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BACKGROUND:
The U.S. Postal Service continues to aggressively cut costs. Its efforts include consolidating the mail processing network to align it with reduced mail volume and a smaller workforce.
This report responds to a request from Congressman James Gerlach of Pennsylvania’s Sixth Congressional District regarding redistribution of processing functions of the Southeastern Pennsylvania Processing and Distribution Center. The Area Mail Processing (AMP) review for this facility redistributed its originating and destinating mail to the Wilmington, DE, Processing and Distribution Facility and the Philadelphia, PA, Processing and Distribution Center. The consolidation was completed on September 7, 2013.
Our objectives were to determine whether a business case existed for the consolidation of mail processing operations from the Southeastern Processing and Distribution Center into the Philadelphia and Wilmington facilities and to assess compliance with established AMP guidelines.
WHAT THE OIG FOUND:
A business case existed to support the consolidation. It should produce a cost savings of about $3.8 million in the first year, and about $9.4 million annually in subsequent years. Our analysis indicates that adequate machine capacity and floor space existed and overall productivity increased at the gaining facilities after the consolidation. We also concluded that the consolidation did not significantly impact customer service, delayed mail declined, and no employees lost their jobs due to the consolidation.
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We found the AMP proposal overstated annual savings by $4.6 million because it did not include additional workhour and transportation costs associated with the consolidation. Finally, the Postal Service generally followed AMP guidelines. Although some deadlines were missed, this did not adversely affect the consolidation process.
WHAT THE OIG RECOMMENDED:
We recommended the vice president, Network Operations, direct the manager, AMP and Facility Consolidations, to re-evaluate workhour and transportation savings and make adjustments to the AMP proposal during the first Post-Implementation Review.