The Postal Service has informed the unions and management associations of its initial findings in the business cases for the implementation of the AMP process for four Processing and Distribution Centers (P&DCs) in Eugene and Medford in Oregon and Macon and Augusta in Georgia. These are the first such consolidations under the Delivering for America plan. A couple of hundred more may be coming soon.
These notification are an early step in the consolidation process described in Handbook PO-408, formerly called an AMP study (Area Mail Processing), and now called a Mail Processing Facility Review (as discussed here). It indicates that the Postal Service has begun a feasibility study to determine whether efficiency and/or service would be improved by the consolidation. The Postal Service will be required to share more information as the process continues, but here’s what the initial findings have to say.
The Medford facility would be converted to a Local Processing Center (LPC), and some mail processing operations would move to the Portland Regional Processing & Distribution Center (RPDC). There would be an estimated net decrease of 17 craft positions and 1 management position. The projected savings are as follows:
- Annual Transportation Savings: $2.9M – $4.9M
- Annual Maintenance Savings: $610K – $1.0M
- Annual Mail Processing Savings: $250K – $420K
- Annual Management Savings: $60K – $110K
- Total estimated Cost Savings: $3.9M – $6.4M
The Eugene facility would be converted to a Local Processing Center (LPC), and some mail processing operations would move to the Portland RPDC. There would be an estimated net decrease of 36 craft positions and 0 management positions.
- Annual Transportation Savings: $1.2M – $2.1M
- Annual Maintenance Savings: $1.7M – $2.8M
- Annual Mail Processing Savings: $290K – $480K
- Annual Management Savings: $0
- Total estimated Cost Savings: $3.2M – $5.4M
The Macon facility would be converted to a Local Processing Center (LPC), and some mail processing operations would move to the new Atlanta RPDC. There would be an estimated net decrease of 26 craft positions and 6 management position.
- Annual Transportation Savings: $1.2M – $2.0M
- Annual Maintenance Savings: $1.3M – $2.1M
- Annual Mail Processing Savings: $220K – $360K
- Annual Management Savings: $380K – $630K
- Total estimated Cost Savings: $3.1M – $5.1M
The Augusta facility would be converted to a Local Processing Center (LPC), and some mail processing operations would move to the new Atlanta RPDC. There would be an estimated net decrease of 11 craft positions and 3 management position.
- Annual Transportation Savings: $770K – $1.3M
- Annual Maintenance Savings: $460K – $760K
- Annual Mail Processing Savings: $220K – $360K
- Annual Management Savings: $190K – $320K
- Total estimated Cost Savings: $1.6M – $2.7M
Here’s a table summarizing this information. (It’s on Google Docs here.)
With these four consolidations, a total of 100 positions would be eliminated, an average of 25 each. If that’s the average for, say, 200 consolidations, it would come to about 5,000 jobs.
The total savings for the four consolidations would be between $11.8 million and $19.6 million. Eliminating 100 positions would save approximately $8 million. The rest of the savings would come mostly from transportation cuts.
The proposals do not include any details about how the transportation and maintenance savings would be achieved. In past consolidations, the transportation savings typically came come from fewer trips and reduced use of Highway Contract Routes and Postal Vehicle Service. The maintenance savings were a consequence of having fewer sorting machines in the facility, hence fewer machine operators and custodial employees.
For all four consolidations, the total annual savings for mail processing per se would be between $1 and 1.6 million — an average of $250,000 to $400,000 each. If 200 P&DCs consolidations averaged in the same range, the total savings for mail processing would be $50 to $80 million.
That’s a far cry from the projections shared with the PRC a couple of weeks ago, which showed that mail processing cost reductions would eventually come to about $700 million annually (as discussed here). How to explain this discrepancy?
The $700 million may include savings from maintenance, which are much greater than those for mail processing itself, and from cuts to management positions. (The transportation savings are a separate category in the projections shared with the PRC.) That would bring the total to something on the order of $284 – $467 million. That gets us much closer to $700 million, but still a ways away.
It’s also possible that the savings for these first four consolidations are relatively small compared to those that will follow. And perhaps further mail processing savings will result from closing other types of facilities, such as Surface Transfer Centers (the Postal Service has told the PRC that it plans to close the STCs in Salt Lake City, Memphis, and Indianapolis).
Another possibility is simply that the Postal Service has overestimated the cost savings. That’s been an issue with previous cost-reduction initiatives, including the Network Rationalization plan on plant consolidations in 2012, as discussed in this 2019 OIG report.
In any case, at this point one can only speculate. More details about the DFA cost reductions were shared with the PRC in a non-public filing, so only those granted permission can see this information (PostCom was granted access earlier this week). As for the rest of us, the Postal Service claims the information is too “commercially sensitive” (as discussed here).
Public meetings will be held for each of the four consolidations on August 8 and 9 (the schedule is here). Perhaps the Postal Service will share more information about the job cuts and cost savings at these meetings.
— Steve Hutkins
(Featured image: Macon GA PO & P&DC)