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Reduce Costs

Evolutionary Network Development
Modeling has shown opportunities to reduce cost by using automation and consolidating similarshaped mail into processing facilities with standard equipment configurations, layouts, and welldefined network roles. Rationalizing the network will also reduce costs by eliminating transportation. The Postal Service is determined to ensure that ongoing operational changes build a network with more efficient transportation, facilities that enable increased use of automation, and optimized worksharing opportunities.

A request was filed with the Postal Rate Commission for an advisory opinion on whether the service changes that will evolve from network redesign plans conform to the Postal Reorganization Act. The case is proceeding. However, the Commission has not set a date for when it expects to issue an advisory opinion.

A Network Alignment Implementation office was created at Postal Service Headquarters to direct network transition activities and coordinate the development of individual site plans for operational changes such as staffing, equipment, expansion, and mail flow and distribution changes. Network redesign began with the deployment and relocation of the newest equipment prioritized to future network locations to ensure those locations will have the latest automation and technology.

Area Mail Processing Consolidations
The Postal Service has continually adjusted its network to reduce inefficiency, excess capacity, and overlapping transportation. In today's network, plants generally process all classes of mail. Local offices continued to review operations for opportunities to eliminate excess capacity and make better use of space, staffing, equipment, and transportation. Consolidating operations improves processing efficiency, increases mail density in containers, and achieves better utilization of transportation capacity. The role of airport mail centers was examined to determine where high-cost on-airport facilities should be reduced and better coordinated using third-party facilities.

All but one of the 11 Area Mail Processing (AMP) proposals approved last year were implemented. One AMP proposal was approved in 2006 and 37 AMP feasibility studies are in progress. The Postal Service has enhanced the AMP stakeholder communications process to address community related concerns and provide more effective outreach. Handbook PO-408, Area Mail Processing Guidelines, is being revised to reflect these changes.

Transportation
New air transportation contracts were awarded in 2006, creating more reliable and flexible resources. UPS was awarded a 3-year contract to provide domestic transport (primarily First-Class Mail and Priority Mail) between 98 U.S. cities. FedEx was awarded a 7-year contract, which replaced their existing contract to transport Express Mail, Priority Mail, and First-Class Mail. A 5-year contract extension was awarded to seven air carriers for the transport of Express Mail, Priority Mail, and First-Class Mail. They won the extension by meeting on-time provisions of the previous contract. Nonperforming commercial air carriers are no longer transporting mail.

The Surface Transportation Center (STC) concept supports moving mail from air to surface transportation and improves vehicle capacity utilization. STC facilities are the concentration points that serve as the backbone for this concept. Six new STCs were opened this year, enabling coastto-coast surface transportation. As each was opened, opportunities to shift mail from air to surface were identified and surface routings were put in place. Service from STC locations has remained at or above previous levels. By the end of the year all existing transportation hubs will be converted to STCs, completing the surface network infrastructure.