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Highlights of USPS Product Cost Workshop Tim O’Reilly

Highlights of USPS Product Cost Workshop Tim O’Reilly. MTAC August 18, 2011. Project Background. There have been criticisms of current costing system We have developed a costing systems review team Gathering feedback from external customers Gathering feedback from internal customers

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Highlights of USPS Product Cost Workshop Tim O’Reilly

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  1. Highlights of USPS Product Cost Workshop Tim O’Reilly MTAC August 18, 2011

  2. Project Background • There have been criticisms of current costing system • We have developed a costing systems review team • Gathering feedback from external customers • Gathering feedback from internal customers • Will examine feasibility of suggestions • Purpose - To develop recommendations to improve cost reporting so that it will provide management the right tools to manage the business – both in terms of making decisions about operational changes and in making product and pricing decisions

  3. Break Out Session Topics • Understanding Bottom Up Costing • Specifically define bottom up costing. • What are the risks/costs/benefits of using? • Data Source Discussion (IMB, IOCS, etc) • Discuss if and when IOCS sampling should be replaced by another data source (ex. IMB). • What are the risks/costs/benefits? • Workshare Model Discussion • What should be measured / included in the cost avoidance estimates • What are the risks/cost/benefits • Cost Data Discussion • Is there cost information that USPS does not either currently produce or provide, that you believe you need? • What are the risks/costs/benefits?

  4. Voted as Most Important Bottom Up Costing • Start with cheapest piece and work up from there • Look at should costs / minimal handling • Use only direct costs, not institutional • Start with actual measurable costs • Risk: There will be winners and losers; some could experience large price increase and be driven out of mailstream

  5. Voted as Most Important Data Source (IOCS / IMB) • IMB should be used as checks and balances against IOCS, not enough IMB data to replace IOCS • Need way to ensure IMB is measuring correct activity; i.e. doesn’t make sense for parcel to be on letter sorting equipment • IOCS does not allocate costs properly - lack of transparency and understanding in how process happens

  6. Voted as Most Important Workshare Model Discussion • Imprecise; does not capture all work done • Need to look at lowest combined cost of both Mail Service Provider and USPS, including fuel costs and capital costs • Need accurate entry points and downflows – possibly use IMB; cost models should be updated with accurate information

  7. Voted as Most Important Cost Data Discussion • Want CRA data by product (more detail), not segment • Want explanation of why costs increase faster than CPI and wages • USPS does not provide ROIs for data costs (requirements) • Presently cost information not being shared as should be (i.e. FSS); Risk is lack of trust

  8. Next Steps • Send a summary of feedback to you by end of next week • We will share recommendations and justification with you in early November • Contact Info: Tim.O’Reilly@usps.gov 202 268-5521 Jennifer.Bradley@usps.gov 202 268-3411

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