Postal Automation Delivers
E-commerce and energy costs are cutting into postalrevenues. It’s time to change the way USPS does business, starting withthe 1971 Postal Reorganization Act.
by Bernie Knill, contributing editor
Postal automation has a great track record and greatpotential — provided that the 30-year-old Postal Reorganization Actdoesn’t keep USPS from competing in the kind of race that’s beingheld today.
Starting in the '70s with the ZIP Code, Optical CharacterRecognition and bar codes scanning, the Postal Service has promoted automationas a strategy of growth to the extent that two-and-a-half as much mail is beingmoved through twice as many locations with only one-third more employees. Bymeans of automation the cost of mailing a first-class letter was lowered inreal terms. Other sections of this article show some processing and materialhandling equipment that is taking the cost out of handling all types of mail,not just first-class letters.
Problem is, costs that weren’t around 30 years agohave started ganging up on postal income. For instance:
• Lettermail isn’t the only way to communicate or send a bill. You have fax,e-mail and overnight delivery services to choose from. “E-commerce iseroding first-class mail,” says retired vice president of engineering forCOMPANY NAME, Bill Dowling. “The growth of first-class mail, particularlybills and payments, has slowed dramatically to one or two percent growth ayear. First-class mail used to make a substantial contribution to the USPS.”Also, e-commerce is proving to be compatible with advertising. Customers whorespond to e-mail solicitation are sometimes mailed a catalog or direct mail.But that doesn’t generate the same kind of income margins thatfirst-class mail does.
• Energycosts are rising. USPS operates 30,000 postal facilities and runs 200,000vehicles.
• Universal service, mandated by the Reorganization Act, eats into thepostal budget as 1.7 million new homes and businesses are added to deliveryroutes every year.
• Start-up firms associated with the Internet are nibbling at postalrevenue.
• Foreignpostal services have opened offices in the U.S.
Increased costs plus decreasing revenues add up to a loss ofrevenue that is expected to come to $2 billion to $3 billion this year.
Not that the Postal Service hasn’t been tightening itsbelt. More than 800 capital expenditures on new construction and renovationshave been halted. Automation projects are being reviewed, delayed, halted.
The Postal Service is having a tough time working under therestrictions of the old Postal Reorganization Act. Postal officials, customers,USPS workers and legislators agree that the Act must be changed(“reform” is the operative word).
“There has to be a change in the Postal ReorganizationAct that surrounds the Postal Service,” says Dowling.“There’s been a change in the market but not in the body of lawthat surrounds the Postal Service. We believe it is inappropriate.”
What should a new piece of legislation contain? It is generallyagreed that the Postal Service needs an alternative to dragged-out, hat-in-handrate setting, where everybody gets a crack at proposed rates whilethey’re in the process of being set.
“My view is that we take this from the public sectorto the private sector, including first class, with safeguards. I’m notsaying: Just turn the switch. Allow the Postal Service to compete and allowother organizations to compete on the monopoly side, but still maintaining theconcept of universal service.”
New legislation should provide for more flexibility in bothpricing and wage negotiations. These were some of the points made in a lettersent by the Postal Board of Governors to President Bush last March: “ThePostal Reorganization Act obligates the Postal Service to provide universalservice to America under regulatory and rate-setting schemes now hopelesslyoutdated. Prices for domestic services, which must be cost based, requireapproximately 18 months to prepare, litigate and implement.”
The official Postal Service position is that the PostalReorganization Act needs to be reformed, to be brought up to the realities ofdoing business as it’s being practiced now, and will be practiced in thefuture.
The mandate of “universal service” covers thingswe take for granted:
• A roomfull of people who do nothing but make address changes for households andbusinesses;
• Thoselocal post offices that don’t get closed because they are integral to thecommunity;
• Delivery of mail to every remote location that might not even be on themap.
John E. Potter, incoming postmaster general, USPS, came tothe point in his inaugural address: “The simple fact is, we are at acrossroads. Competition and technology are forcing us to re-examine everything—everything we are doing.” Postal reform was one of those things.“And we have to keep our focus on reform. Working with our stakeholders,we have to reach consensus on the changes that will keep the Postal Servicestrong for many years to come. I’m going to do everything I can to bringall the parties together to work toward this goal. I’m not a rookie atthis. I’ve been around a long time. I’ve been the COO andI’ve negotiated contracts. I’m convinced we can do this.” MHM
Whither the TrayManagement System?
The Tray Management System (TMS) was exactly that: amaterial handling system to manage the flow of mail trays in a postal facility.Its components were conveyors to move the trays in and out, a high-rise storageand retrieval configuration, and a sorter to direct the flow of trays afterthey have been retrieved. “Tray Management Systems were installed at 30sites by three primary contractors: Accu-Sort, Lockheed Martin andSiemens,” says Tom Day.
Recalls Bill Dowling: “Initially when we began thisprogram, we looked for competition in the marketplace. At one time weenvisioned that we would retrofit all the facilities for TMS and that would bea big job for one supplier. It turns out that when the technology was shakenout, it was more challenging than what we or the suppliers expected. And now wehave three very capable suppliers and a nice competitive basis for whatbusiness we do put out for a Tray Management System,” Dowling says.
The initial contract for the Tray Management Systems hasbeen exercised and the Postal Service has gone no further with its deployment,says Tom Day. “We’re at a point now where we will completely revisethat aspect of material handling in the Postal Service. We came to theconclusion in looking at the program that the costs, particularly in terms ofinitial reliability and maintenance of the system, were beyond what we hadanticipated originally. It didn’t give us the return on investment wewere looking for,” he says.
The TMS was installed in both large and small facilities.“That technology doesn’t fit everywhere,” Day says.“When you get to the small facilities, the level of complexity andinvestment required, you really can’t justify it.”
Day believes that the backbone of the TMS, either thetilt-tray or cross-belt sorter, is a good, solid technology, and is a validapplication in a medium to large facility.
“The storage and retrieval systems, on the other hand,were very complex in the control systems required to make those systemseffective,” says Day. He notes that the randomness of the trays movingand stored throughout the system “reaches a level of complexity thatmatches the FAA trying to move flights around the country.
“The way we work is to put the trays into storage andretrieve them at a given point in time during the course of the night for aspecific sort program. The problem we ran into was the capacity of the systemto feed the trays back into the machine,” Day says. “So if youtried to withdraw everything you accumulated during the course of the night,you couldn’t get it out fast enough to get it to the point where youneeded it. The processing machine just needed more mail than you are capable offeeding.
“The other thing that makes the TMS complex is that wehad 30 systems deployed under the contract to three different vendors. Soyou’ve got this logistics support system out there: three different setsof parts and three different systems to maintain on which to train electronicstechnicians. One of the ways we’ll be more effective on both maintenanceand logistical support of parts is when we get a fully deployed national systemand can take advantage of scale,” Day says. MHM