Postal Service goes on a milk run, delays more mail

Steve HutkinsBlog, Featured

Big changes are coming to the way mail is transported between processing centers and post offices. The Postal Service has notified the unions and management associations that it’s launching an initiative called “Optimized Collections,” starting in Richmond, VA, on October 28, with potential expansion in November and January to Columbus, OH; Madison, WI; Oklahoma City, OK; and Santa Clarita, CA.

The presentation in the notification doesn’t use the term, but the optimized network will employ what’s called a “milk run.” The expression comes from the days when delivering milk was a daily event, and the milkman distributed the full bottles and collected the empty bottles from a previous delivery all at the same time.

There’s not much milk delivery these days, but water cooler companies are doing milk runs when they drop off full bottles and pick up the empties on the same trip. Actually, letter carriers go on milk runs every day — when they drop off mail in the mailbox, they’ll also pick up anything in the box being sent out.

But there’s nothing mundane about the Optimized Collections initiative. It will upend a decades-old system that involves longstanding relationships with hundreds of trucking companies, delay a significant portion of First Class mail and packages, and probably violate the statutory prohibition against discriminating against some users of the mail.

[Update 11-23-23: The Postal Regulatory Commission, as part of its Public Inquiry into Delivering for America, has filed an information request asking the Postal Service about many of the issues discussed below.]

Optimizing Collections

Under the current system, the Postal Service hires private companies to transport most of the mail between processing centers and post offices under what’s called Local Distribution Transportation (LDT) contracts. In 2021, there were about 1,500 suppliers for LDT.

Contracting out transportation like this has a long history, going back to the Star Routes of the stage-coach era. In 1970, they were renamed Highway Contract Routes (HCR), a term that applies to various kinds of contracted transportation, including last mile from post offices to homes (Contract Delivery Service), long haul transportation between plants, and the LDTs.

The HCR trucks depart processing centers early in the morning, around 4 a.m., and transport the day’s mail to post offices, generally arriving before 8 a.m., so there’s enough time for a final sort and loading onto delivery vehicles. After post offices close, the HCR drivers pick up the mail and transport it to processing centers, where it’s sorted and prepared during the night for transport the next morning.

In the Postal Service’s new network, the delivery units in the back of post offices are being consolidated to large Sorting & Delivery Centers. The mail will go directly from the S&DC to homes and businesses, skipping the stop at the post office and eliminating the need for HCR drivers to transport the morning mail. If one of the carriers picks up the outbound mail at the end of the day on the way back to the S&DC, there’s also no need for the evening HCR stop.

But the S&DC system does not encompass all 31,000 post offices. It includes only those that are within a 30-minute drive of the S&DC. Anything longer adds too much time to the route to make financial sense (not that adding 20 or 30 minutes makes any sense either).

The Postal Service’s projections have varied, but it’s likely that about 6,000 post offices could become “spokes” of an S&DC hub. That leaves about 25,000 post offices, half of which have delivery units requiring a morning drop from the processing center, while the others have PO Boxes that also require daily delivery.

It’s never been clear how transportation to and from these facilities would be handled under the new S&DC network. Nor have we been told how the S&DC network would significantly reduce transportation costs, especially when one considers that it will add hundreds of millions of miles to the routes running out of S&DCs.

Now we know. The trucks that drop off the morning mail will also pick up the mail — yesterday’s mail — all in one stop. There will be no evening pickup. All the mail and parcels sent during the day will simply sit at the post office waiting until the next morning for collection.

A service talk for employees dated July 28, 2023, explains the new optimized mail transportation system this way: “The number of transportation dispatches will be consolidated for select offices. The process for outgoing collection mail dispatch will be combined and transported with existing morning trip(s). The morning dispatch of mail will arrive as scheduled and outbound collection mail from the previous business day will be transported at that time.”

A customer communication notice puts it more simply: “Due to transportation changes at our facility, all mail and packages dropped today will be sent on the first dispatch tomorrow morning.”

The notification also states that optimizing collections will “improve cube utilization.” Presumably this refers to the fact that when trucks return to the processing center in the morning, they’re empty, and when they leave the plants in the evening to pick up mail, they’re also empty, but when trucks pick up and drop off at the same time, they’re never empty. (Logistics abhors an empty truck.)

The Postal Service spends something like $2 billion a year transporting mail between processing centers and post offices. Eliminating anything like half the trips would significantly reduce transportation costs and improve the Postal Service’s bottom line. But Optimized Collections won’t be much of an optimization for all the customers whose mail and parcels are sitting at the post office all night.

Milk runs in Richmond

There have been indications for many months now that the Postal Service was cooking up a scheme like this.

Back in May, the Postmaster General told the Postal Forum: “We are in the process of organizing our local transportation into a hub and spoke system connecting large, equipped S&DCs to the remaining 15,000 smaller delivery units. Smaller transport vehicles operating round trip service schedules and dynamically routed assignments will enable us to utilize all our equipment and driver availability more efficiently.”

This seemed to indicate that the S&DCs would connect not only with their spoke offices but also with delivery units that are beyond 30-minutes. But it wasn’t clear how.

Then in June, the Postal Service shared a presentation with the management associations and unions showing the implementation status of the Sorting & Delivery Center plan. Most of the presentation was about the S&DCs that would be launched in June and September, along with which post offices would become “spokes” and lose their carriers.

One slide in the presentation showed a map with the changes coming to the region surrounding Richmond, Virginia.

Richmond Region (USPS Presentation)

The map shows the region’s Regional Processing & Delivery Center, Local Processing Centers, and four S&DCs, plus about 500 post offices, approximately half with delivery units (DUs) and half retail only post offices (POs). The map shows route lines connecting these post offices, and the legend identifies them as “DU/PO Milk Run.”

This seems to be the first reference to “milk runs” in the new network. The term is not widely used in postal world, and apparently the Postal Service will not be using it to explain what “Optimized Delivery” is all about. In all the other USPS presentation maps of the new RPDC regions, like those for Atlanta, Portland, and Charlotte, the lines connecting the post offices are just called “routes,” without “milk run.”

Optimization levels

The notification to the stakeholders indicates that there will be different “optimization levels” depending on volume and distance. The three levels are:

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

A couple of diagrams explain the differences:

Optimized Collections (USPS Presentation)

The first diagram shows full optimization, in which there’s a dropoff and pickup at each stop. Presumably this method would be applied to those facilities that have a relatively low volume to pick up and that are the farthest from the S&DC hub.

The hybrid version involves picking up the mail on the way back to the S&DC. Presumably this would apply to post offices that have a larger volume and that are closer to the S&DC. It’s not clear, though, when the return stops would take place. If the drop offs take place between, say, 5 and 8 a.m., the pickups would occur between 9 a.m. and 1 p.m. Any mail sent after the pickup time would wait until the next morning for collection.

The optimization plan would exclude those post offices that have the most volume and that are closest to the S&DC. This probably includes all the spoke offices of the S&DCs and the other nearby offices that don’t have delivery units (like finance stations).

Beyond a brief explanation of the three levels of optimization, the notification to stakeholders says nothing about what the pickup times might be in the hybrid model, which post offices would be impacted, how many would fall into each category of optimization, and many of the other questions raised by the initiative.

Slowing down single-piece mail

The notification to customers says, “Customer service will not be impacted with this change and remains aligned to meet product service standards.”

The Postal Service would thus have us believe that holding the mail until the next day will not impact service and delivery will continue to meet service standards. But it doesn’t take a logistics expert to see that sitting on the mail overnight will slow down delivery and impact service performance scores.

Under Optimized Collections, it’s important to note, most of the mail will not be impacted. That’s because 85 percent of the mail — all Marketing Mail and about 70 percent of First Class mail — is pre-sorted and dropped at processing centers, and it will go out for delivery every morning as usual. And much of the single-piece First Class mail won’t be impacted either because it will be sent at a post office that’s being excluded from Optimized Collections.

The mail that will slow down is the single-piece First Class mail, as well as parcels, sent from lower volume post offices, typically those that are outside the high-density S&DC service areas. This mail contains bill payments, business correspondence, election ballots, and other important, time-sensitive documents. The outbound parcels include packages sent by individuals and small businesses, like an e-bay seller.

As for how much mail would slow down, it depends on which post offices get Optimized Collections, but a ballpark figure would be 10 to 13 percent of First Class mail, maybe 5 or 6 billion pieces annually.

The claim that service performance for this mail won’t be impacted is hard to believe. The Postal Service’s performance on single-piece mail has been historically weak, and its scores on single-piece mail with a 3, 4, and 5-day service standard continue to be poor, even though these standards were relaxed in 2021 so that the Postal Service could move long-distance mail by ground instead of air.

For example, for a First Class letter going between Virginia and Chicago, the service standard is three days. For the week of October 7-13, only 75 percent of this mail was on time (compared to 89 percent for the same week last year). For FC mail between Virginia and Seattle, the service standard is five days; for the week of October 7, about 74 percent was on time (compared to 79 percent last year).

These performance scores can only get worse when the mail is sitting overnight at the post office. But the Postal Service doesn’t want to acknowledge that its operational changes will impact service. If that were the case, these changes would require an advisory opinion from the Postal Regulatory Commission, and the Postal Service has no interest in going down that road.

The discrimination issue

The problem with Optimized Collections is not simply that it will slow down a lot of First Class mail. There’s also the issue of whose mail will slow down.

As explained above, some post offices will be excluded from optimization, some will get a late morning (or early afternoon) pick up, and some will not get a pickup until the next day.

Let’s go back to the map of Richmond. Here’s a Google map version of the map included in the USPS presentation above. The data is on Google docs here.

The P&DC in Sandston will become a Regional Processing & Delivery Center (RPDC) and house a Local Processing Center (LPC); a second LPC will be at the Norfolk P&DC. The region will have four S&DCs — at the P&DCs in Richmond, Charlottesville, Hampton, and Norfolk.

Of the Richmond region’s 500 post offices, about half contain delivery units (yellow dots) and half are retail only (brown). There are about 110 post offices within 30 minutes of an S&DC. About 50 or 60 are potential spoke post offices (red dots); the others don’t have delivery units but are nearby and could be serviced by carriers for the spoke offices. All 110 offices are in population-dense areas with large mail volumes, and most likely, they will continue to have evening pickups.

That leaves nearly 400 offices that could become part of the Optimized Collections initiative — and 400 communities that will suffer the impact of slower outgoing mail.

[Update 11/22/23: In comments on the Optimized Collections initiative shared with members, the APWU says that it was told that 290+ facilities are listed for possible change. If so, that would include about 60 percent of the 500 post offices in the Richmond region. Those excluded would probably include the 110 post offices that are within 30-minutes of an S&DC as well as another 100 that are in higher density areas outside the 30-minute “reach” of an S&DC. A list of 330 facilities that could be subject to Optimized Collections is here, tab “330 potential Optimized Collections.” It consists of post offices outside the S&DC service areas that have fewer than 10,000 people — a proxy for post offices with lower volumes.]

The communities most likely to be included in the Optimized Collections initiative tend to be small and rural, as indicated by the following data.

Richmond Region (in blue) with S&DC areas (in red). View interactive map.

The total population of the Richmond region is around 4 million. About 58 percent live within an S&DC service area, while 42 percent live outside the S&DC areas. About 92 percent of the population inside the S&DC areas is urban; the population outside S&DC areas is half urban, half rural.

The Richmond region has about 555 ZIP codes. Some 430 of them fall outside an S&DC service area, and about 65 percent of these ZIP codes are entirely rural. For the 120 ZIP codes within S&DC areas, only 16 percent are entirely rural.

There are about 2,530 carrier routes in the Richmond region, about half of them inside S&DC service areas and half, outside. Over 70 percent of the routes inside S&DC areas are city carrier routes, while only 17 percent of those outside the S&DC areas are city carrier routes (the rest are rural routes and highway contract routes in rural areas).

Of the 400 post offices outside the S&DC areas, over half are Remotely Managed Post Offices (RMPOs) — the small, rural post offices that lost their postmaster and had their hours reduced under POStPlan in 2012. There are only three RMPOs inside the S&DC service areas.

Generally speaking, then, the greatest impacts of Optimized Collections will fall on those who live in less densely populated areas that are too far from an S&DC and where the mail volume is relatively low.

This is similar to another aspect of the S&DC system. According to the Postal Service, one of the main benefits of S&DCs is that they make it possible to provide same- and next-day delivery of packages under USPS Connect because there’s no morning stop at the post office to unload trucks and load delivery vehicles. But not everyone lives close to an S&DC.

As the Postal Service has told the PRC, the communities that aren’t near S&DCs “will not receive the direct benefits of an S&DC, such as the ability to drop packages for delivery to an entire local market from a single consolidated location.” Only those who live within the “busiest markets” — i.e., densely populated urban areas — will benefit. (There’s more on that in this post.)

Optimized Collection adds another dimension to this pattern of discrimination. People living outside the S&DC service areas won’t get the benefits of USPS Connect for their incoming packages, and it will take an extra day to deliver their outgoing mail and packages.

This seems to be a fairly clear violation of 39 U.S. Code § 403, which states that “In providing services and in establishing classifications, rates, and fees under this title, the Postal Service shall not, except as specifically authorized in this title, make any undue or unreasonable discrimination among users of the mails, nor shall it grant any undue or unreasonable preferences to any such user.”

Unfortunately, the PRC will probably not weigh in on this issue unless someone files a formal complaint, a burdensome process requiring legal assistance, briefs and reply briefs, information requests, and technical analysis.

Insourcing transportation

The notification to the stakeholders says that the Optimized Collection initiative will be done “in conjunction with logistics career insourcing initiative.” This apparently refers to previously announced plans to replace the HCR system with USPS employees.

Back in November 2022, the Postal Service and APWU signed a Memorandum of Understanding establishing a pilot in Oklahoma City that created a new position called Postal Vehicle Operators (PVOs). The new position was “intended to assign to the MVS craft the transportation of bulk quantities of mail without driving a vehicle that requires a Commercial Driver’s License (CDL).”  The full-time assignments allowed for a workday of eight hours within nine or ten hours as well as some part-time positions.

According to another Memorandum of Understanding between the APWU and USPS dated June 20, 2023, “Bulk quantities of mail transported between mail processing facilities and S&DCs will be performed by Postal Vehicle Service (PVS} employees unless such work was previously subcontracted. In addition, the transportation of bulk quantities of mail to/from an S&DC to/from the retail units/box sections that letter carriers were removed from will be performed by PVS employees. The parties will continue to meet for the purpose of discussing bringing subcontracted PVS work ‘in house.’”

In a notice to members in September, the APWU provided an update on another agreement expanding the deployment of the new Postal Vehicle Operator positions. The announcement says that the Postal Service would establish 63 PVO positions at the Richmond S&DC, 38 PVO positions at the Charlottesville S&DC, 14 PVO positions at the Hampton S&DC, and 25 positions in the S&DC in Athens, Georgia. “These will bring work to the craft that had previously been performed by contractors,” announced the APWU.

In the past, insourcing transportation between plants and post offices has confronted a significant obstacle — the morning dropoffs and evening pickups are separated by several hours so they can’t be done in a continuous eight-hour shift. Private contractors can use two different drivers working a 4-hour shift, or the same driver who’s willing to work the split shift, but that’s generally not possible with full-time postal employees.

Optimized Collection may help solve this problem. A PVO driver on a hybrid Optimized Collection route could do four hours dropping off and another four picking up, with an hour break, all in one continuous route. Plus, the part-time PVOs could work just a four-hour morning shift, six days, for a 24-hour week, and do the full-optimization routes.

As for the HCR companies that have been doing this work for the Postal Service for many years, their future is in jeopardy. Several weeks ago, Multichannel Merchant reported that a company that has been running HCR trucks out of Staunton, Virginia, was told the contract would be terminated on September 15.

The owner said she had been informed that the Richmond area was a pilot for the USPS’s plan to take over mail shipments that had been handled by contractors. She also heard from someone who had been in a meeting with the Postmaster General that the switch from contractors to in-house transport will be completed by 2025.

Although postal employees, HCR companies, and the public are first learning about Optimized Collection and the insourcing of HCR work, the Postal Service has probably been planning these changes for a long time. The Delivering for America plan published in 2021 discussed “optimizing” the surface transportation network, which may have included eliminating evening pickups.

But as usual, the Postal Service is sharing details about the 10-year plan in a piecemeal way, thus avoiding the regulatory scrutiny and public opposition that would take place if everyone saw the full picture all at once.

— Steve Hutkins

(Featured Image: What is a milk run in logistics?)

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