The Postal Service unwinds the NDC network and merges the mail streams

Steve HutkinsBlog, Featured

As part of its 10-year plan to streamline the network, the Postal Service is in the process of “unwinding” its 21 Network Distribution Centers, which handle Marketing Mail, Periodicals and some ground packages.

One of the goals of this NDC Unwind is to merge the mail and packages handled by the NDCs into the First Class Mail stream. While that may improve the efficiency of mail processing, it blurs the differences between postal classes and products and the speed of delivery one expects from each.

The 21 NDCs are all located in properties that are owned by the Postal Service, most of them since they were originally created in 1975, when they were called Bulk Mail Centers (many, like the Philadelphia NDC pictured above, still have the original signage). The BMCs processed Parcel Post, Bound Printed Matter, Media Mail, Standard Mail and Periodicals. In 2009, the Postal Service transformed the BMC network and turned the facilities into Network Distribution Centers.

Here are a map and list of the 21 NDCs. (View on Google Docs here.)

The 207 Report

News of the “NDC unwind” appeared last month on the website of the National Association of Postal Supervisors in a summary of a meeting in October with representatives of the Postal Service: “The NDC unwind initiative,” reads the summary, “is to explore changes in processing at the NDC, such as eliminating originating processing of marketing/periodicals and retail ground processing while continuing to provide excellent service. Every NDC will need an individual plan. The plan is to modify and possibly eliminate the NDC to NDC network.”

More details about the “unwind” appeared last week in a report submitted by the Postal Service in response to a requirement of Section 207 of the Postal Reform Act. (The report is dated December 2, 2022, but the redacted version wasn’t published on the PRC website until Feb. 10, 2023.)  The 207 report describes changes afoot at the NDCs in Atlanta and Chicago.

“The Atlanta NDC,” says the report, “is being completely overhauled and developed as a future location for other operations when the packages and mail processed in this location are moved to a new building in Palmetto, GA.” (That’s the new mega-plant the Postmaster General visited with the Washington Post last fall.) It goes on to say the Atlanta NDC is being fully renovated with “improved lighting, upgraded facilities and bathrooms” and the removal of obsolete equipment, “which will free workroom floor space to support the reconfiguration of the Atlanta area.”

The report doesn’t get into it, but these “other operations” and “reconfiguration” include turning the Atlanta NDC into one of the new Sorting & Delivery Centers, as we learned from a USPS presentation from July 29, 2022, which shows seven S&DCs in the Atlanta metro area, including the NDC.

The 207 report also describes changes at the Chicago NDC, which will be transformed into one of two Regional Processing and Distribution Centers (RPDC) in the Chicago metro area. These RPDCs are the multi-functional mega-plants that have been previously reported. Most if not all of them will not only process the mail but also function as Sorting & Delivery Centers.

In addition to the two in Chicago, three RPDCs are being built in Indianapolis, Charlotte and Atlanta. According to the 207 report, “These are all leased buildings. Currently, the projects are at the early stages of construction (Atlanta), buildout design (Charlotte), and construction (Indianapolis). Atlanta and Charlotte will start processing in 2023 while Indianapolis will be operational in 2024.”

As for the remaining 19 NDCs, the 207 report says the Postal Service is evaluating what to do with them: “The other 19 NDCs are the focus of design studies to evaluate how best to use the buildings and equipment as part of the RPDC network.” The Postal Service owns all 21 of the NDC properties, so rather than closing any of them down completely, the Postal Service may turn the biggest NDCs into RPDCs while repurposing the others as S&DCs.

The 207 report, it should also be noted, confirms what’s been suspected all along — the new Sorting & Delivery Centers will eventually lead to post office closings.

The report says that through changes in the Chicago metro area, including the repurposing of the NDC, the Postal Service will “realize substantial savings due to the non-renewal of leases.” The same goes for Atlanta, where, by combining smaller operations into the new Palmetto RPDC (also a S&DC), “we expect to reduce lease costs.” And ditto for Charlotte, where thanks to its new RPDC/S&DC, the Postal Service expects “to see savings through the elimination of leased facilities.”

These leased facilities may include a processing plant or two, but the context makes it clear that the Postal Service is referring to leases on post offices. When it comes time to renew the lease, many of the post offices that that lose their carrier operations to an S&DC will be closed. It’s part of the plan. But since the Postal Service has been claiming that these post offices will remain as is, it didn’t want to spell that out in the report, which barely even mentions post offices.

The NDC Unwind

The “NDC unwind” was also the subject of a USPS presentation shared in a recent daily huddle at one of the NDCs.

According to the presentation, the objectives of the plan are to “eliminate origin processing at NDCs, eliminate the NDC-to-NDC network, and merge Marketing, Periodicals and package services into the First Class mail stream.”

Under the current system, the presentation explains, the largest mailers truck their Marketing Mail directly to an NDC, while smaller mailers usually drop theirs at one of several Processing & Delivery Centers in their area — which are usually closer since there are hundreds of them as opposed to 21 NDCs.  (According to the 207 report, “In FY 2022 Q3 and Q4 there were 989 customers who inducted commercial mail directly at NDCs and 5,010 customers who inducted commercial mail directly at P&DCs.”) The mail is trucked from the P&DC to the NDC, and then, if necessary, to another NDC, then to other P&DCs, and then to delivery units at post offices.

The new system will streamline the process. The Marketing Mail, Periodicals and ground packages will go to a P&DC and be merged with First Class Mail and routed via the existing First Class network. Retail Ground and Parcel Select Ground Packages will be processed with First Class Packages. The mail will be trucked directly to delivery units at S&DCs and post offices, bypassing the NDC network.

Eventually the trips between P&DCs and NDCs and between NDCs and NDCs (inter NDC) will be minimized or eliminated. The NDC transformation is expected to result in workload reductions at the NDCs, with P&DCs absorbing much of the work.

The implementation is taking place in three phases: (1) Retail Ground & Parcel Select packages move to the First Class Mail network; (2) Marketing Mail, Periodicals & Bound Printed Material decentralize to FCM routing; (3) the remaining Market Dominant Package Services merge to FCM. A timeline in the presentation shows much of the implementation got started last summer, while the remainder is scheduled for the first half of 2023, one NDC after another.

Service Standards and Product Classifications

The merging of the mail streams helps explain the changes to service standards and product classifications that have been going on since 2021 and that are still underway.

In October 2021, the Postal Service relaxed service standards on First Class Mail and Periodicals (PRC Docket N2021-1), which allowed it to decrease its use of air transportation from 21 percent of First Class Mail to 12 percent.

In May 2022 it did the same with First Class Package Services (PRC Docket N2021-2).

In June 2022, the Postal Service upgraded (i.e., accelerated) service standards for Retail Ground and Parcel Select to align with the standards for First-Class Package Services (PRC Docket N2022-1).

In October 2022, the Postal Service was granted approval by the PRC to streamline its competitive ground package services. Retail Ground and Parcel Select Ground were discontinued as distinct products and subsumed into First Class Package Services, which had previously included only small packages but will now include packages up to 70 pounds.

Last week, the Postal Service announced its intention to rename First Class Package Services as Ground Advantage. Service standards for all ground parcels will align with the First Class service standards.

As some mail speeds up while other slows down, the various mail streams for First Class mail (except for the percent that still uses air transportation), Marketing Mail, Periodicals, and Ground Advantage parcels will essentially merge into one stream.

Merging the Mail Streams

The full implications of this transformation of the postal network remain to be seen, but streamlining the processing and delivery network and integrating the mail streams will homogenize the mail, diminishing the differences between the way in which various classes and products are processed and delivering everything at approximately the same speed.

Back in 2000, First Class Mail averaged about 1.9 days to deliver, while standard mail averaged 4.4 days. The difference in class meant something. Now, not so much.

According to reports recently submitted to the PRC for its annual compliance review, the average delivery times for First Class Mail and Marketing Mail are becoming almost indistinguishable.

As recently as 2015, average delivery time for First Class Mail was still less than 2 days. During FY 2021, the average days to deliver for First Class Mail had increased to about 2.6 days while Marketing Mail averaged about 3.1 days. During FY 2022, First Class averaged 2.55 days and Marketing Mail averaged 2.7 days.

As more First Class Mail eventually shifts to ground transportation (taking advantage of the new, slower service standards), its average delivery time may slow down more, while the more streamlined treatment of Marketing Mail may speed up its delivery time. The differences between First Class and Marketing Mail could become even less recognizable.

In a similar way, ground packages, which used to take several days, will speed up — next-day delivery is one of the selling points of the new USPS Connect brand and the new S&DC system — which will make the differences between Ground Advantage and Priority less noticeable as well.

Where it’s all going

The Postal Service has been implementing the Delivering for America plan and its transformation of the postal system in a piecemeal way: modifying service standards on one class, then another; changing product classifications on one product, then another; moving equipment from one plant to another; repurposing one processing center into Sorting & Delivery Center, then another; and relocating carriers from post offices, one by one.

The Postal Service has thus evaded a holistic review of what the 10-year plan will do.

In 2021, the attorneys general of nineteen states filed a complaint with the Postal Regulatory Commission arguing that it should do an advisory opinion on the whole plan, not its individual components, but the Commission dismissed the complaint.

Implementation of the DFA will thus continue with no comprehensive, external analysis of what it will all mean in the end — that is, aside from the inevitable: reducing the workforce by tens of thousands, closing post offices, cutting retail hours, selling historic properties, and transforming the Postal Service into a business rather than a public service. And that cannot end well.

— Steve Hutkins