The U.S. Postal Service is in the process of re-engineering the Bulk Mail Center (BMC) network to transform it into a new system of Network Distribution Centers (NDCs). The new network will consolidate the processing of originating mail into fewer sites to achieve greater operational efficiency and reduce transportation costs while expanding the surface transportation reach for more products.
Since 2001 the Postal Service has been evaluating various network design alternatives. In 2006 USPS was planning to redesign its network around approximately 70 Regional Distribution Centers (RDCs), which would perform bulk processing operations for all classes, act as Surface Transfer Centers (STCs), and become mailer entry points. However, due to the impacts of the passage of the Postal Accountability and Enhancement Act, Public Law 109-435 (2006) in late 2006, the approval of the Phase I Flat Sequencing Systems (FSS), the 2007 rate change that introduced shape-based pricing, and the significant amount of capital investment required to implement the network, it was determined that the RDC concept would not result in the planned benefits so the program was stopped.
As a result, in early 2007 the Postal Service began to evaluate another alternative and by mid 2007, the concept of an outsourced Time-Definite Surface Network (TDSN) emerged. The Postal Service considered outsourcing some of the operations currently performed in the Bulk Mail Centers (BMCs) and back filling the BMCs with new FSS and other operations consolidated from nearby facilities. The Postal Service issued both a Request for Information (RFI) and a draft Request for Proposal (RFP) and received significant interest from the industry. However, due to the unprecedented decline in mail volume which began in 2008 and the current economic environment, future volumes became nearly impossible to forecast. Without sufficient volume guarantees, potential suppliers would have placed a premium on the price at which they would be willing to perform the requested services. By late 2008 it was apparent that it was not the right time to outsource a network of this size and scope.
Still facing significant cost reduction targets and excess capacity, the Postal Service turned its attention to an internal reengineering effort aimed at creating more efficient and cost effective use of the BMC network. The current network plan will transform the BMCs into Network Distribution Centers (NDCs) in order to achieve the cost savings and service performance improvements necessary to position the Postal Service for success when the economy begins to rebound.
The new network design is focused on transforming the BMCs into Network Distribution Centers. NDCs will consolidate the processing and dispatching of mail in order to achieve economies of scale, greater operational efficiency, and reduce transportation. The Postal Service is pursuing an incremental approach to the activation of this new network. Service remains the priority of the redesigned network and the implementation strategy reflects that.
The core principle of the NDC concept is to fill up containers and fill up trucks as early in the network as possible and to dispatch as deep into the network as possible. This objective is achieved by using three tiers of consolidation opportunity. The NDC’s level of responsibility depends on its network tier.
The new network, when fully implemented, will include:
Eleven Tier 1 NDC facilities that will process and distribute local and destination Standard Mail, periodicals, and package services.
Six Tier 2 facilities that will perform all Tier 1 activities, plus distribution of outgoing Standard Mail, periodicals, and package services into the network.
Four Tier 3 facilities that will perform all the Tier 1 and Tier 2 functions and act as a consolidation point for less-than-truckload volumes from Tier 2 sites.
The Postal Service is pursuing an incremental approach to the activation of this new network and it is expected to be completed by the end of November 2009.
