 330;
Number of carriers: n/a;
Average annual national cost per address (estimate)[A]: 115.
Type of route: Total;
Salary and benefits (billions): $23.6;
Number of routes: 246,122;
Possible deliveries (millions): 129.0[F];
Average deliveries per route: 524;
Number of carriers: n/a;
Average annual national cost per address (estimate)[A]: n/a.
Source: USPS.
Note: n/a stands for not applicable.
[A] According to USPS, these data are updated annually based in part on
a 1995 cost-of-delivery study.
[B] Career employees include full-time city and rural carriers and
certain part-time city carriers.
[C] Noncareer employees include certain transitional city carriers and
supplemental/substitute rural carriers.
[D] These costs represent the entire contractual rate, and may involve
costs for transportation services provided as part of these contracts.
According to USPS officials, most of these routes strictly provide
delivery service, but the remaining routes incorporate other mail
transportation services such as trucking mail from one USPS facility to
another (deliveries are made to addresses along the line of travel).
[E] This number represents the number of contract delivery routes on
which delivery service is provided for at least one address.
[F] There are about 129 million addresses served by letter carriers.
Another 20 million addresses are provided delivery as part of USPS Post
Office box service (for a total of 149 million addresses). These
deliveries are made by USPS clerks.
[End of table]
* The number, location, and mode of delivery. The number of addresses
on a particular route; the distance between addresses; the geographic
location of the route (e.g., the downtown of a major metropolitan area
versus a small town); and the mode of delivery (e.g., mail delivered to
a curbline mailbox, a mail slot in a door, or a clusterbox[Footnote 10]
at the end of the street). For example, on city carrier routes, the
current annual cost for door delivery is $354, curbline delivery is
$225, and centralized delivery[Footnote 11] is $161.
* Transportation. The length of a carrier route, the need for a
vehicle, and vehicle costs (e.g., for fuel and maintenance).
* Other factors. Weather conditions, terrain, sick leave usage, and
carrier turnover.
* Declining volume reduces USPS's revenue, but it does not necessarily
reduce costs commensurately. Many of the costs associated with its
delivery network are fixed, and these fixed costs are difficult to
reduce as volumes decline. USPS incurs facility, equipment,
transportation, and personnel costs associated with providing mail
delivery to over 149 million addresses 6 days a week, regardless if 20
or 1 piece(s) of mail needs to be delivered to a particular address.
Mail volumes have declined over the last 2 years and USPS is projecting
even lower volumes in 2009 and 2010 (see figure 2). Even so, USPS's
delivery network increases by more than 1 million addresses each year.
This trend poses a challenge to reducing delivery costs because as the
network expands, so do some of USPS's overhead costs.
Figure 2: Total Mail Volume, by Year:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 1994;
Mail volume (billions of pieces): 178.
Fiscal year: 1995;
Mail volume (billions of pieces): 180.7.
Fiscal year: 1996;
Mail volume (billions of pieces): 183.4.
Fiscal year: 1997;
Mail volume (billions of pieces): 190.9.
Fiscal year: 1998;
Mail volume (billions of pieces): 196.9.
Fiscal year: 1999;
Mail volume (billions of pieces): 201.6.
Fiscal year: 2000;
Mail volume (billions of pieces): 207.9.
Fiscal year: 2001;
Mail volume (billions of pieces): 207.5.
Fiscal year: 2002;
Mail volume (billions of pieces): 202.8.
Fiscal year: 2003;
Mail volume (billions of pieces): 202.2.
Fiscal year: 2004;
Mail volume (billions of pieces): 206.1.
Fiscal year: 2005;
Mail volume (billions of pieces): 211.7.
Fiscal year: 2006;
Mail volume (billions of pieces): 213.1.
Fiscal year: 2007;
Mail volume (billions of pieces): 212.2.
Fiscal year: 2008;
Mail volume (billions of pieces): 202.7.
Fiscal year: 2009 (projected);
Mail volume (billions of pieces): 180.
Fiscal year: 2010 (projected);
Mail volume (billions of pieces): 170.
Source: USPS.
[End of figure]
One of USPS's core strengths is what is referred to as "the last mile"
of mail delivery--that is, its carrier delivery network reaches
millions of business and residential addresses 6 days a week. Carriers
perform a variety of activities each workday to support this delivery
network, some of which are illustrated in figure 3.
Figure 3: Selected USPS Carrier Activities:
[Refer to PDF for image: eight photographs]
Manually sorting mail;
Filling out paperwork;
Scanning mail before leaving the delivery unit;
Taking mail to the delivery vehicle;
Loading delivery vehicle;
Delivering parcels;
Loading a mailbox;
Unloading a collection box.
Source: © 2009 USPS. Used with permission. All rights reserved.
[End of figure]
These activities are divided between the office and the street. During
office time each morning, carriers organize their mail for delivery.
First, carriers manually sequence unsorted letter and flat mail into
delivery order by inserting each piece into the pigeonhole in their
case[Footnote 12] that corresponds to the address on the route. The
sorted mail is removed from the case, bundled for delivery, and placed
into trays. Carriers then pick up and organize their parcels and
accountable mail (e.g., Certified Mail and Registered Mail) for
delivery. Carriers also conduct safety inspections of their postal
vehicles. During street time, carriers load mail into their vehicles
and proceed to their routes. Carriers then deliver and collect mail,
traversing their routes by foot, vehicle, or a combination of both.
They also perform various other tasks such as scanning mail with
Delivery Confirmation, obtaining signed receipts for Registered Mail,
and picking up parcels. After traversing their routes, carriers return
to their delivery units and complete various administrative duties such
as depositing collected mail, handing in receipts and money collected,
and sorting mail for the next day.
USPS Has a Variety of Tools for Monitoring Delivery Efficiency:
USPS headquarters and field officials noted that monitoring delivery
efficiency--that is, determining the extent that mail is delivered
using best work practices in the least amount of time--is a complex
endeavor. They have a variety of tools and systems to help them monitor
delivery efficiency. These include written guidance, as well as
information systems that capture various delivery-related operational
data (see table 2).
Table 2: Tools and Systems for USPS Delivery Managers to Use in
Monitoring Delivery Efficiency:
Written guidance:
Policy Handbooks:
* M-38, Management of Rural Delivery Services (Rural Carriers);
* M-39, Management of Delivery Services (City Carriers);
* M-41, City Delivery Carriers Duties and Responsibilities;
* Postal Operations Manual 603, Rural Carrier Duties and
Responsibilities;
Operating Procedures:
* Morning Standard Operating Procedures;
* Rural Delivery Standard Operating Procedures;
Collective Bargaining Agreements:
* 2006-2010 Agreement between the U.S. Postal Service and the National
Rural Letter Carriers' Association and other related documents;
* 2006-2011 National Agreement between the National Association of
Letter Carriers and the U.S. Postal Service and other related
documents.
Information systems and associated operating data:
* Flash System: Tracks system-wide delivery operational and budgetary
information;
* Delivery Operations Information System: A national database system
which contains delivery information for 97 percent of city delivery
routes (almost 8,600 delivery units) that is used by postal managers to
manage delivery operations. This database incorporates the Managed
Service Point system that collects information from carriers as they
scan bar-coded labels placed at various points throughout their route;
* Rural System: Tracks performance information on rural delivery
routes;
* My Post Office: A tool used to track and report on the number and
resolution of delivery-related issues raised primarily by small local
businesses and residents;
* Business Service Network System: Tracks customer information
including complaints and problems for large mailers;
* Mail History Tracking System: Provides information on local letter
mail-processing operations and helps identify problems with the
sequencing of this mail before delivery;
* Miscellaneous Service Systems: USPS systems for monitoring delivery
performance measurement for Express Mail and some single-piece and bulk
First-Class Mail, a Priority Mail, Package Services, and International
Mail; may provide data on areas experiencing poor delivery performance.
Source: USPS.
[A] The External First-Class Measurement System, administered by a
contractor, measures when test mail pieces are deposited in collection
boxes and received at various addresses.
[End of table]
The tools--the written guidance and operational data--assist delivery
managers in conducting effective monitoring by helping them in setting
carriers' expectations and evaluating their performance (compared to
those expectations). The expectations can include how much time
carriers should need to prepare the mail for delivery and when carriers
should depart for and return from their respective routes. The tools
provide the policies, processes, and data that are used to evaluate the
delivery efficiency of a particular carrier or delivery unit. The data
provide managers with information on a variety of factors such as mail
volumes, addresses, or amounts of mail that need to be manually sorted.
Managers supplement these data with other information as appropriate,
such as whether any carriers called in sick, or if weather conditions
or road construction are likely to affect delivery.
When evaluating delivery efficiency, these managers stated that while
they use many efficiency indicators (such as those included in table
3), there is no single, clear-cut measure of delivery efficiency across
all postal units. They also noted that:
* the systems supporting these metrics allow for data to be analyzed in
many different ways (e.g., the systems allow for data to be tracked at
the national, area, district, delivery unit, route, and carrier level,
and over specific periods of time) and:
* some indicators track factors external to the delivery unit that can
affect a carrier's delivery efficiency. For example, the metric used to
calculate "Delivery Point Sequence (DPS) Percentages" tracks the
percentage of letter mail that has been sorted into delivery sequence
using automated equipment. This percentage can directly impact the
amount of time carriers spend in the office, because the higher the DPS
percentage, the less time carriers will need in the office to manually
sequence their letter mail into delivery order.
Table 3: Key Delivery Metrics USPS Uses to Monitor Delivery Efficiency:
Metric: Deliveries per hour;
Description: The number of addresses delivered for each workhour used.
Metric: Total cased[A] volumes;
Description: The volume of mail that needs to be manually cased by
carriers.
Metric: Delivery Point Sequence (DPS) percentages;
Description: In the delivery units that receive DPS letters, this is
calculated by dividing DPS letters by total letter volumes (DPS letters
+ cased letters) multiplied by 100.
Metric: City carrier workhours;
Description: The number of workhours used by city carriers.
Metric: City deliveries per route;
Description: The number of addresses delivered to on a particular city
delivery route.
Metric: City delivery percentage to standard;
Description: This metric compares city carrier office performance to
"standard" rates.[B]
Metric: City delivery--Office Efficiency Indicator (OEI);
Description: A calculation of cumulative deliveries divided over the
total carrier office workhours.
Metric: City delivery--Street Efficiency Indicator (SEI);
Description: A calculation of cumulative deliveries divided by the
total carrier street workhours.
Metric: City carrier overtime;
Description: The number of overtime workhours used by city carriers.
Metric: City carrier penalty overtime;
Description: The number of penalty overtime workhours used by city
carriers. Penalty overtime workhours are paid at a rate of twice the
base hourly straight time rate for overtime work.
Metric: Carriers back by 1700;
Description: The number of city carriers who arrive back into the
office from their route by 1700 (i.e., 5:00 p.m.).
Metric: Rural carrier workhours;
Description: The number of workhours used by rural carriers.
Metric: Rural carrier overtime;
Description: The number of overtime workhours used by rural carriers.
Metric: Rural percentage to standard;
Description: A calculation of the number of workhours used by rural
carriers divided by the expected contractual number of rural carriers.
Source: USPS.
[A] Casing is the manually sorting mail into delivery order.
[B] The established standards specify, among other things, that city
carriers are to manually case 8 flats or 18 letters per minute.
[End of table]
These officials stated there are major differences in how efficiency is
monitored, depending on whether routes are being served by city or
rural carriers. According to USPS officials, due to the nature of city
routes (they account for the majority of delivery workhours and costs
and city carriers' compensation is based on an "hourly" system), far
more data are collected and analyzed for city routes compared to rural
routes. For example, USPS has implemented the Delivery Operations
Information System (DOIS) national database, which collects significant
amounts of delivery-related data, to assist city delivery unit
supervisors in (1) managing office activities, (2) planning street
activities, and (3) tracking and monitoring delivery performance. DOIS
receives constant data feeds from various systems including the Managed
Service Point program, which collects information from city carriers as
they scan bar-coded labels placed at various points throughout their
route (e.g., on mailboxes). This system provides USPS a tool for
monitoring the consistency of delivery time, and, in doing so, can help
hold carriers accountable for their performance: if a carrier's scans
differ significantly from the norm or are otherwise divergent (e.g., a
point was not scanned), the delivery manager is to review these
instances with the carrier.
Differences in Management and Operations Result in Varying Degrees of
Efficiency throughout USPS's Delivery Network:
Using USPS's delivery metrics and rankings and the results of our own
analysis of USPS's delivery operations, we found that the efficiency of
USPS's delivery units varied. For example, figure 4 shows the
distribution of Office Efficiency Indicator (OEI) across selected
delivery units. OEI measures the number of addresses a delivery unit
handles per hour of office time--units with higher OEI scores handle
more addresses per office workhour than those with lower OEI scores
(thus, other things being equal, higher values indicate more efficient
use of carrier office time). As can be seen in figure 4, there is
considerable variation in the indicator across delivery units, with
many offices showing a considerably lower value of OEI than the average
score of 286.[Footnote 13]
Figure 4: Office Efficiency Indicator for Select City Delivery Units,
2008:
[Refer to PDF for image: vertical bar graph]
2008 Office Efficiency Indicator: 0 to 25;
Frequency (of delivery units): 3.
2008 Office Efficiency Indicator: 25 to 50;
Frequency (of delivery units): 7.
2008 Office Efficiency Indicator: 50 to 75;
Frequency (of delivery units): 29.
2008 Office Efficiency Indicator: 75 to 100;
Frequency (of delivery units): 106.
2008 Office Efficiency Indicator: 100 to 125;
Frequency (of delivery units): 245.
2008 Office Efficiency Indicator: 125 to 150;
Frequency (of delivery units): 327.
2008 Office Efficiency Indicator: 150 to 175;
Frequency (of delivery units): 512.
2008 Office Efficiency Indicator: 175 to 200;
Frequency (of delivery units): 590.
2008 Office Efficiency Indicator: 200 to 225;
Frequency (of delivery units): 587.
2008 Office Efficiency Indicator: 225 to 250;
Frequency (of delivery units): 663.
2008 Office Efficiency Indicator: 250 to 275;
Frequency (of delivery units): 711.
2008 Office Efficiency Indicator: 275 to 300;
Frequency (of delivery units): 653.
2008 Office Efficiency Indicator: 300 to 325;
Frequency (of delivery units): 556.
2008 Office Efficiency Indicator: 325 to 350;
Frequency (of delivery units): 512.
2008 Office Efficiency Indicator: 350 to 375;
Frequency (of delivery units): 379.
2008 Office Efficiency Indicator: 375 to 400;
Frequency (of delivery units): 317.
2008 Office Efficiency Indicator: 400 to 425;
Frequency (of delivery units): 200.
2008 Office Efficiency Indicator: 425 to 450;
Frequency (of delivery units): 192.
2008 Office Efficiency Indicator: 450 to 475;
Frequency (of delivery units): 150.
2008 Office Efficiency Indicator: 475 to 500;
Frequency (of delivery units): 117.
2008 Office Efficiency Indicator: 500 to 525;
Frequency (of delivery units): 97.
2008 Office Efficiency Indicator: 525 to 550;
Frequency (of delivery units): 76.
2008 Office Efficiency Indicator: 550 to 575;
Frequency (of delivery units): 47.
2008 Office Efficiency Indicator: 575 to 600;
Frequency (of delivery units): 40.
2008 Office Efficiency Indicator: 600 to 625;
Frequency (of delivery units): 39.
2008 Office Efficiency Indicator: 625 to 650;
Frequency (of delivery units): 26.
2008 Office Efficiency Indicator: 650 to 675;
Frequency (of delivery units): 23.
2008 Office Efficiency Indicator: 675 to 700;
Frequency (of delivery units): 15.
2008 Office Efficiency Indicator: 700 to 725;
Frequency (of delivery units): 15.
2008 Office Efficiency Indicator: 725 to 750;
Frequency (of delivery units): 8.
2008 Office Efficiency Indicator: 750 to 775;
Frequency (of delivery units): 11.
2008 Office Efficiency Indicator: 775 to 800;
Frequency (of delivery units): 3.
2008 Office Efficiency Indicator: 800 to 825;
Frequency (of delivery units): 8.
2008 Office Efficiency Indicator: 825 to 850;
Frequency (of delivery units): 4.
2008 Office Efficiency Indicator: 850 to 875;
Frequency (of delivery units): 4.
2008 Office Efficiency Indicator: 875 to 900;
Frequency (of delivery units): 4.
2008 Office Efficiency Indicator: 900 to 925;
Frequency (of delivery units): 5.
2008 Office Efficiency Indicator: 925 to 950;
Frequency (of delivery units): 2.
2008 Office Efficiency Indicator: 950 to 975;
Frequency (of delivery units): 1.
2008 Office Efficiency Indicator: 975 to 1000;
Frequency (of delivery units): 1.
Source: GAO analysis of USPS data.
Note: Data cover approximately 7,300 city delivery unit finance numbers
that are tracked in DOIS. The Office Efficiency Indicator is a
calculation of the cumulative possible deliveries divided by the total
office workhours.
[End of figure]
Furthermore, during our site visits and interviews with USPS delivery
officials in headquarters, areas, districts, and local delivery units
and our analysis of city delivery operations, we found that certain
factors can affect the efficiency of a particular delivery unit,
including the following:
* Delivery manager quality, experience, and local knowledge. Delivery
officials stated that delivery managers who are not familiar with the
local unit's office and street operations and either do not effectively
use or are not trained to use tools such as DOIS for monitoring
delivery efficiency will struggle to achieve efficient operations.
These problems appeared in most of the lower-ranked units we visited,
where the delivery managers had generally held that position in that
particular unit for less than 1 year. In certain delivery units, these
managers were not familiar with the intricacies of local delivery
operations and had not yet conducted comprehensive street observations
of carriers. Furthermore, officials from the NALC and NRLCA emphasized
that delivery managers' knowledge of the policies and procedures of
their respective carriers can help to facilitate efficient operations
within that delivery unit.
* Mail processing activities. These officials stated that the extent to
which delivery units receive mail dispatched from the processing plant
in a timely and consistent manner--including a higher percentage of DPS
letters--can promote more efficient operations. For example, receiving
mail at the early segment of the dispatch from the processing plant can
increase a delivery unit's efficiency. Conversely, officials at lower-
performing delivery units, whose units were near the end of the
dispatch queue, told us that any delays earlier in the queue would mean
their mail would arrive late. Delays could ripple throughout the
affected delivery units as carriers waited in their units for mail to
arrive and could not start their respective routes. These sentiments
were echoed by officials at the NALC and NRLCA, who stated that having
carriers wait at certain delivery units (sometimes as long as a couple
of hours) for their mail to arrive from the processing plant is
detrimental to carrier efficiency.
* Carrier and other support staff. These officials stated that the
extent to which they have an appropriate complement of experienced
carriers and support staff also can affect the efficiency of delivery
operations. In particular, officials at the lowest-performing delivery
unit we visited indicated that frequent carrier turnover (e.g., where
carriers can "bid-out" and transfer to other delivery units for reasons
such as their route was located in a "bad neighborhood" or the delivery
unit lacked parking for their personal vehicle) was a significant
problem requiring considerable resources to train new carriers.
Furthermore, officials at other delivery units stated that other
problems such as not having enough clerks to perform key mail
preparation tasks, experiencing attendance-related issues, and having
many carriers placed on work restrictions[Footnote 14] also could
negatively affect a unit's efficiency.
* Size of the delivery unit. These officials stated that achieving
delivery efficiency is much more difficult in larger urban delivery
units than in smaller suburban units. They stated that delivery
managers in these urban units typically have larger carrier staffs and
higher mail volumes, traffic congestion, and more frequent address
changes to contend with. In performing our own analysis of USPS
delivery data, we found that mail volume in a unit was correlated with
measures of efficiency and workload. In particular, we found that in
units with higher volume, the OEI tended to be lower. Similarly, in
those units, overtime levels tended to be higher. It appears,
therefore, that managing workload and improving efficiency is more
difficult in units with larger mail volumes.
* Route structure. These officials stated that the inability of certain
delivery units to align their city carrier route structure with
changing mail volumes would cause inefficiencies in their delivery
operations.[Footnote 15] These officials indicated that some units were
unable to make route adjustments for reasons such as poor delivery
data; the time-consuming and costly nature of the route adjustment
process (covered in greater detail later in this report); or
ineffective relationships with the local NALC representatives. For
example, in most higher-ranked units we visited, city carrier routes
had been adjusted within the last calendar year (when mail volume was
declining), while in other lower-ranked units, officials stated that
some city carrier routes had not been adjusted in over 10 years.
* Delivery unit location. These officials also stated that other
factors including geography, local climate, transportation network, and
roads also can affect delivery efficiency. For example, officials noted
that delivery units located in areas that regularly receive substantial
snowfall or experience major road construction can have more difficulty
achieving efficiencies than areas that are not facing such challenges.
According to USPS officials, it is difficult to compare efficiency
across delivery units because units vary so much in terms of size,
location, weather, and other factors. Moreover, the officials said
variation is to be expected when dealing with a delivery network the
size and scope of USPS's. They stated, and we observed during our site
visits, that delivery managers in the field (e.g., at the area,
district, and delivery unit levels) are very familiar with those
factors. This familiarity provides them useful insight into efficiency
across units and aids them in determining the courses of actions for
less-efficient units. Specifically, in all of the lower-ranked units we
visited, USPS had begun taking actions to increase delivery efficiency.
These actions included having delivery managers follow unit-specific
checklists, bringing in managers from other parts of the country to
train or replace the managers of lower-ranked units, having district
and area officials provide support, and conducting training. For
example:
* One of the districts we visited had replaced the entire management
team at certain low-performing units and assigned district delivery
managers to these units for months to guide and train the new
management teams. District officials reported that this additional
effort was starting to increase the efficiency of these units,
including significant improvements in street efficiency and workhours
used. District officials stated that at one low-performing unit that
was running 300 to 400 hours over projected amounts each month, the
efforts of the district delivery manager and new management team over a
9-month span resulted in the delivery unit operating at about 100 to
150 hours below projected amounts.
* In low-performing delivery units in another district, new delivery
managers from other parts of the country were brought in to replace
poor-performing managers, and the district provided DOIS refresher
training to the delivery supervisors in these units. According to
officials in this district and the lowest-performing unit in that
district, these actions have increased managers' use of and confidence
in DOIS, which is facilitating more efficient delivery.
Our analysis of USPS delivery data and observations at delivery units
we visited were consistent with results of work performed by the USPS
Office of Inspector General (OIG). A report in February 2009[Footnote
16] found inconsistencies in the use of some of these delivery tools
and that supervisors were not monitoring street performance in
accordance with USPS policies, for example:
* USPS policies on the number of DOIS reports supervisors must review
daily were inconsistent.
* Supervisors did not always discuss performance issues with carriers,
conduct street observations, or take corrective action when misconduct
occurred.
* Increases in the number of routes and the size of the geographical
area covered reduced supervisors' ability to provide effective "real-
time" monitoring through street observations.
The OIG made a corresponding recommendation, and USPS delivery managers
in headquarters stated they are taking actions to address it.
USPS Actions Have Improved Delivery Efficiency, but Lack of Performance
Information and Implementation Challenges May Limit Future Savings:
USPS has implemented a broad range of actions to improve delivery
efficiency. These include billion dollar automation investments such as
FSS, processes to expedite the adjustment of city carrier routes to
respond to declining mail volumes, information systems that will
support adjusting routes on a daily and long-term basis, and other
programs to efficiently deal with new addresses and USPS delivery
vehicles. These actions, along with other actions to address declining
mail volumes, have helped USPS generate efficiencies in the delivery
network, and USPS is relying on these actions to generate additional
savings in the future. These future savings, however, may be limited by
USPS's lack of performance information and implementation challenges
for each of these actions.
Individual Actions May Continue Generating Efficiencies and Savings,
although They May Be Limited by Implementation Challenges:
Flat Sequencing System:
Description: USPS's FSS is the cornerstone of its efforts to improve
delivery efficiency. FSS machines delivery sequence flat mail (mainly
large envelopes, catalogs, circulars, and magazines). FSS is based on
the success USPS has achieved deploying DPS equipment, which delivery
sequences letter mail, thus avoiding timely and costly manual sorting.
USPS began implementing DPS on its carrier routes in 1993, and reports
annual cost avoidance of about $5 billion through this effort. DPS
percentages have continued to rise over the years. Figure 5 shows that
for city delivery routes, about 90 percent of letters are delivery
sequenced. Like DPS, the percentage of carrier routes that receive
delivery sequenced letters have grown. At the end of 2008, 99 percent
of all city delivery routes and 86.5 percent of all rural routes
received delivery sequenced letter mail.
Figure 5: Delivery Sequenced Letter Mail Volume Trends for City
Delivery:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 1993;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 0.4%.
Fiscal year: 1994;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 6.3%.
Fiscal year: 1995;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 12.3%.
Fiscal year: 1996;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 21.4%.
Fiscal year: 1997;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 35.3%.
Fiscal year: 1998;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 43.8%.
Fiscal year: 1999;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 49.6%.
Fiscal year: 2000;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 55.6%.
Fiscal year: 2001;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 61.5%.
Fiscal year: 2002;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 62.1%.
Fiscal year: 2003;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 65.7%.
Fiscal year: 2004;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 71.4%.
Fiscal year: 2005;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 74.5%.
Fiscal year: 2006;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 78.4%.
Fiscal year: 2007;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 82.9%.
Fiscal year: 2008;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 87.6%.
Fiscal year: 2009;
Percentage of letter mail sorted using Delivery Point Sequencing
equipment: 90.2%.
Source: USPS.
[End of figure]
Prior to FSS, approximately 80 percent of all flat mail (46.6 billion
pieces in 2008) was manually sorted into delivery order by carriers in
the delivery unit. USPS has found that replacing manual mail processing
with automation is the largest factor in improving operational
efficiency and service performance. USPS expects FSS to increase in-
office productivities by eliminating inefficiencies associated with the
manual sorting of flat mail by carriers. Figure 6 illustrates that on
an average route, a city carrier would manually sort nearly 500 less
flat mail pieces each day once FSS automation is implemented. Thus, in
addition to reducing the amount of flat mail that carriers would need
to manually sort each morning, FSS would sort flat mail more quickly
and accurately, and improve the consistency and timeliness of delivery.
Based on lessons learned from DPS (it has taken USPS 15 years to
achieve a DPS percentage of about 90 percent for letter mail), USPS
expects it will take less time for FSS to achieve high percentages
(i.e., about 80 percent) of delivery sequence flats than occurred with
letters.
Figure 6: Differences in Average Daily Flat Mail Volumes That Will Need
to be Manually Sorted on City Carrier Routes Receiving FSS Mail:
[Refer to PDF for image: illustration]
Manually sorted without FSS: 615 pieces (5.3 feet);
Manually sorted with FSS: 123 pieces (1 foot).
Source: GAO graphic based on USPS data.
Note: On FSS routes, city carriers, on average, will be manually
sorting nearly 500 less flat mail pieces (the equivalent of 4 feet of
flat mail) each day.
[End of figure]
Because carriers will have less mail to manually sort, they will have
more available time to deliver mail. According to USPS, this will
create opportunities to consolidate or realign delivery routes, thereby
reducing the need for carriers, carrier workhours, and overtime. These
cumulative changes could then also reduce the need for delivery
vehicles and facility space. Since a vehicle is assigned to most
carrier routes, if certain routes were consolidated, fewer delivery
vehicles and less fuel would be needed. With less mail to sort
manually, carriers would also need less casing equipment and facility
space. USPS officials also noted that route adjustments may change the
time customers receive their mail and collection service (i.e., they
may receive mail earlier or later in the day).
Status: USPS has been planning and testing FSS for years and has
recently begun deploying these machines. In December 2006, USPS
committed $1.5 billion to test and purchase FSS machines, and prepare
mail processing facilities for these machines. These efforts have
included renovating and expanding plants and equipment to house and
operate future FSS machines (each machine has a large footprint and is
expected to need approximately 30,000 square feet). USPS also has taken
extensive action to prepare delivery units to receive FSS mail--
including working with delivery units that will receive FSS mail to
ensure that they are certified according to USPS standard operating
procedures and collecting data to assist delivery unit managers
effectively inspect and adjust FSS-impacted carrier routes. USPS has
coordinated its FSS efforts with carriers and their bargaining units
and modified work rules and practices to incorporate FSS mail. In
particular, agreements with the NALC and NRCLA have been signed to
develop appropriate work rules and route inspection and adjustment
procedures. In addition, USPS has taken steps to keep all stakeholders
informed about FSS, such as posting material to a new FSS Web page,
[Footnote 17] and making public presentations.
Currently, USPS is in Phase I of FSS deployment (see table 4 for an FSS
timeline). Three FSS machines are operating in the Processing and
Distribution Center in Dulles, Virginia, and, as of the end of June
2009, are processing flat mail for 17 delivery units and 571 carrier
routes in Northern Virginia.[Footnote 18] The final FSS machine slated
for Dulles is currently being tested and installed. Installations in
the next three FSS sites (Columbus - three machines, Phoenix - five
machines, and Kansas City - two machines) will continue in a limited
capacity due to an unsuccessful first article test[Footnote 19] from
December 2008 (see table 4).
Table 4: Key FSS Developments:
Date: Oct. 2003;
Action: Contract awarded for development of FSS prototype machine.
Date: Apr. 2006;
Action: Testing of FSS prototype machine in Indianapolis, Ind.
Date: Dec. 2006;
Action: Board of Governors approved purchase of 100 machines for Phase
I to be installed at USPS facilities throughout the country (areas with
high flat mail volumes) that will cover 1,300 delivery zones.[A]
Date: Sept. 2007;
Action: FSS preproduction machine installed at Dulles Processing and
Distribution Center.
Date: Dec. 2007;
Action: FSS preproduction machine begins live mail testing.
Date: Feb. 2008;
Action: FSS preproduction machine fully operational--live mail is being
processed.
Date: Apr. 2008;
Action: Following declining mail volumes, number of delivery zones
covered in Phase I increased to 1,800.
Date: May 2008;
Action: First production FSS machine was installed in Dulles, Va.
Date: Dec. 2008;
Action: First-article acceptance test on production FSS machine in
Dulles, Va, was unsuccessful due to issues with throughput and system
reliability. Actions are being taken to alleviate these issues and
schedule another test.
Date: Feb. 2009;
Action: Two FSS machines are processing flat mail in Dulles, Va.--the
preproduction machine and the first production machine. Because of
volume declines (7.2 billion flats since 2006), USPS increased the
number of zones expected to support FSS to 1,993 and is reconsidering
where the 100 FSS machines are to be deployed.
Date: June 2009;
Action: Three production FSS machines are processing flat mail in
Dulles, Va. The first phase of the first article retesting was
completed, with the second phase scheduled for August 2009.
Date: Oct. 2010;
Action: One hundred FSS machines for Phase I to be fully deployed.
Source: USPS.
[A] A delivery zone is a small geographic area represented by the five
digits of a ZIP Code, and each zone contains a number of carrier
routes.
[End of table]
Throughout this process, USPS has actively worked with members of the
mailing industry to facilitate FSS implementation. Business mailers are
the key source of flat mail and play a major role in preparing,
transporting, and addressing flats. Incorporating FSS requirements into
mailer's operations may require them to make significant investments in
equipment and transportation so that their mail preparation activities
are compatible with FSS. During a forum we hosted with mailer
representatives in fall of 2008 and in more recent conversations, these
representatives stated that USPS has done a good job of communicating
and coordinating with them regarding FSS developments and challenges.
Specifically, they recognized the following efforts:
* A joint USPS-mailer workgroup developed a communications plan to keep
mailers and others informed of FSS developments.
* A joint USPS-mailer workgroup established rules for where the address
must be placed on flat mail.
* A joint USPS-mailer workgroup is developing new methods for bundling
flat mail.
* USPS has implemented processes for communicating FSS developments,
which include the use of multiple channels such as USPS publications,
the newly created FSS Web page, and presentations to mailers.
* USPS management has taken actions to respond to flat mail volume
declines by, among other things, reconsidering where the 100 FSS
machines are to be deployed.
Reported performance/opportunities for additional efficiencies: USPS
has set financial and operational targets for FSS implementation and
deployment. As part of the FSS's project justification, USPS estimated
annual cost savings and productivity improvements.[Footnote 20] These
savings levels were predicated on USPS meeting the various operational
targets; for example, each day FSS machines are expected to operate for
17 hours and delivery sequence over 280,000 flat mail pieces.
USPS has been tracking the results and performance of the current FSS
machines in the Dulles facility. Delivery managers in headquarters and
the Capital Metro Area--which has responsibility for the Dulles
facility--have reported positive benefits. They noted in delivery units
that have received FSS-delivery-sequenced flats for 2009, workhours are
down compared with the same period in 2008, and carriers have been able
to get to the street earlier in the day and handle more deliveries.
Although these officials recognize that lower mail volumes factor into
some of these savings, they noted that FSS helped USPS more effectively
manage this decrease in workload. For example, in the Reston, Virginia,
Delivery Annex, FSS implementation has resulted in:
* eliminating nine full-time routes and two rotating carrier positions,
and adding two auxiliary routes;[Footnote 21]
* reducing seven full-time regular positions and one transitional
position from city carrier employment rolls;
* reducing one full-time regular clerk position;
* reallocating seven vehicles from city routes to rural routes; and:
* removing 56 pieces of casing equipment, freeing up space in the annex
for other purposes.
Challenges: Several challenges threaten USPS's ability to meet its FSS
deployment milestones and cost-saving targets. The most pressing
challenge is declining flat volumes, which have required USPS to re-
evaluate its deployment plans (see figure 7).
Figure 7: Annual Percent Change in Volume of Domestic Flat Mail, 2003-
2008:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 2003;
Percent change in flat mail volume from previous year: 0.1%.
Fiscal year: 2004;
Percent change in flat mail volume from previous year: 1.9%.
Fiscal year: 2005;
Percent change in flat mail volume from previous year: 2.9%.
Fiscal year: 2006;
Percent change in flat mail volume from previous year: -0.3%.
Fiscal year: 2007;
Percent change in flat mail volume from previous year: -2.6%.
Fiscal year: 2008;
Percent change in flat mail volume from previous year: -11.1%.
Source: GAO analysis of USPS data.
[End of figure]
USPS has reported flat volumes have declined by 7.2 billion pieces
since 2006 (a 13 percent reduction), and USPS is projecting 2009
volumes to be the lowest in nearly 15 years. Taking these developments
into account, USPS has already begun refocusing its FSS deployment
through the following actions:
* Expanding the geographic reach of certain FSS machines. Previously,
USPS estimated that the 100 FSS machines deployed as part of Phase I
would serve 1,300 delivery zones. With flat volume declines and the
need for the FSS machines to sort enough flats for USPS to gain
appropriate return on its FSS investment, USPS increased the number of
delivery zones to 1,993. In making these changes, USPS understands that
other factors will affect USPS's operations based on revised
deployment, such as transportation times to and from mail processing
facilities to delivery units in the added zones, as well as FSS's
ability to handle additional delivery zones.[Footnote 22]
* Adjusting deployment locations. Because of significant flat volume
declines, USPS is performing additional analyses to prevent over
deployment of FSS machines and is developing an FSS Redirection Plan.
Originally, each mail processing facility designated as an FSS site was
slated to receive two to five FSS machines. USPS is also considering
deploying fewer machines in certain sites (and in some cases, deploying
single machines) and adding alternative FSS sites to optimize
deployment.
Aside from these volume concerns, other challenges exist that will
affect FSS deployment. In December 2008, the first FSS production
machine did not pass its first article test at the Dulles facility;
this key engineering test was originally scheduled for November 2008,
but was pushed back due to machine performance issues. Although USPS
has taken actions to coordinate with the manufacturer to resolve these
issues, as of June 2009, FSS has not yet been passed this engineering
test. Considering that the FSS contract schedule required that five FSS
machines be operational at this time, nationwide deployment has been
delayed and revised. These delays could hinder USPS's ability to fully
realize efficiencies under FSS, particularly as the PRC recently
testified that it took nearly a decade for DPS efficiencies to be fully
realized.[Footnote 23] USPS is taking actions to minimize the effects
of this delay, including having the manufacturer continue installation
of FSS machines at the initial deployment sites and accelerating the
installation schedule. Also, the USPS OIG has reported on the flats
volume and FSS engineering challenges facing USPS. The OIG has issued
multiple reports on the status of FSS, including a December 2008 report
that outlined the risks associated with these challenges.[Footnote 24]
FSS is also going to have a noticeable impact on its carriers, postal
customers, and mailers, as USPS will need to make operational
adjustments to effectively achieve savings. In terms of the carriers,
they will need to adjust to a change in their office and street times,
as well as route adjustments based on FSS operations, which may result
in changes in the number or deployment of full-and part-time carriers.
Furthermore, customers may also be impacted by FSS operations in that
due to more efficient sorting, their flat mail should be delivered in a
timelier, more consistent manner. However, the potential route
adjustments may impact the time customers receive their mail delivery
and collection service each day (i.e., earlier or later). Furthermore,
while mailers expressed optimism that the FSS program would reduce USPS
costs, they also noted that challenges remain. For example, they noted
USPS's deteriorating financial condition could impact its ability to
acquire the capital funds needed to purchase newly developed equipment
that will support FSS operations. Specifically, they stated that USPS
equipment to handle flat mail bundles will be essential for them to
prepare flat mail in a cost-effective manner. These mailers also stated
that uncertainty remains regarding the pricing of FSS mail--as FSS
reduces costs for USPS, postal rates for flat mail will need to be
lower than they would have been if FSS had not been implemented for
mailers to benefit from FSS.
Considering the impact that FSS is projected to have on postal
stakeholders, including employees, mailers, and the public,
communicating with these parties regarding the status of FSS is
crucial. USPS has already taken actions, including establishing a
Communications Plan to notify stakeholders of FSS developments; working
with mailers as part of the Mailers Technical Advisory Committee; and
coordinating with employees, the NALC, and the NRLCA, to find ways
incorporate FSS into carrier operations.
City Carrier Route Inspections, Adjustments, and Carrier Optimal
Routing:
Description[Footnote 25]: City carrier routes--which may include time
spent in the delivery unit preparing mail for delivery (e.g., office
time) and then time spent delivering mail (e.g., street time)--are set
to take as close to 8 hours of daily work as possible, which USPS
considers an efficient route. This determination is based on multiple
factors, including mail volumes and types, number of deliveries, and
travel times. If either USPS or a carrier identifies a significant
change in one or more of these variables (for example, if mail volumes
and the number of deliveries increase), these parties have collectively
bargained agreements that provide procedures to have the route
inspected to determine if the route needs to be adjusted to fit an 8-
hour workday.
Historically, USPS and the NALC have had three agreed-upon processes
for adjusting city carrier routes:
* Formal Route Inspection is management initiated and involves
observing a carrier's office and street activities for 1 or more days,
counting and recording the mail that the carrier handled, and recording
the time the carrier uses for each activity. A formal inspection is
conducted on every carrier route within the delivery zone.
* Minor Route Adjustment is management initiated and involves using a
carrier's office and street time data, number of addresses where mail
is delivered, and latest route inspection data.
* Special Route Inspection is carrier or management initiated and
conducted in the same manner as a formal route inspection, and may only
involve one or more carrier routes. A special inspection may be
required if the carrier is experiencing conditions such as excessive
overtime, consistently leaving or returning to the office late, or
significant change in number of deliveries.
USPS does not have strict policies on the timing and frequency of city
carrier route inspections. Rather, delivery managers are to continually
monitor routes to identify when route inspections and adjustments are
needed. Consequently, the timing and frequency of city carrier route
inspections and adjustments vary throughout the country. According to
USPS's system for tracking route inspections and adjustments (the
National Route Adjustment System), between 2006 and 2008, USPS
conducted formal route inspections of 90,697 city carrier
routes.[Footnote 26] During these 3 years, the annual number of formal
route inspections has fluctuated from a low of 17,633 inspections in
2007 to a high of 46,498 inspections in 2006.
In making route adjustment decisions--mainly determining how to
restructure city carrier routes--USPS has developed the Carrier Optimal
Routing (COR) system. COR is a computerized management tool that uses
digital mapping, algorithms, and route inspection data to create
efficient city carrier routes that are more compact and contiguous.
Among COR's benefits are reduced vehicle-related expenses, minimized
street time, and enhanced carrier safety through better lines of
travel. Since COR's introduction in 2004, USPS headquarters has trained
over 250 employees nationwide to develop COR's database, which is
fundamental to its success. These employees were trained to collect
detailed delivery and geographic data for the database including, among
other things, street address ranges, street prefixes and suffixes,
street names, directionals, one-way streets, traffic signs, and parking
restrictions.
Status: Due to its increasing financial challenges brought on by the
declines in mail volume, USPS delivery managers were concerned that
certain city carrier routes were not aligned properly (that the
expected workload on the routes from declining volumes did not
necessitate 8 hours of work). USPS initiated conversations with the
NALC to discuss options for conducting route inspections and adjusting
routes. Both parties recognized the cost and time associated with the
three aforementioned options limited the number of routes that could be
inspected and adjusted; therefore, they agreed to make significant
modifications to the process. In October 2008, USPS and the NALC
reached a historic agreement on an Interim Alternate Route Adjustment
Process (IARAP) aimed at enhancing USPS's ability to quickly respond to
declining mail volumes and improve the efficiency of carrier
operations. IARAP was developed to be expeditious, less contentious,
data driven, and jointly administered. USPS and the NALC began
evaluating routes using this process in October 2008. Joint USPS and
NALC route evaluation teams were established in each district to work
with delivery unit managers and union representatives to evaluate and
adjust routes. Through this effort, 90,000 routes were evaluated and
adjustments were implemented between January and May 2009, with 2,500
routes being eliminated.
USPS and the NALC jointly evaluated IARAP between November 2008 and
March 2009, and, because opportunities for improvement were identified,
the process was modified. A Modified Interim Alternate Route Adjustment
Process (MIARAP) was agreed to by both parties and signed in early
April 2009, and included, among other things, a formal dispute
resolution process (a diagram of both processes is illustrated in
figure 8).
Figure 8: Summary of the Interim and Modified Interim Alternate Route
Adjustment Processes:
[Refer to PDF for image: illustration]
Interim Alternate Route Adjustment Process:
Signed: October 2008;
Routes adjusted: November 2008 - May 2009;
Total city carrier routes: 160,000;
Routes not evaluated: 70,000;
Routes evaluated: 90,000;
Adjustments implemented.
Modified Interim Alternate Route Adjustment Process:
Signed: April 2009;
Routes adjusted: June 2009 - February 2010.
Routes to be evaluated: 70,000;
Possibility of routes being eliminated[A];
Routes to be reevaluated: 87,500;
Possibility of routes being eliminated[A];
Adjustments to be implemented;
All remaining routes to be evaluated again: Up to 157,500;
Possibility of routes eliminated[A].
Adjustments to be implemented.
Source: GAO analysis of USPS operations.
[A] Depending on the results of the route evaluations, a segment of
these routes could be eliminated.
[End of figure]
Under MIARAP, all 157,500 city carrier routes are to be evaluated.
Starting in June 2009, the 70,000 routes that were not evaluated under
IARAP are to be evaluated and the remaining 87,500 routes that were
evaluated under IARAP are to be re-evaluated. By the end of June 2009,
MIRAP had eliminated an additional 1,800 routes. Starting in the fall
of 2009, all routes will be re-evaluated using the latest mail volume
data and adjusted if necessary.
USPS also has taken actions to keep stakeholders such as its employees,
unions, mailing industry, and customers informed of these developments.
These actions include listing the potential routes to be included in
the IARAP adjustments on its Web site, having address updates available
for the mailers at the end of each month, and establishing policies and
procedures for notifying customers if they will be affected by these
changes.
As these route adjustment developments have taken place, so too has COR
implementation. Currently, COR is focused on delivery zones (1) where
FSS will be deployed and/or (2) that contain 10 or more city carrier
routes. As of March 2009, the COR database is complete for 2,904 (47.5
percent) delivery zones, and 3,216 (52.5 percent) remain to be
completed. Of the FSS delivery zones, the COR database is completed for
1,318 (81.5 percent); 299 (18.5 percent) remain to be completed.
According to USPS, about 45 of its 74 district offices used COR to
perform route adjustments during IARAP. USPS attributed this low
percentage to the very time-consuming and technical nature of making
route adjustments using COR. USPS and the NALC have since agreed that
the route evaluation team will jointly use COR, where it is available,
to optimize and adjust routes under MIARAP. USPS also plans to
establish a network of COR subject matter experts. Each area office is
to identify 4 COR users to become subject matter experts (36
nationwide). Headquarters will train these employees and keep them
updated on the latest COR developments. The COR subject matter experts
are to train, assist, and update others within their respective area
offices.
Reported performance/potential opportunity for additional efficiencies:
USPS stated that significant savings should be derived after inspecting
and adjusting routes based on the agreements with the NALC. According
to USPS, these efforts could result in annualized savings of nearly $1
billion, and result in more consistent delivery service; increased
employee satisfaction; and reduced facility space needs, miles driven,
and fuel use. Some of the expected savings will be achieved in 2009,
but the majority of the savings will not be realized until 2010.
The goal of COR is to create an optimal routing scheme that would
reduce workhours, vehicle mileage, fuel, and energy costs; and improve
carrier safety and service. According to USPS delivery officials, 811
city carrier zones (13.3 percent of all city delivery zones) and over
16,000 routes (about 10 percent of all city carrier routes) have been
adjusted using COR. USPS stated that COR will continue to be a
significant part of its delivery strategy for 2009 and 2010.
Challenges: Challenges remain regarding route inspections and
adjustments, as well as the use of COR when doing so. USPS will be
challenged to effectively implement and monitor the vast numbers of
route inspections and adjustments made as part of its agreements with
the NALC. Achieving savings will require major efforts from not only
USPS, the carriers, and the NALC, but also from mailers who will need
to update their address lists with the route adjustments. In terms of
COR, USPS area and district officials cited shortages in COR-trained
personnel to input route and volume data and perform the route
adjustments. Area officials we spoke to said that the timeline mandated
by headquarters to fully implement COR for all delivery units was not
sufficient given the amount of time it takes to collect and input the
data, and many units still do not have complete data inputted into COR.
As USPS continues to expand the reach of its route adjustment process,
it will need to keep stakeholders informed of these developments,
particularly as these changes result in different delivery times for
customers and modifications to mailer operations.
The City Delivery Pivoting Opportunity Model (CDPOM):
Description: CDPOM is a scheduling tool that local delivery managers
can use to align available staffing and resources with delivery needs.
As we mentioned previously, each carrier route is established so that
on an average day, the expected workload will approximate 8 total hours
of office and street time. CDPOM helps city delivery managers make
daily adjustments (called pivots) to deal with daily unstaffed routes.
This may involve transitioning other carriers who (1) may not have
enough volume to support 8 hours of work on their own routes (i.e., the
concept of "undertime" which is illustrated in figure 9) or (2) may
have volumes that support 8 hours of work on their own routes, but will
work overtime to assist on the unstaffed routes. Delivery managers
stated that in many instances it is more cost effective to incur
overtime in these instances rather than incur the costs associated with
bringing in a substitute carrier for the day.
Figure 9: Hypothetical Example of City Carrier "Undertime":
[Refer to PDF for image: stacked horizontal bar graph]
Normal volumes:
Time carrier spends in office: 2 hours;
Time carrier spends on street: 6 hours;
Total: 8 hours.
Low volumes:
Time carrier spends in office: 1.5 hours;
Time carrier spends on street: 5.5 hours;
Undertime: 1 hour;
Total: 8 hours.
Source: GAO analysis of USPS operations.
Note: The above chart shows how undertime may arise due to lower-than-
expected mail volumes. This example assumes a normal 8-hour workday and
that other factors on the route such as number of deliveries and
mileage traveled (everything except for mail volume) remain constant.
[End of figure]
Historical and projected volume and workhour data from DOIS is fed into
CDPOM, which in turn provides output on the expected workload and
workhours needed that day for each carrier route in a particular
delivery unit. Local delivery managers use the output from CDPOM, along
with other data such as the number of available employees, weather, and
accountable mail volume[Footnote 27] to determine the extent to which
pivoting is needed a particular day. The supervisor discusses potential
pivoting opportunities with the potentially impacted carriers and then
sets the route schedule and pivoting plan for the day. CDPOM then
tracks how closely delivery units are able to take full advantage of
pivoting opportunities.
Status: Pivoting began primarily as a "seasonal" tool to manage vacant
routes, such as during summer, when carriers often take vacation and
mail volume is lower than other times of the year. However, as overall
mail volumes have dropped in the past 2 years, delivery units have
significantly expanded the use of pivoting from a seasonal to a daily
management tool.
Reported performance/potential opportunity for additional efficiencies:
According to USPS delivery managers, the use of CDPOM has resulted in
more efficient delivery operations. USPS reported that organization-
wide use of CDPOM has contributed to significant gains in the number of
deliveries per route and reductions in overtime hours. Specifically, in
2008, USPS reported that CDPOM helped increase the number of deliveries
per hour by over 4 percent (to nearly 63 deliveries per hour) while
reducing city carrier overtime hours by more than 25 percent. Although
USPS expects continued efficiency gains from the use of CDPOM, no
performance targets or savings have been reported for 2009. It is
important to note, however, that fewer pivoting opportunities may be
available in the future based on the vast number of potential route
adjustments, particularly if volumes continue to decline or trend back
up.
Challenges: Despite its success, the program still faces some
challenges. During our site visits, we found that employee acceptance
of pivoting varied across delivery units. According to NALC officials,
carriers would generally rather not pivot since they feel a sense of
ownership of their particular routes. USPS delivery managers we met
with indicated some resistance in delivery units where carriers were
used to working overtime and said it can be difficult to pivot carriers
onto unstaffed routes when the projected undertime on their route is
only slightly less than 8 hours for that day. While it is possible to
capture 30 or 45 minutes of undertime from carriers, it is much more
challenging to capture 15 minutes or less.
Delivery Point Growth Management Program:
Description: Growth in USPS's delivery network presents another
important challenge to improving efficiency of carrier delivery
operations. As noted, although overall mail volume has been decreasing,
USPS's delivery network grows by more than 1 million addresses each
year. USPS uses a Growth Management Tool to provide delivery managers
with (1) procedures for contacting local developers to plan for growth
and (2) standardized guidance for determining an appropriate route type
and delivery mode when establishing delivery for new addresses. The
Growth Management Tool identifies key criteria for making decisions,
such as considering low-cost means of delivery. As stated earlier,
delivery costs vary with the type of carrier route (city, rural, or
contract) and delivery mode.
Status: USPS has increased the number of lower-cost delivery routes and
modes as it has taken on more addresses. Table 5 shows how USPS managed
the net increase of 12.6 million new delivery points between 2000 and
2008 by adding only 1,633 routes. USPS made a concerted effort to
promote the use of rural and highway contract routes (which, as
described earlier, are less costly than city routes), while also
promoting the use of more efficient delivery modes, like centralized
delivery, wherein mail is delivered to a limited number of locations
rather than to every business and residence.
Table 5: Changes in Carrier Delivery Routes and Modes, 2000-2008:
Summary: Routes[A] (net);
Change from 2000 to 2008: 1,633;
Other information: See below.
Summary: Delivery points[B] (net);
Change from 2000 to 2008: 12.6 million;
Other information: See below.
City: Routes (net);
Change from 2000 to 2008: -6,876;
Other information: This decline was primarily due to a reduction in the
number of foot and park and loop routes.
City: Delivery points (net);
Change from 2000 to 2008: 3.9 million;
Other information: USPS reduced over 1 million costly door deliveries,
while adding 5.2 million curbline, centralized, and Neighborhood
Delivery Collection Box Unit (NDCBU) deliveries[B].
Rural: Routes (net);
Change from 2000 to 2008: 7,589;
Other information: Most of this increase was comprised of additional
curbline and dismount routes.
Rural: Delivery points (net);
Change from 2000 to 2008: 8.1 million;
Other information: Half of these were curbline deliveries, and the use
of centralized and NDCBU deliveries increased by over 63 percent.
Contract delivery: Routes (net);
Change from 2000 to 2008: 920;
Other information: Similar to rural routes, most of this increase was
attributable to increasing numbers of curbline and dismount routes.
Contract delivery: Delivery points (net);
Change from 2000 to 2008: 0.6 million;
Other information: Most new deliveries are to curbline mailboxes, but
the use of centralized delivery more than tripled.
Source: GAO analysis of USPS data.
Note: Numbers may not add due to rounding.
[A] USPS has four main carrier delivery route categories: (1) foot
routes (4 percent of carrier routes in 2008) limited to city carriers--
for this type of route, the carrier walks to deliver mail and does not
drive a vehicle; (2) park and loop routes (34 percent) when a letter
carrier parks the vehicle and walks out and back over one or more
streets, delivering mail away from and looping back to the vehicle; (3)
curbline routes (49 percent) when a letter carrier (walking or in a
vehicle) delivers to customer mailboxes at the curb; and (4) dismount
routes (12 percent) when a letter carrier leaves a vehicle for one or
more deliveries and then returns to move the vehicle to the next
address.
[B] USPS has four main modes of carrier delivery: (1) other (30 percent
of addresses in 2008), which are primarily door deliveries; (2)
curbline (41 percent); (3) centralized (16 percent); and (4) NDCBU (13
percent), which are centralized units of more than eight individually
locked compartments that receive mail.
[End of table]
Recent developments may impact the manner in which USPS manages growth
in the future. Members of Congress have raised concerns about USPS's
use of outsourcing, which includes contract delivery service, and we
have reported that USPS did not have a comprehensive mechanism for
measuring results or actual savings of these actions.[Footnote 28]
Without cost-savings data, USPS managers, stakeholders, and Congress
cannot assess the value and risk of outsourcing. Furthermore, tied to
the joint USPS/NALC Interim Alternative Route Adjustment Process, these
parties entered into a Memorandum of Understanding on the Assignment of
City Delivery in October 2008 that limits USPS's use of contract
delivery service by stating that, absent a boundary agreement between
the rural and city letter carrier unions, all new growth will go to
city routes unless such growth would create inefficiencies.
Reported performance/opportunities for additional efficiencies: USPS
has not reported on past or projected savings and has not established
performance targets.
Challenges: USPS will continue to be challenged by customers and
employees in promoting these lower-cost forms of delivery. For example,
centralized delivery is often unpopular with residents in new
residential developments, and developers may be unwilling or unable to
work with the local postmasters to utilize centralized delivery.
Furthermore, USPS efforts to advocate lower-cost forms of delivery may
need to incorporate the changes related to the use of contract delivery
service and the requirement that new delivery points adjacent to
existing city routes will be served by city carriers. USPS delivery
managers in headquarters stated they are in the process of revising the
Growth Management Tool to account for these new factors.
Manage Vehicle Fleet:
Description: USPS owns and operates about 198,000 vehicles that support
USPS's delivery and collection operations. To improve delivery
efficiency, USPS is taking actions to reduce, reallocate, and install
Global Positioning Systems (GPS) in its delivery fleet. Specifically,
USPS is taking the following actions:
* Reallocating vehicles to rural routes. USPS is reallocating USPS-
owned vehicles used on city carrier routes to rural routes pursuant to
an agreement with the NRLCA. USPS officials have stated that in certain
geographic areas, it is more cost effective for USPS to own these
vehicles than to reimburse rural carriers for the use of their private
vehicles. USPS is coordinating these efforts with IARAP and MIARAP, as
they may result in excess vehicles due to the elimination of motorized
city delivery routes.
* Reducing delivery vehicle fleet. USPS is attempting to reduce its
delivery vehicle fleet through such actions as its route reduction and
optimization strategies and its Growth Management Program. This
includes attempting to increase the number of foot delivery routes,
particularly for routes that are adjacent to USPS delivery units.
* Testing use of GPS. USPS is testing the use of GPS in USPS-owned
delivery vehicles. These systems collect information on miles traveled,
deviations from routes, idle time (with the engine on or off), and
numbers of stops or park points, thereby providing delivery managers
with a "breadcrumb trail of vehicle activity."
Status: In 2008, USPS purchased over 1,350 delivery vehicles to replace
vehicles used on existing city delivery routes and redeployed the older
vehicles to selected rural routes. USPS also installed GPSs (each unit
costs about $250) in 500 delivery vehicles in Chicago as a pilot
program. Due to the positive response associated with these systems,
they are being deployed in the Albuquerque, New Mexico, and Northern
Virginia districts.
Reported performance/opportunities for additional efficiencies:
Although USPS estimated that reallocating USPS-owned delivery vehicles
will save about $1.3 million each year, a USPS Vehicle Operations
Manager stated that no actual cost savings have been achieved to date,
but that intangible benefits related to carrier safety and retention
have been realized. USPS did not report cost-saving information or
targets for the efforts focused on reducing the delivery fleet or
installing the GPSs.
Challenges: The extent that USPS will achieve these savings will depend
on its ability to overcome certain challenges related to improving its
vehicle fleet. For example, many of the delivery vehicles being
transferred to rural carriers are older vehicles that may require
additional maintenance and incur related costs. Furthermore,
successfully implementing these actions will require cooperation
between USPS, the carriers, and NALC representatives because of the
potential impact on carrier operations (e.g., changing from vehicle to
foot routes or using the GPSs).
USPS's Actions Have Collectively Helped Improve Delivery Efficiency,
but Lack of Performance Targets and Results May Hinder Future Savings:
The actions USPS has taken to improve delivery efficiency, along with
reductions in workload from declining mail volumes, have led to savings
in regular and overtime workhours and their related costs. For its
rural and city delivery operations between 2006 and 2008, USPS reported
reducing nearly 10 million workhours while absorbing 2.7 million
additional addresses. These reductions were the result of city and
rural carriers needing fewer workhours to complete their routes and
USPS being able to pivot or adjust the carrier routes to capture the
undertime associated with increased DPS percentages and declines in
mail volume. USPS also reported reducing its complement by 10,000 full-
time city carriers through attrition.
Specific to city delivery operations, USPS reported saving over 17
million city delivery workhours (nearly $680 million) in 2008 while
absorbing an additional 1 million addresses and cutting overtime hours
and overtime costs each by about 29 percent. As figure 10 shows,
overtime workhours as a percentage of total workhours have been reduced
during this time for city delivery units tracked by DOIS--a trend
likely related to the drop in mail volumes during these years.
Figure 10: Mean Overtime Workhours as a Percentage of Total Workhours,
by Year, for Selected City Delivery Units:
[Refer to PDF for image: vertical bar graph]
Year: 2006;
Percentage of total workhours that are overtime workhours: 13%.
Year: 2007;
Percentage of total workhours that are overtime workhours: 12%.
Year: 2008;
Percentage of total workhours that are overtime workhours: 9%.
Source: GAO analysis of USPS data.
Note: Data cover approximately 7,300 city delivery unit finance numbers
that are tracked in DOIS.
[End of figure]
USPS has also achieved a steady increase in the efficiency of its
delivery operations in the office as measured by USPS's OEI since 2006
(see figure 11).
Figure 11: Mean Office Efficiency Indicator Performance, by Year, for
Selected City Delivery Units:
[Refer to PDF for image: vertical bar graph]
Year: 2006;
Office Efficiency Indicator: 243.
Year: 2007;
Office Efficiency Indicator: 257%.
Year: 2008;
Office Efficiency Indicator: 286.
Source: GAO analysis of USPS data.
Note: Data cover approximately 7,300 city delivery unit finance numbers
that are tracked in DOIS. The Office Efficiency Indicator is a
calculation of cumulative deliveries divided over the total office
workhours. USPS prefers to track a measure of aggregate OEI, but the
trend over the last few years is the same.
[End of figure]
Currently, USPS is projecting for 2009 that its delivery operations
will eliminate about 37 million workhours (reducing costs by
approximately $1.4 billion[Footnote 29]) compared to 2008.
Specifically, USPS is projecting a 27.9 million workhour reduction
($1.1 billion in savings) from city delivery operations and an 8.8
million workhour reduction ($285 million in savings) from rural
delivery operations. These savings are predicated on reducing the
number of city carrier workhours through attrition and the nonrenewal
of transition workforce. USPS has made progress in achieving this goal,
as it has already reported saving almost 26 million city and rural
delivery workhours between October 2008 and mid-May 2009, compared with
the same period last year.
USPS, however, has not identified specific cost-saving targets and
results for many of the aforementioned delivery efficiency actions,
including IARAP, MIARAP, CDPOM, delivery point growth management, or
vehicle fleet management. USPS headquarters delivery officials stated
they do not have specific cost-saving targets or results for many of
their initiatives because it is difficult to isolate the impact of one
initiative from the influence of other factors that can affect
delivery, many of which occur outside the purview of delivery managers
(e.g., declining mail volumes, staffing changes, and delays in
receiving mail from the processing plant). Although we recognize that
isolating the impact of an initiative from other factors can be
difficult, we note that USPS has done so in other areas. For example,
USPS has estimated annual cost savings and productivity improvements
for FSS. However, without targets in place against which to measure
performance, USPS has no way to assess and report on the progress of
its major delivery initiatives, determine whether changes should be
made, and hold managers accountable for achieving targets. As a result,
USPS lacks a key management tool for tracking the savings associated
with each initiative.
We have previously reported on the importance of cost-saving targets
and their benefits for selected USPS operations.[Footnote 30]
Furthermore, provisions in the Postal Accountability and Enhancement
Act required USPS to, among other things, track cost savings and
benefits for its network realignment actions and establish goals for
delivery service performance.[Footnote 31] Developing and implementing
performance targets and results can help inform stakeholders such as
USPS senior management, local delivery managers, employees, unions,
mailers, customers, and Congress, about the effectiveness of these
actions, as well as help postal managers allocate increasingly scarce
resources as efficiently and effectively as possible.
USPS Has Proposed Moving to 5-Day-a-Week Delivery:
USPS has proposed moving to 5-day delivery to help it address its
financial problems. By way of background, in January, the Postmaster
General asked Congress to eliminate the long standing appropriation
provision mandating 6-day delivery. He stated that if 6-day-a-week
delivery became unaffordable, it could become necessary to temporarily
reduce mail delivery to only 5 days a week. In May 2009, USPS testified
that it can no longer afford the costs of 6-day delivery and advocated
the move to 5-day delivery. Specifically, USPS testified that it is
proposing to eliminate delivery on Saturday because delivery volume is
generally lighter on Saturdays and that most business, professional,
and government offices operate on a traditional 5-day week from Monday
through Friday. USPS stated that it is studying this proposal and
engaging with customers to understand their needs and concerns,
recognizing that reducing the frequency of delivery would have an
impact on service.
This study is an opportunity to begin identifying and addressing some
of the challenges that would be associated with such a major change.
For example, in 2008, USPS estimated that eliminating delivery on
Saturday would save $3.5 billion annually, assuming that this reduction
would have no effect on mail volume. Also in 2008, a PRC study
estimated that USPS could annually save $1.9 billion by reducing
delivery to 5 days, based on some different assumptions, such as
assuming that this reduction would lead to a 2 percent volume decline.
[Footnote 32] This year, PRC testified that because changing to 5-day
delivery would result in a nationwide change of service, USPS would be
required to bring it before the PRC, which then would conduct a review,
solicit public input, and issue an advisory opinion on the proposed
change.[Footnote 33]
To date, there are divergent views on the merits of 5-day delivery. For
example, the Association of Postal Commerce (a national group of
businesses and organizations using the mail) recently testified that
USPS will not be able to remain financially self-sustaining for much
longer under its current model unless it is given freedom to make
changes in this and other areas. This association explained that
"desperate times call for desperate measures and the time has come to
match delivery days to mail volume" even though many of its members
have business plans that depend on 6-day delivery. In contrast, the
Mailers Council (a group of mailers that collectively generate 70
percent of mail volume) testified that it opposed 5-day delivery on the
basis that USPS has not explained how it would be implemented. Postal
labor union officials have also opposed 5-day delivery. For example,
the President of the NALC expressed strong opposition to 5-day
delivery, stating that "This is not the time to undercut public and
mailer respect for, and reliance on, the Postal Service by reducing
service drastically and counterproductively to 5 days a week." He
explained that "The nation's mailers have diverse needs and business is
conducted 6 days a week in America. In general they want 6-day delivery
- need 6-day delivery - and expect 6-day delivery." At a May 2009
hearing, USPS announced that it has a new study under way regarding 5-
day delivery, which USPS expects to release in the summer of 2009.
Conclusions:
USPS is facing a number of financial challenges as mail volumes have
declined significantly. As such, USPS has stated that actions to
increase efficiency will become increasingly important throughout its
entire network, particularly in the delivery area. USPS has worked with
its mailers, employees, and unions to take significant actions aimed at
promoting more efficient delivery operations. These actions resulted in
almost $765 million dollars in reported savings from workhour
reductions between 2006 and 2008, with more potentially on the horizon.
Achieving future progress, however, may be difficult. Uncertainties
remain, for example, if volumes continue to fall, will USPS be able to
continue cutting delivery-related costs without severely reducing the
quality of delivery service? Or, if volumes rise, will USPS be able to
absorb the additional volumes without incurring significant additional
costs? We are encouraged by the efforts USPS has taken with its carrier
employees and their unions to promote more efficient delivery
operations. The lack of specific performance measures for some of these
actions, however, limits USPS's understanding of which specific
initiatives achieve the greatest savings or the extent to which others
may not have achieved intended results--information that is
particularly important in a time of financial constraints and limited
resources.
Recommendations:
We recommend that the Postmaster General establish cost-saving targets
and track results for each of the major USPS initiatives to improve
delivery efficiency.
Agency Comments and Our Evaluation:
The U.S. Postal Service provided written comments on a draft of this
report in a letter from the Acting Senior Vice President, Delivery
Operations, dated June 18, 2009. These comments are reproduced in
appendix II, and our evaluation of them is summarized below. USPS also
provided technical comments, which we incorporated where appropriate.
USPS generally agrees with our assessment of mail delivery operations
and reiterated the challenges it faces in an environment of declining
volumes and expanding delivery network. USPS stated it has taken
actions to improve delivery efficiency, and realizes that in spite of
these accomplishments, further efficiencies are both needed and
achievable. USPS did not agree, however, to fully implement our
recommendation for establishing and tracking cost-saving targets for
its major delivery initiatives. Specifically, USPS stated it adheres to
our recommendation for its major capital investment initiatives (e.g.,
FSS), all of which go through a rigorous process to establish an
expected return on investment. For other major delivery initiatives,
such as the Interim Alternative Route Adjustment Process, City Delivery
Pivoting Opportunity Model, and Delivery Point Growth Management which
deal with a particular work practice or address an unforeseen situation
such as the current severe economic recession, USPS does not set formal
cost-saving targets and does not measure specific cost savings. USPS
stated that for these initiatives, (1) management does expect that
results will be achieved, (2) expected savings for these and major
initiatives are built into the operating budget, and (3) steps are
taken to measure success in other ways such as tool usage and number of
employees trained.
We recognize that USPS has already established cost saving targets for
its major delivery initiatives that are also significant capital
investments, such as FSS. Our recommendation, however, extends the
establishment of cost-savings targets to all major delivery
initiatives. In making our recommendation, we did not envision that
establishing cost-savings targets for its major delivery initiatives
would require a highly formalized process, such as the one used for
USPS's capital investment initiatives. We are neither prescribing nor
suggesting how USPS should establish cost-savings targets for its major
delivery initiatives. USPS can use either an existing process or
develop a new one for establishing these cost-savings targets. Once
established, these targets will provide USPS with benchmarks to
evaluate the performance of major delivery initiatives, assist managers
in understanding which initiatives achieved the greatest savings or the
extent to which other initiatives may not have achieved intended
results, and hold managers accountable for achieving these targets.
While we recognize the value of USPS measuring the success of its
initiatives in other ways, due to its escalating financial problems,
USPS will increasingly need to identify opportunities to aggressively
cut costs and improve efficiency in the delivery area.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 14
days from the date of this letter. At that time, we will send copies of
this report to the Postmaster General and other interested parties. In
addition, this report will be available at no charge on GAO's Web site
at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-2834 or herrp@gao.gov. Contact points for our
Office of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix IV.
Signed by:
Phillip Herr:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Objective, Scope, and Methodology:
This report addresses (1) how the U.S. Postal Service (USPS) monitors
delivery efficiency; (2) characteristics of delivery units that affect
their efficiency; and (3) the status and results of USPS's actions to
improve delivery efficiency, in particular, USPS's Flats Sequencing
System (FSS).
To gather information relevant to all three objectives, we interviewed
USPS delivery managers at headquarters, 2 areas, 7 districts, and 21
delivery units, which encompassed 7 states plus Washington, D.C.
[Footnote 34]
To address the first objective, how USPS monitors efficiency, we also
obtained documentation from various officials about their processes,
operating procedures, information systems, and operating data for
monitoring delivery efficiency. This included interviewing headquarters
officials responsible for (1) the nationwide management of city
delivery and rural delivery, (2) delivery-related information systems,
and (3) customer complaint systems focused on the public, smaller
mailers (My Post Office system), and larger mailers (the Business
Service Network). We reviewed USPS internal policies and operating
procedures; its manuals for managing city delivery (M-39, Management of
Delivery Services) and rural delivery (M-38, Management of Rural
Delivery Services); and the collectively bargained agreements between
USPS and its rural carrier and city carrier unions (the 2006-2010
Agreement between the U.S. Postal Service and the National Rural Letter
Carriers' Association and the 2006-2011 National Agreement between the
U.S. Postal Service and the National Association of Letter Carriers).
We also discussed USPS efforts to monitor delivery efficiency with
officials from the USPS Office of Inspector General (OIG) and the
Postal Regulatory Commission.
To address the second objective, identifying characteristics of
delivery units that affect their efficiency, we conducted a multistep
process to identify a range of higher-and lower-ranked units for site
visits.
1. Delivery officials provided us with efficiency rankings of its nine
area offices--which are the nine USPS geographic regions of the
country--for the entire nation. These rankings were based on eight
delivery-related metrics that provide insight into the most and least
efficient delivery organizational units. (Delivery officials stated
that they primarily focus on monitoring delivery efficiency for the
larger city delivery units because they account for the majority of
USPS delivery costs,[Footnote 35] and, in doing so, they rely
significantly on the data provided in the Delivery Operations
Information System (DOIS)).
2. From those nine areas, we identified the top-, middle-, and lowest-
ranked areas.
3. Within those three areas, we then collected rankings on each of the
districts. We identified the top-and bottom-ranked districts within
each area, which narrowed our focus to six districts.
4. Within those six districts, we then collected rankings on each of
the delivery units. We identified the top-and bottom-ranked delivery
units within each of these six districts, which narrowed our focus to
12 delivery units for our potential site visits.
5. We then discussed these 12 delivery units with USPS and considered
other factors, such as potential travel considerations and ratio of
city routes to rural routes in the office, and made revisions as
appropriate. For example, if the two top-(or bottom-) ranked offices
were located close to one another and could easily be incorporated into
our travel, we visited the extra unit(s) to gather additional
information.
During these visits, we observed carrier operations and met with area,
district, and delivery unit officials to discuss delivery operations.
We supplemented this information by collecting data on over 40 delivery-
related metrics including workhours, volumes, office efficiency, and
street efficiency for about 8,000 delivery units throughout the country
(offices that have at least five city delivery routes) from various
USPS delivery information systems, including the DOIS, Flash, Address
Management System, and National Route Adjustment System. We examined
different efficiency measures, how they varied across delivery units,
and how they related to each other. We studied time trends for various
delivery measures and factors that potentially drive those outcomes. We
also reviewed nationwide city and rural carrier information on
workhours, salaries and benefit costs, overtime workhours and costs,
penalty overtime workhours, and sick leave hours. We discussed the
reliability of the data from these systems with delivery officials and
found them sufficiently reliable for our review. In assessing the
reliability of the data, we interviewed delivery officials how the data
were collected, managed, quality tested, and corrected. We also spoke
to delivery data specialists about potential issues with the data and
how they should be resolved. Additionally, we conducted electronic
tests for completeness and accuracy, and to detect potential outliers.
A small number of outliers were excluded from some of the figures. We
also examined data regarding the route adjustment process and reviewed
USPS OIG work on delivery issues.
To address the third objective, determining the status of USPS's
actions to improve delivery efficiency, including FSS, we conducted the
following activities:
* In addition to the aforementioned delivery officials, we met with
officials who managed and implemented the various initiatives,
including the program manager for FSS. We discussed actions to improve
efficiencies--including their reported savings, further savings
opportunities, and challenges associated with these initiatives. We
also discussed USPS actions with representatives from the National
Association of Letter Carriers (NALC), who represent over 214,000
active city delivery letter carriers employed by USPS, and the National
Rural Letter Carriers' Association (NRCLA), who represent nearly 90,000
full-and part-time rural carriers. In fall of 2008, we convened a
roundtable of major mailers to discuss these initiatives, how they may
impact their members, and future challenges, and then followed up with
some of these mailer representatives again in June 2009.
* We viewed demonstrations of the City Delivery Pivoting Opportunity
Model (CDPOM) and Carrier Optimal Routing (COR) programs at USPS
headquarters. In addition to the above mentioned officials, we also
visited and interviewed officials at a mail processing plant and
delivery units that have or are preparing to implement FSS machines.
Specifically, we visited the USPS Processing and Distribution Center in
Dulles, Virginia, where the FSS preproduction machine was operating,
and delivery units in Reston, Va., and Fairfax, Va., both of which
received FSS-processed mail from Dulles. We also met with other mail
processing and delivery unit managers to discuss the impact of FSS on
their operations. This included officials in the Greater Indiana
district who conducted the operational and performance test of the FSS
prototype machine, as well officials in the Central Florida district
who were preparing their district for FSS Phase I deployment.
* We also collected and reviewed other data and documentation on these
initiatives and other delivery-related information from such sources as
USPS Annual Reports, Integrated Financial Plans, Comprehensive
Statements, and Address Management System Delivery Statistics Reports.
We conducted this performance audit from July 2008 to July 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the U.S. Postal Service:
Linda J. Welch:
A/Vice President:
Delivery And Post Office Operations:
United States Postal Service:
475 L'enfant Plaza SW:
Washington DC 20260-7017:
June 18, 2009:
Mr. Phillip R. Herr:
Director, Physical Infrastructure Issues:
United States Government Accountability Office:
Washington, DC 20548-0001:
Dear Mr. Herr:
Thank you for providing the U.S. Postal Service (USPS) with the
opportunity to review and comment on the draft report titled U.S.
Postal Service: Mail Delivery Efficiency Has Improved, but Further
Action Needed to Consolidate Gains (GAO-09-696).
The Postal Service is operating in a challenging business environment.
The current economic climate impacts all aspects of our business and
especially the labor intensive function of delivering mail to more than
129 million residential and business addresses. As noted in the draft
report. Delivery is the largest cost segment within the USPS. At the
end of 2008, over 350,000 full and part-time letter carriers were
engaged in the delivery of mail to customers across the country.
Although mail volume is declining by double digit figures compared to
fiscal year (FY) 2008, our delivery network continues to expand. The
Government Accountability Office (GAO) mentions in the draft report
that during the period of 2006 through 2008, the USPS absorbed nearly
2.7 million addresses while reducing 10,000 career letter carriers. The
management of the Postal Service is justifiably proud of these types of
accomplishments and realizes that in spite of our significant
accomplishments, further efficiencies are both needed and are
achievable.
The Postal Service management generally agrees with the GAO's
assessment of mail delivery operations. The GAO recommends in their
draft report that the Postmaster General establish cost-saving targets
and track results for each of the major USPS initiatives to improve
delivery efficiency. For major investment initiatives such as the Flats
Sequencing System (FSS) initiative referenced in the draft report, the
USPS currently does what the GAO recommends. Prior to the Postal
Service making a significant investment of capital in an initiative, a
rigorous process is followed to ensure that the investment will meet
established return on investment hurdle rates. We establish a baseline
and then set specific targets for reducing workhours or other expenses.
The rationale for a major investment as well as the financial
assumptions and expected results are all clearly defined in the
Decision Analysis Report that supports the investment. Once the
initiative is fully deployed, the standard practice is to conduct a
cost study to validate that the expected savings were achieved.
From time-to-time, the USPS launches an initiative to deal with a
particular work practice or to address an unforeseen situation such as
a current severe economic recession. The Interim Alternate Route
Adjustment Process, City Delivery Pivoting Opportunity Model and
Delivery Point Growth Management are examples of such initiatives.
Although the target setting process is not as formalized for these
initiatives, management does have an expectation of achieving results.
These initiatives generally center upon tools or techniques for
delivery managers to use in order to achieve cost savings. Often, it is
a combination of various initiatives yielding different levels of
results that enable the Postal Service to achieve workhour reductions.
The common denominator for these types of initiatives and major
initiatives such as FSS is that the expected savings are built into the
operating budget. Performance against the approved budget provides a
useful measurement of how effectively managers are managing the
business. Additionally, while the Postal Service does not measure
specific cost savings on every delivery initiative we undertake, we do
and will continue to ensure that we measure the success of such
programs in other ways such as the usage of the tool, number of
employees trained, etc.
The USPS is in the process of finalizing the FY2010 operating budget.
There is no question that we will need to continue to aggressively
manage the business during these challenging times. I am confident that
we will successfully navigate the Postal Service through the current
economic crisis.
If you or your staff wish to discuss any of these comments further, I
am available at your convenience.
Sincerely,
Signed by:
Linda J. Welch:
cc: Mr. Donahoe:
Mr. Galligan:
[End of section]
Appendix III: Geographic Coverage of USPS's Nine Area Offices:
Figure 12: USPS's 9 Area Offices:
[Refer to PDF for image: U.S. map]
The map depicts the geographic coverage of the following nine offices:
Northeast;
Eastern;
New York Metro;
Capitol Metro;
Southeast;
Great Lakes;
Southwest;
Western;
Pacific.
Source: U.S. Postal Service.
[End of figure]
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Phillip Herr, (202) 512-2834 or herrp@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Gerald P. Barnes, Josh
Bartzen, Jeremy Cluchey, Emily Larson, Summer Lingard, Kenneth E. John,
Josh Ormond, Erin Roosa Cohen, Amy Rosewarne, Amy Abramowitz, and
Patrick Dudley made key contributions to this report.
[End of section]
Footnotes:
[1] Unless otherwise noted, year references are for fiscal year.
[2] GAO, U.S. Postal Service: Network Rightsizing Needed to Help Keep
USPS Financially Viable, [hyperlink,
http://www.gao.gov/products/GAO-09-674T] (Washington, D.C.: May 20,
2009); U.S. Postal Service: Escalating Financial Problems Require Major
Cost Reductions to Limit Losses, [hyperlink,
http://www.gao.gov/products/GAO-09-475T] (Washington, D.C.: Mar. 25,
2009); U.S. Postal Service: Deteriorating Postal Finances Require
Aggressive Actions to Reduce Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-332T] (Washington, D.C.: Jan. 28,
2009).
[3] Some postal customers pick up their mail from the local delivery
unit instead of waiting for USPS to deliver it.
[4] In this report, we use the term "delivery sequenced" when referring
to flats and letters that have been automatically sequenced in the
exact order of carrier delivery.
[5] A delivery unit can be a post office, station, branch, or annex
that has mail delivery functions. A district office, of which there are
74 nationwide, is an administrative field unit that oversees most
operational and support functions for delivery units in a defined
geographic area and reports to one of nine USPS area offices. A figure
illustrating the geographic coverage of the nine area offices is
provided in appendix III. The states visited included: Florida,
Georgia, Illinois, Indiana, Maryland, South Carolina, and Virginia.
[6] 39 U.S.C. §101.
[7] 39 U.S.C. §§101 and 403. USPS is to provide a maximum degree of
effective and regular postal services to rural areas, communities, and
small towns where post offices are not self-sustaining.
[8] For example, see Financial Services and General Government
Appropriations Act, 2009, Pub. L. No. 111-8, div. D, title V (Mar. 11,
2009). The provision states that "6-day delivery and rural delivery of
mail shall continue at not less than the 1983 level." Appropriations
are a small part of USPS's total budget--$109 million in 2008 for Free
Mail for the Blind, Absentee Voting, and other adjustments and
reconciliations.
[9] The compensation systems for city and rural carriers are
collectively bargained between USPS and its associated unions--the NALC
represents city carriers, and the NRLCA represents rural carriers.
Generally speaking, city carriers are compensated on an hourly basis,
while rural carriers are salaried employees. Compensation for contract
carriers is established via the contract posted by USPS.
[10] USPS defines a clusterbox as a centralized unit of individually
locked compartments for the delivery of mail.
[11] Centralized delivery is defined as delivery and collection
services to a number of businesses or residences from a centrally
located delivery point or place, such as a group of mailboxes at an
apartment building.
[12] A piece of equipment that contains address separations into which
carriers sort letters and flats.
[13] According to USPS, this variation is expected due to varying
levels of volumes and other characteristics that differ from office to
office, and OEI is an indicator that can be used to measure an entity
against itself and not another entity.
[14] These work restrictions can result from carriers who qualify for
limited and light duty assignments. We are currently conducting a
review of USPS's accommodation of injured workers in limited duty and
rehabilitation assignments and plan to issue a report on this topic
later this year.
[15] According to USPS officials, the annual method for measuring and
adjusting rural carrier routes helps provide a more efficient route
structure.
[16] U.S. Postal Service OIG, Management Advisory - Management of City
Letter Carriers' Street Performance, report number DR-MA-09-001
(Arlington, Va., Feb. 23, 2009).
[17] See [hyperlink, http://ribbs.usps.gov/index.cfm?page=flat].
[18] For maintenance training, two FSS machines are being installed at
USPS's National Center for Employee Development in Norman, Okla.
[19] The First Article Test is the installation and evaluation of the
first production unit to determine whether it conforms to all contract
requirements for acceptance.
[20] Specific cost savings figures for FSS are considered proprietary
by USPS, and are therefore not included in this report.
[21] An auxiliary route is a carrier route that is regularly scheduled
for completion in less than 8 hours and is not up for bid to become a
full-time route.
[22] For example, it is estimated that each day it will take FSS
operators 17 minutes to update the machine for each additional delivery
zone. Thus, as the number of delivery zones expands, so too will the
amount of time needed daily to adjust the FSS machines to handle each
new zone.
[23] Statement of John Waller, Director of Office of Accountability and
Compliance, on behalf of the Postal Regulatory Commission, Before the
U.S. House of Representatives Subcommittee on Federal Workforce, Postal
Service, and the District of Columbia, Committee on Oversight and
Government Reform, May 20, 2009.
[24] USPS OIG, Audit Report-Flats Sequencing System Contractual
Remedies, July 1, 2009, report number CA-AR-09-006; USPS OIG, Audit
Report-Flats Sequencing System: Program Status, December 23, 2008,
report number DA-AR-09-001; USPS OIG, Management Advisory-Management of
Contract Changes - Flats Sequencing System, December 1, 2008, report
number CA-MA-09-002; USPS OIG, Audit Report - Flats Sequencing System:
Production First Article Testing Readiness and Quality, June 4, 2008,
report number DA-AR-08-006.
[25] The system of route inspections and adjustments and Carrier
Optimal Routing only pertains to city delivery carriers. As a
comparison, rural carriers follow collectively bargained guidelines
that require annual Mail Counts to determine the scope of each rural
carrier's route for the upcoming year.
[26] The same route may have been inspected more than once during this
3-year period.
[27] Accountable mail includes Express Mail, Certified Mail, and
Registered Mail, and refers to mail that requires the signature of the
addressee (or addressee agent) upon receipt to provide proof of
delivery or indemnification for loss or damage.
[28] GAO, U.S. Postal Service: Data Needed to Assess the Effectiveness
of Outsourcing, [hyperlink, http://www.gao.gov/products/GAO-08-787]
(Washington, D.C.: July 24, 2008).
[29] According to USPS delivery officials, these estimates are based on
workhour rates that can vary throughout the year.
[30] GAO, U.S. Postal Service: Intelligent Mail Benefits May Not Be
Achieved if Key Risks Are Not Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-599] (Washington, D.C.: May 6,
2009), and U.S. Postal Service: Mail Processing Realignment Efforts
Under Way Need Better Integration and Explanation, [hyperlink,
http://www.gao.gov/products/GAO-07-717] (Washington, D.C.: June 21,
2007).
[31] Sections 301 and 302 of the Postal Accountability and Enhancement
Act (Pub. L. No. 109-435), enacted on December 20, 2006.
[32] PRC, Report on Universal Postal Service and the Postal Monopoly
(Washington, D.C., Dec. 19, 2008).
[33] When USPS determines that there should be a change in the nature
of postal services which will generally affect service on a nationwide
or substantially nationwide basis, it is required to submit a proposal
to the PRC that requests an advisory opinion on that change within a
reasonable time period prior to the change. PRC is required to hold a
hearing on the proposal before issuing its written opinion. 39 U.S.C. §
3661.
[34] A delivery unit can be a post office, station, branch, or annex. A
district office, of which there are 74 nationwide, is an administrative
field unit that oversees most operational and support functions for
delivery units in a defined geographic area and reports to one of nine
USPS area offices. A figure illustrating the geographic coverage of the
nine area offices is provided in appendix III. In addition to visiting
Washington, D.C., we also visited the following states: Florida,
Georgia, Illinois, Indiana, Maryland, South Carolina, and Virginia.
[35] We concentrated our analysis on city delivery rather than rural
delivery because most of USPS's information on delivery efficiency is
focused on city carrier operations and because city delivery accounts
for nearly 75 percent of annual delivery salary and benefit expenses.
[End of section]
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