Milk Run in Dairyland: USPS Optimizes Collections in Wisconsin

Steve HutkinsBlog, Featured

Last week the Postal Service responded to an information request by the Postal Regulatory Commission concerning the new Optimized Collections initiative. The response sheds a bit more light on the OC plan, but not much.

Under the current system, mail is transported early each morning from processing centers to 31,000 post offices, where it’s distributed to PO Boxes and sent out for delivery by letter carriers. In the evening, the process is reversed — the outgoing mail is collected from post offices and transported back to the processing centers.

Optimized Collections eliminates the evening collection of mail and parcels. The day’s mail will instead be collected the next morning, at the same time that the mail from the processing center is dropped off at the post office.

It’s essentially a “milk run” approach — pick up and drop off at the same stop — just as the milkman on his daily route would distribute full bottles and collect the empties, all at the same time.

The plan would eliminate the evening collection at thousands of the country’s post offices — almost all of them in rural areas — and slow down a significant portion of single-piece First Class mail and parcels.

While Amazon packages may be getting priority in many post offices, single piece First Class is some of the most important mail the Postal Service handles. It includes bill payments, business and legal correspondence, election ballots, donations to non-profits, invitations, and other time-sensitive documents — and it’s all sent at full postage, with no discounts for pre-sorting.

Implementation of Optimized Collections began in Richmond, Virginia, in October, as described in this previous post. Next up, Wisconsin, with implementation set for January 8th.

Changing the name

While Optimized Collections is just getting started and hardly anyone has even heard of it, the Postal Service has already decided a name change is in order.

As explained in the response to the PRC’s information request, “The Postal Service believes that the term ‘Optimized Collections’ has been misunderstood by some stakeholders and does not accurately capture the operational processes that are contemplated through this initiative. For those reasons, we intend to refer to the initiative as ‘Local Transportation Optimization’ in the future.”

Built for the Holidays: USPS regional facility at the center of metropolis

The new name puts the emphasis on cutting transportation costs rather than on improving collection times — which will clearly not be happening.

The new name, though, is not quite as catchy and may not stick. Throughout its responses to the information request, the Postal Service continues to refer to the “Optimized Collections Plan” rather than using the new name.

(Apparently the  “Milk Run Initiative” was not given serious consideration, even though “milk run” was used on a map of the Richmond area in a June 2023 USPS presentation.)

When news of the plan first began to circulate in early November, the APWU referred to it as “an alleged pilot program” in which “pilot sites” were being “tested.” But in its responses to the information request, the Postal Service never uses the terms “pilot” or “test.” It instead emphasizes the “critical importance” of the initiative and says it must be implemented at “a rapid pace.”

The Postal Service may tweak the plan as it’s deployed across the country, but this is not a test to see if the plan works and should go forward. The Postal Service is definitely proceeding with Optimized Collections. This is not a test.

Eliminating “unnecessary trips”

The basic idea of the plan raises many questions. The details revealed so far raise even more. I described some of the issues after a USPS presentation was shared with union and management in October. A few days later, PostCom filed a motion for an information request with several questions about the plan. The next day, the Commission filed its own information request, which overlaps with many of the questions posed by PostCom.

Built for the Holidays: USPS trucks at LPC/S&DC

The Commission’s information request begins by asking the Postal Service if the OC plan was included in a list of cost initiatives in the Delivering for America plan as of 2021 (this list was submitted in a nonpublic library reference). The Postal Service says, no, it wasn’t included because it wasn’t part of the DFA in 2021. It’s a “new initiative.”

The Postal Service explains the rationale for the plan this way: “The local transportation network is currently characterized by a large number of underutilized and unnecessary trips, due to the fact that the Postal Service currently operates separate trips to pick-up and drop-off mail and packages from delivery units. This leads to underutilization and high costs, particularly on longer local transportation lanes that transport lower amounts of volume.”

The Postal Service says that eliminating the “unnecessary trips” to collect mail at some offices will not only lower costs but also reduce carbon emissions. But it’s hard to take that explanation very seriously, given the Postal Service’s refusal to electrify more than 62 percent of the new delivery fleet and the fact that consolidating carriers to Sorting & Delivery Centers will add hundreds of millions of miles to routes.

“Our current inefficient and costly transportation network is unsustainable,” the Postal Service proceeds to explain, “and taking these and other steps to address our transportation costs is a critical element of generating the overall level of savings that are needed from self-help operational initiatives in order to achieve financial sustainability.”

It’s not clear from this response why such a “critical element” of the DFA plan was not included in the original cost savings estimates in 2021. Did someone at the Postal Service come up with this idea only recently? Or was the initiative being considered back in 2021 but not to the extent that it could be included in the cost savings?

Given that the relaxation of service standards — one of the first steps in the DFA plan — may now make it possible for some mail to be delayed by a day, was the Postal Service contemplating Optimized Collections when it changed service standards, and if so, why was this never mentioned during the PRC’s Advisory Opinion process?

Levels of optimization

The Commission asked for more details about the criteria used to determine the three optimization levels described in the USPS presentation:

  • Full Optimization (Single Stop – Drop Off/Pick-up Same Time)
  • Hybrid-Optimized (Return Stop – Drop Off, Then Pick-up on Return)
  • No Optimization (Exceptions)

The full and hybrid levels were illustrated in this graphic included in the presentation.

OPTIMIZED COLLECTIONS (USPS PRESENTATION)

The October presentation said the level would be determined by volume and distance, but provided no details. In its response to the information request, the Postal Service explains further: The optimization will be limited to post offices more than 50 miles away from the Local Processing Center (LPC), or S&DCs, as in the graphic. Those that are less than 50 miles will continue to have a separate evening collection.

The only exception will be offices that are more than 50 miles away but that have a relatively high volume of outgoing mail. Those with more than one container of mail will be subject to “Hybrid Optimization,” in which the truck drops off the destinating volume on the outgoing leg of the trip, and then picks up the originating volume on the return leg. That pickup would probably occur in the late morning or early afternoon, so some of the originating mail would continue to be picked up on the same day, while everything mailed after the pickup would wait for collection the next morning. Offices more than 50 miles away that have more than seven containers of mail will be excluded from optimization.

No public list of impacted offices

The Postal Service confirms that the Optimized Collections Plan was implemented in Richmond, VA, on October 28, 2023, as had been indicated in the October presentation.

That presentation had also listed four locations for potential expansion in November and January: Columbus, OH; Madison, WI; Oklahoma City, OK; and Santa Clarita, CA. The Postal Service now says no final decisions have been made and there’s no timeline for Columbus, Oklahoma City, and Santa Clarita. But the Postal Service will now be implementing Optimized Collections not only in Madison but also in Milwaukee and Green Bay, all on January 8, 2024.

Built for the Holidays: Post Office at city center

The Postal Service would not provide the implementation timeline for the rest of the initiative, as requested by the Commission, but it did say that it “intends to pursue a rapid pace of implementation in recognition of the critical importance of implementing this initiative.”

The Commission asked for a list of all the facilities that will be affected, along with the collection times before and after implementation and the impact on transportation of mail between processing centers and post offices

The Postal Service shared a list that includes the affected facilities in the Richmond area and said a similar list would be provided for the Wisconsin locations when it’s completed. But the Richmond list was provided as a non-public document, because, as the Postal Service explains in the request for non-public treatment, it contains collections times for competitive produces (parcels), and that information is considered “commercially sensitive.”

The Postal Service could have shared a public list of the impacted post offices without including this sensitive information, but chose not to do so. The patrons of impacted post offices in Virginia were probably informed of the changes, so it’s not exactly top secret. In any case, a list of the Richmond region post offices, along with a list of those that are possibly part of the initiative, can be found in this post.

Optimizing Wisconsin

Given that the Postal Service has not made the Richmond list public, it probably won’t share the Wisconsin list either. But using the criteria identified in its responses to the information request, one can create a model that helps illustrate the initiative and its potential impacts.

Here’s a map of the three service areas in Wisconsin surrounding the LPCs in Madison, Milwaukee, and Green Bay. The list is on Google Docs here.

The model assumes that Optimized Collections will eventually include the LPCs in Kingsford, MI (Iron Mountain) and Eau Claire, WI, so the post offices near these facilities are not included in the list or map.

There are about 475 post offices in the three areas that could be served by the LPCs in Madison, Milwaukee, and Green Bay. The post offices are categorized in terms of optimization level and distance from the LPC. Since volume data aren’t available, the model uses population as a proxy. Here’s the breakdown:

  • 118 post offices (marked in red) are within a 30-minute drive of the LPC, which will probably be co-located with an S&DC. About 75 of these have delivery units, and their carriers could be relocated to the S&DC. All 119 would continue to get the evening collection, perhaps by one of the carriers working out of the S&DC, on a last stop before returning to the S&DC.
  • 163 offices (marked in blue) are more than 30 minutes but less than 50 miles from the LPC. They would continue to get an evening collection.
  • 6 offices (marked in green) are more than 50 miles from the LPC, but based on their population (more than 25,000), they probably have a large enough volume to exclude them from optimization.
  • 18 offices (marked in purple) are more than 50 miles from the LPC, but with populations of 10,000 to 25,000. They probably have enough volume to merit hybrid optimization, i.e., the mail would be collected on the truck’s return trip later in the morning or early afternoon.
  • 163 offices (marked in yellow) are beyond 50 miles and have fewer than 10,000 people. In the model, these offices would be subject to full optimization.

Overall, then, 181 post offices — about 39 percent of the 475 in the area — would be subject to full or hybrid optimization.

If that turned out to be representative of the entire country, at full optimization over 12,000 post offices could lose the evening collection.

Impacts on First Class Mail

The Commission asked for an estimate of the percent of First Class mail that could be impacted. The Postal Service said it would provide estimates on the Richmond implementation when they were prepared, and earlier this week it submitted a supplemental response to the information request with the following data for single-piece First Class mail in the Richmond region: Fully Optimized: 9 percent; Hybrid Optimization: 22 percent; No Optimization: 68 percent.

That means 31 percent of single-piece mail in the Richmond region was subject to one form of optimization or another — or about 8 percent of First Class mail as a whole.

The modeling for Wisconsin shows that a lower percentage of mail would be impacted than in Richmond because the criterion of 50 miles from the LPC instead of 25 miles means a much smaller area would be subject to optimization.

The model indicates that in Wisconsin about 9 percent of single-piece First Class mail would be fully optimized and another 8 percent would be subject to hybrid optimization. If that were true for the country as a whole, it would represent four percent of First Class mail overall — nearly two billion pieces.

It’s possible that once implementation is underway, the Postal Service will expand the reach of the plan by shifting to the 25-mile criterion it had used in the Richmond deployment. To see what that might look like, the modeling includes an alternate scenario for Wisconsin with somewhat different volume thresholds.

The model for this scenario shows that 10 percent of single piece mail would be subject to full optimization and 22 percent would be subject to hybrid optimization — roughly the same percentages the Postal Service shared with the Commission earlier this week for the Richmond region. It also shows that about 320 post offices would lose the evening collection. That’s about two-thirds of the post offices in the region. For the country as a whole, that’s over 20,000 post offices. (See Google Docs, tab “Alt scenario.”)

The Commission did not ask about parcel impacts, but the packages sent by individuals and small businesses, like an e-bay seller, are often extremely time-sensitive. Priority shipping provides delivery in one-to-three business days, and Express provides next-day to 2–day delivery service, with a money–back guarantee.

Meeting those delivery standards does not seem possible if the package isn’t collected from the post office until the day after it was sent. But it’s not likely that the Postal Service will share any parcel data with the public, since that information is considered commercially sensitive.

Impacts on rural areas

Here’s another map of the three areas in Wisconsin being subject to Optimized Collections. As in the Google map above, the areas in red indicate ZIP codes within 30 minutes of the LPC, the maximum range for “spoke” offices of the S&DC. Blue indicates areas between 30 minutes and 50 miles and hence not subject to optimization. Green indicates areas beyond 50 miles with a population more than 25,000, also not subject to optimization. The purple areas are beyond 50 miles but have a population between 10,000 and 25,000 and would be subject to hybrid optimization. Yellow is for the areas beyond 50 miles that will be subject to full optimization. The population data discussed below can be found on Google Docs, tab “WI POP analysis.” An interactive version of the map is here.

The total population of these areas is about 4.5 million. The areas that would continue to get an evening pickup (red, blue and green) encompass about 3.8 million people, while the areas that will no longer get the evening collection (yellow and purple) represent about 727,000 people — about 17 percent of the total population.

The population of these areas as a whole is about 23 percent rural. For the 3.8 million who continue to get evening collection, about 17 percent live in rural areas. For the 727,000 who are impacted by the optimization initiative (full and hybrid), 54 percent live in rural areas, and for the areas that are subject to full optimization, 74 percent of the population is rural.

The region has about 493 ZIP codes. For the ZIP codes not subject to optimization, 30 percent are entirely rural. For those that would be subject to full optimization, 76 percent are entirely rural.

Here’s a summary of the data on the Wisconsin optimization based on the model:

The potential for discrimination

As discussed in this previous post on the implementation in Richmond, the Optimized Collections plan has the potential for discriminating against rural residents in violation of 39 U.S.C. § 403.

The Commission asked the Postal Service to discuss this apparent “differentiation in mail services between residents in less densely populated areas, situated at a relatively large distance from an S&DC and those in more densely populated areas near an S&DC.” The Postal Service was also asked to explain why such a differentiation did not constitute “undue or unreasonable discrimination among users of the mail.”

The Postal Service would not even acknowledge that the new system results in a differentiation in services: “a customer’s distance from an LPC does not necessarily correspond to the population density of the location in which that customer resides.” Plus, “the Postal Service does not anticipate adverse impacts to the reasonable expectations embodied in the service standards that apply to all customers: under the Optimized Collections Plan, ‘day 0’ (i.e., start-the-clock) will not change, and we do not anticipate material impacts to First-Class Mail service performance from this initiative.”

In anticipation of further questioning about this subject, the Postal Service invoked what’s called the Gamefly Test, a three-part test used by the Commission to determine if there’s a violation of 39 U.S.C. § 403.

According to the Postal Service, customers who are subject to Optimized Collections will not receive a different level of service (test #1). Even if they do, it shouldn’t be seen as discriminatory because customers residing in different geographical locations are often not “similarly situated” (test #2) so comparing them would be apples to oranges. And finally, even if there is discrimination, it shouldn’t be considered “undue or unreasonable” (test #3) because the cost savings of the Optimized Collections Plan will “supply a legitimate basis within the meaning of 39 U.S.C. § 403(c).”

The Postal Service may or may not be correct in its application of the Gamefly Test. Perhaps the Commission will ask more questions about it, or perhaps the issue will be left to elected officials to address. There are probably many members of Congress who will not appreciate seeing their rural constituents receive a lower level of service.

Impacts on service performance

The Commission asked how the Optimized Collections Plan will impact the length of time between customer drop-off or carrier collection on the route and the first processing (start-the-clock) scan.

The Postal Service replied that it is not changing the “start-the-clock” for First-Class Mail, or changing the application of the current service standards. No “material impacts” on First Class mail are anticipated. In fact, says the Postal Service, “this initiative will further enhance our operational practices and therefore our ability to improve our service performance generally, including for all First-Class Mail.” That’s because mail processing will be able to take place in late morning and early afternoon, not just in the evening and overnight.

“While short-term impacts to service performance during the execution process may occur,” the Postal Service says it “will monitor any impacts that occur, and may make adjustments as necessary and warranted.”

Built for the Holidays: Inter-facility truck arrives at Delivery Unit

The start-the-clock issue refers to the moment when the mail piece enters the mail stream for purposes of calculating how long it takes for the piece to be delivered. In many cases, the first scan may not take place until the piece arrives at a processing center, so the start-the-clock moment is unknown and needs to be estimated. The process for making this estimate is rather complicated and a bit murky (it’s described here).

In any case, if the clock starts on the day the mail is actually dropped at the post office or picked up by a carrier en route, and it doesn’t go out to the processing center until the next morning, it will obviously add a day to the delivery time and impact service performance scores.

These scores have been declining steadily, even under the more relaxed service standards implemented in 2021. For example, during the first quarter of FY 2024 (Oct. 1 – Dec. 31, 2023), for mail going between Wisconsin and California, only 78 percent of First Class mail was on time compared to 96 percent last year. In some cases, the scores are much worse: For the week of Nov. 4, 2023, between California and Connecticut, just 35 percent of First Class mail was on time, compared to 96 percent last year. (See the USPS performance dashboard for more.)

Communicating the changes to customers

The Commission asked the Postal Service what steps it was taking to communicate the changes to affected communities and customers, including whether publicized collection information, including the pick-up times printed on collection boxes, will be updated at the affected locations to reflect the changes due to the Optimized Collections Plan.

According to the materials provided to the union and management in October, a notice for impacted customers was prepared, but it’s not clear if or how it was distributed in Richmond, and the Postal Service makes no reference to this notice in its response.

Instead, the Postal Service focuses on collection box times and notes that the plan will not impact the schedule for removing mail from collection boxes. But if the mail continues to be collected from blue boxes by carriers or post office employees in the late afternoon, it may still end up sitting inside the post office until the next day. Apparently that fact won’t be added to the times on the collection box.

Finally, the Commission expressed concern about thefts from collection boxes should mail sit in the boxes overnight. That won’t be a concern, though, because the initiative does not affect the schedule for removing mail from collection boxes.

Insourcing transportation

The Commission asked about another slide in the USPS presentation that had indicated that the Postal Service would be optimizing the network in “conjunction with logistics career insourcing initiative.”

Built for the Holidays: New electric truck delivers to a real home

The Postal Service confirmed that it will in fact be converting Highway Contract Route (HCR) transportation to Postal Vehicle Service (PVS) transportation for lanes less than 350 miles. The implementation of Optimized Collections is considered as part of the modeling going on with this insourcing of transportation.

One of the potential advantages of combining the Optimized Collection plan and the insourcing initiative is that the Postal Service will not be locked into HCR contracts and their routes. Instead, it will have the flexibility to set whatever distance and volume criteria it chooses and to change them anytime. While the Postal Service used 25 miles as a criterion in Richmond and 50 miles in Wisconsin, these numbers could change, and perhaps not uniformly across the country. It’s also possible that the volume criterion could change, again not necessarily in a uniform way. But none of this is discussed in the Postal Service’s response to the information request. The Postal Service simply says that it “continues to monitor Optimized Collections and may make adjustments as necessary and warranted.”

The Commission asked “whether—and if so—how the Optimized Collection Plan impacts Highway Contract Route and Postal Vehicle Service costs,” along with relevant documentation. The Postal Service says the initiative will significantly reduce costs, but no comprehensive cost savings estimates have been prepared, and the Postal Service provided no documentation.

The Postal Service’s responses to the questions about insourcing transportation don’t begin to begin to reflect the significance of the OC initiative. To replace the HCR routes, thousands of new USPS drivers would need to be hired, and thousands of postal trucks would need to be deployed. Hundreds of private trucking companies will lose their contracts, and many will go out of business.

For decades, the Postal Service has used private contractors for this work, presumably because they’re less expensive. It’s amazing that the Postal Service could make this transition without providing any data on the costs.

Withholding information

The Postal Service’s responses to the information request about Optimized Collections are not particularly forthcoming. As always, important information is being withheld from employees, customers, and patrons. But that’s business as usual with today’s postal leadership.

Several recent news reports focus on how USPS representatives at meetings about the consolidation of processing centers are refusing to answer any questions, prompting one Congressman to write a scathing letter to the Postmaster General. A town hall planned in Richmond, Virginia, to address ongoing delivery problems had to be cancelled because the Postal Service would not send a representative.

A few days ago, Senator Gary Peters (MI), Chairman of the Homeland Security and Governmental Affairs Committee, sent a letter to DeJoy, asking a number of questions about the Network Plan and demanding more transparency on the potential impacts on postal employees, customers, and service performance.

In his cover letter to the Section 207 Report to Congress filed last week, the Postmaster General used the opportunity to once again criticize the PRC. “Our regulator,” he wrote, “has a demonstrated tendency to resist change or to move only incrementally as it concerns our efforts to acquire new business and save this institution.”

If the Postmaster General had his druthers, the Postal Service wouldn’t even be participating in the Commission’s public inquiry.

— Steve Hutkins

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