The debate about the five-day delivery reflects the limitations of the USPS’s current paradigm – one that is predicated on what we would call a ‘fixed-state operating model’: every day, mail destined to your house is sorted somewhere in the postal network to the same delivery route, using the same sort scheme pointing to that specific route, on a sorting machine assigned to that same sort scheme (or vice versa), for distribution by a carrier who will visit every address on that same delivery route.
Under that fixed-state operating model, the five-day delivery debate makes sense: cost reduction versus customer/consumer-service. But both sides of the coin are not in conflict! They can be easily reconciled using ‘delivery-point economics’. Today, in the United States, mail is sorted in one location then pushed to its next handling point until it reaches its delivery unit where it is scheduled for delivery. Typically, mail is pushed along and is delivered as soon as it gets there. Under delivery-point economics, mail is delivered not as soon as it gets there, but when it has to! This is a critical difference, because, in our days of changing customer needs, significant cost can often be avoided by holding and staging mail sometimes as little as 24 hours to avoid delivery without the mail being late.
Standard Mail is today the leading class of mail delivered to U.S. households. However, Standard Mail’s contribution to operating margins is lower than First Class Mail, and therefore a higher density of mail per destination point is necessary to cover its costs. Standard Mail, however, offers more flexibility in service commitments. Using ‘delivery-point economics’, the USPS can manage and hold standard mail short of its delivery unit until it positively maximizes delivery economics, or until it must deliver it because of service commitment.
A move to a delivery economics model will require an adaptive approach where large sorting machines in a processing plant are operating equally on a grid within a geographical area, and mail flows are modulated between plants and delivery. Inventory (mail piled up somewhere) is no longer considered a sign of failure, but the result of deliberate and adaptive decision making. Ultimately, delivery routes are no longer fixed, but delivery points are adjusted, skipped or combined to minimize cost subject to meeting service requirements.
This model would implement what we call ‘any-day’ delivery, a policy designed to meet customers service requirements while focusing on reducing the single most expensive part of USPS’ operation.
for more information on delivery point economics, please contact us