II. Reduce Costs

Two factors, automation and standardization, are most responsible for the cost savings under Transformation. During 2006 the Postal Service continued to execute a methodical, data-driven effort to standardize processes. The effort is succeeding because it engages employees at all levels and functions to identify cost-saving opportunities. The introduction of new technology and equipment will continue to provide opportunities. Capitalizing on them depends largely on standardization and process innovations developed by employees and industry partners.

The Postal Service's cost-saving efforts remain rooted in five strategies:

• Use automation to remove processing costs.

• Expand standardization to capture savings.

• Rationalize facility networks and create flexibility in transportation.

• Partner with commercial mailers to reduce the total cost of mail.

• Streamline internal postal business processes.

1. Use Automation to Remove Processing Costs
Investments have increased the amount of mail that can be processed on automated equipment by adding capacity and expanding capabilities, improving quality, and automating the forwarding of letters.

Letters
System enhancements are improving the quality of processing operations and increasing the amount of mail that is successfully processed on automation. In 2006 the Postal Service began replacing older mail processing equipment. New machines that feature improved technology are designed to increase processing capacity without requiring more facility space.¹ Improvements in encoding and machine capabilities are increasing the amount of mail that can be processed on automation.

Total Factor Productivity (TFP)

Total Factor Productivity has increased for 7straight years. The 2007 objective is to increase TFP an additional 0.8 percent.

Software released for barcode sorters enables 4-State Customer Barcode (4-CB) capability, which handles this information-rich format and improves read rates. Other software improvements enhance address recognition and decrease encoding errors. Use of a database that links commercial names to addresses improved barcoding results. This directory will increase the amount of mail sorted to delivery point sequence.

1 Older Multiline Optical Character Readers (MLOCR) are being replaced by Delivery Barcode Sorter Input/Output Subsystem (DOISS) machines. The DIOSS has more sorting capacity which reduces the time it takes to process outgoing mail. The DIOSS also increases DPS capacity.