Observations from the National Star Route Meeting in Las Vegas, Jan 19-20
The USPS announced a new cost savings initiative for Surface Transportation operations at the recent National Star Route Mail Contractor’s Association meeting on January 19-20. The USPS is under competitive pressure from UPS and FedEx and others and needs to reduce operations costs while improving service. It currently spends $5 Billion on Surface Transportation and intends to cut this by $1 Billion. It also has an average service level (successful on-time delivery) of 92.5% and needs to improve this to 95%+.
The USPS is exploring a new Dynamic Route Optimization system that will allow it to be more flexible and responsive to demand, giving it the ability to consolidate and expand Highway Contract Routes (HCRs) based on real-time and projected service demand/volume. USPS is experimenting with this approach now, which requires the use of a Transportation Management System (TMS) through which mail freight will be managed and tracked, combined with expanding GPS reporting to every 15min (for most, or perhaps all, USPS delivery vehicles and trailers regardless of size) and enhanced with real-time supply chain visibility based on optimized routing, ETAs with traffic conditions and load status at origin / destination.
The USPS TMS would also include analytics that tracks the volume of mail traffic, and as it decreases the system would eliminate or consolidate HCRs into fewer routes to reduce costs. As the volume of mail increases, it could also dynamically expand HCRs and create new HCRs to cover the demand.
Mail Contractors that hold routes being consolidated and expanded wouldn’t see their overall contract structure change, but new routes would be put out for rapid bid to certified mail freight carriers. Contracts, in general, will be shifted to 2-year duration, with two 1-year extensions before requiring a re-bid.
The analytics component of the USPS TMS would also include performance monitoring. All mail facilities and contracted mail freight stops would be geo-fenced, and combined with GPS tracking will allow the USPS to track on-time performance for deliveries and contract compliance.
The USPS is conducting a pilot right now on one route and expects to expand that pilot to a total of x8 routes going forward which will help the understand what kind of TMS system and what “best practices” to adopt. Ultimately the USPS hopes to implement this type of logistics practice across all their routes within the next few years.
This is a major change in the way National Star Route Mail Contractors conduct business, shifting them sharply towards a more demanding supply chain operations model and will require them to understand the ins and outs of using TMS systems, equipping all of their drivers and vehicles with GPS tracking and accountability tools, and adjusting to dynamic HCR process.
allGeo has experience in every aspect of this new way of doing business by the USPS and is already supporting transportation and logistics companies with highly complex tracking, just-in-time analytics, and reporting needs. We look forward to working with both the USPS and the National Star Route Mail Contractor’s Association Members to help make this new initiative a success.
