Optimizing Highway Transportation at the United States Postal Service

•USPS Cutting Back to 6 Days/Week?•Home Page•Going Postal

INTRODUCTIONVIDEO

Introduction•Delivers over 200 billion items per year•Deliver via air and highway•36,496 total retail and delivery facilities•218,684 vehicles•599 processing facilities•584 million pieces is the average volume per day•1,258,025 total work hours•For the past few years operating expenses have been more than revenue which has resulted in a net loss•Thus, USPS needs to cut costs!!

•Transportation costs are largely made up of air and highway transportation•In 2009, transportation expenses decreased 13.4%•In 2009 highway transportation expenses were $3,044 million which decreased 13% from 2008 (mostly due to lower fuel prices)•June 1st, 2009-the General Services Administration (GSA) purchased $210 million worth of fuel efficient vehicles from Chrysler, Ford, and GM using money from the ARRA•USPS replaced over 6,500 vehicles from its current fleet with more fuel efficient models•A 1% increase in fuel and natural gas costs would result in a $22 million increase in fuel expenses

Introduction

Background•Delivers more than 200 billion pieces of mail each year•Different types• Letters• Flats• Parcels• Periodicals

•Different levels of service• Priority• First Class (overnight, 2-

day, and 3-day)• Standard

•Multiple transportation networks• Bulk Mail Centers (BMCs)• Service Transfer Centers (STCs):

consolidates mail into aggregate volumes• Processing & Distribution Centers (P&DCs)• Priority Mail Processing Centers (PMPCs)• Air Mail Centers (AMCs)

•Each transportation network designed to serve a particular purpose. However, since they do not work isolated from each other, significant overlapping and redundancies exist.

Accommodating Various Options

The map shows the general location of a sample of MBCs, STCs, and P&DCs within the USPS transportation network in the northeastern section of the United States.

Image taken from actual article

•A model that helps to solve the vehicle-routing problems with pickups and deliveries by utilizing mixed-integer programming.•Highly flexible for application across a wide range of components•The objective is optimize the existing transportation network by identifying opportunities to modify transportation and reduce costs

Highway Corridor Analytic Program

Problem Statement

•The USPS delivers more than 200 billion items per year.•It is essential to the service and financial goals of USPS to deliver these items in a timely and efficient manner. •The transportation network of the USPS is large and complex so the planning process for transportation is extremely important and also very challenging. •The Highway Corridor Analytic Program (HCAP) develops ways to make scheduling and routing of transportation more efficient while maintaining on-time delivery—ultimately saving money.

METHODOLOGY

•HCAP solves vehicle-routing problem with pickups and deliveries model.•Facilities - locations•Deliveries – items to be transported– Represented by volume of mail to be

transported•Trips•Legs•Assignment Constraints•Capacity constraints•Minimum Cost

•Optimal Solution • Commercial Routing Software• Routing-specific Software Libraries• Heuristic Approaches• Optimization Software Libraries

METHODOLOGY

•Evaluation of Alternatives• Solution time• Optimality• Expandability• Flexibility

METHODOLOGY

RESULTS-Once fully tested and developed, the HCAP was deployed to analysts -Used to identify cost saving opportunities

- Robustness of model allowed for varied application

- Varied applicability allowed for model to be tailored to unique needs for different regions

•Many different scenarios have been run and implemented in various parts of operations across the country•IBM & USPS worked together with model for implementation in Pacific area• Savings have been

approximately $3.7 million annually to date

• Represents 24% of the transportation costs that were able to be saved

USPS & IBM

•Implemented at an STC in Midwest• Resulted in annual savings of $1.3 million to date

•Also used in Eastern U.S. operations• Adopted for local transport at a P&DC in North Carolina • Also for STC transport in Pennsylvania

•These efforts resulted in $400,000 in annual savings

Implementation

•By adopting this model to assess the efficiency of the USPS transportation network, the firm was able to see dramatic savings•Even with potentially high development costs, it is clear to see that a firm such as USPS can greatly benefit from optimizing their networks to eliminate inefficiencies

Conclusion

CRITIQUE

•Organization• Helpful diagrams• Helpful headings and titles

•Presentation• Professional• Diagrams could have been

better• 12 pages is good length

•Subject Content• Good, but• Repetitive• Lacked detail

•Subject Matter• Interesting

•Overall Article• Good article