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!!</li></li></ul><li>Introduction<br /><ul><li>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</li></li></ul><li>Background<br /><ul><li>Delivers more than 200 billion pieces of mail each year
Each transportation network designed to serve a particular purpose. However, since they do not work isolated from each other, significant overlapping and redundancies exist.</li></li></ul><li>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. <br />Image taken from actual article<br />
Highway Corridor Analytic Program<br /><ul><li>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</li></li></ul><li>Problem Statement<br /><ul><li>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. </li></li></ul><li><ul><li>HCAP solves vehicle-routing problem with pickups and deliveries model.
Robustness of model allowed for varied application
Varied applicability allowed for model to be tailored to unique needs for different regions</li></li></ul><li>USPS & IBM<br /><ul><li>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</li></li></ul><li>Implementation<br /><ul><li>Implemented at an STC in Midwest
Resulted in annual savings of $1.3 million to date
These efforts resulted in $400,000 in annual savings</li></li></ul><li>Conclusion<br /><ul><li>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</li></li></ul><li><ul><li>Organization