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June 17, 2014. Western Area Focus Group. Drew Aliperto Western Area Vice President Erica brix Western area manager, operations Support. Western Area Focus Group. Thank You for Your Participation In This valuable process. Value of the Area Mailer Industry Focus Groups:.

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slide1
June 17, 2014

Western Area

Focus Group

Drew Aliperto

Western Area Vice President

Erica brix

Western area manager, operations Support

slide2
Western Area Focus Group

Thank You for Your Participation

In This valuable process

Value of the Area Mailer Industry Focus Groups:

  • Forum to Communicate Operational Changes
  • Provides a Forum for Crucial Feedback / Suggestions / Ideas
  • Builds Critical Relationships at All Levels of the Organization
  • Immediate Issue Resolution
slide3
Volume

Universal Service

Obligation

  • Transactional volume
  • declining due to e-diversion
  • Advertising mail is subject to more substitution options
  • Mail volume highly sensitive
  • to economic changes
  • Mail mix changes – lost profit contributions

Postal network driven by:

  • Delivery points
  • Retail locations
  • Sortation facilities
  • Six-day delivery

Price

Labor Costs

  • ~80% of total costs
  • COLA increases
  • Benefits: pensions, retiree health, health insurance
  • Limited flexibility
  • Retiree prefunding obligation, rising workers’ compensation costs
  • Limited pricing flexibility

Business Imperative for Change

Declining

steadily

Fixed cost

base

These trends will continue to put pressure on USPS ability to provide affordable universal service

Rising cost

per hour

Rising but

capped

slide4
Continuous Efficiency Improvements Have

Helped Mitigate the Impact of Business Threats

$16 Billion of Annualized Savings in the past seven fiscal years with workhours reduced by 24%

Despite Significant Cost

Reductions Losses Remain

At Unsustainable Levels

Total Workhours (Millions)

Savings (Billions)

Career Employees – Reduced by 205K since 2006, without layoffs

Postal Service is More Efficient Than Ever

800

30

696

685

24.2

663

Annual Growth 1.2% [2000 – 2013]

623

25

584

557

20

528

491

15

TFP Cumulative Trend

10

5

Annual Growth 0.3% [1972 – 1999]

0

'06

'07

'08

'09

'10

'11

'12

13

19721980199020002013

slide5
A Deep Financial Hole
  • Liabilities exceed assets by approx. $40 billion
  • The USPS has only 35 cents of assets to cover each dollar of its liabilities

ASSETS

LIABILITIES

  • * Newly available data on forever stamp usage resulted in a $1.3B reduction in Deferred Revenue – Prepaid Postage
  • ** Under multi-employer accounting rules, there are approximately $51B in obligations not shown on the balance sheet.
  • Significant profits over years and legislation are needed to recover.
slide6
USPS Business Plan

Closing the Gap

2016 Savings

  • Legislative Initiatives

$11.1B

  • Operational Initiatives

$6.0

  • Transforming Infrastructure
  • Continuous Improvement
  • Workforce

$2.6B

  • Reduce the Unit Cost of labor
  • Increased Flexibility

6

slide7
Key Legislative Goals
  • Require USPS Health Care Plan
    • Resolves RHB Prefunding Issue
  • Refund FERS Overpayment
  • Adjust Delivery Frequency (6-Day Packages, 5-Day Mail)
  • Streamline Governance Model
  • Authority to Expand Products and Services
  • Require Defined Contribution System for Future Postal Employees
  • Instructions to Arbitrator
  • Reform Workers’ Compensation
  • Right to Appeal EEOC Class Action Decisions

7

slide8
Western Area Focus Group

Delivery and Post Office Operations

Transforming Infrastructure

Facilities

Retail Ops

Network Operations

8

slide9
Western Area Focus Group

Delivery Optimization

9

slide10
Major Optimization Initiative

Delivery Optimization

Transforming Infrastructure

  • Units
  • 2,513 Delivery Unit Consolidated
  • Routes
  • 24,000 City Routes Reduced
  • Deliveries
  • Efficient Mode of Delivery

10

slide11
Delivery Mode Conversions

Current Policy/Strategies are Driving Migration to More Efficient Delivery Mode

USPS Delivery Modes

FY 2013 Growth by Mode

Fiscal Year 2013

FY 2013 Growth % Total

CENTRAL

DOOR

Door

(61.2K)

(6%)

37.8M

40.5M

Curbline

490.9K

47%

31%

28%

Centralized

607.6K

59%

CURBLINE

55.0M

Total Growth

1.04M

- -

41.0%

Total street deliveries – 133.3M

slide12
Western Area Focus Group

Access Optimization

12

slide14
Retail Strategy

Retail Channel Strategy Focus

  • Grow Revenue
  • Reduce the Cost to Serve
  • Transform Customer Experience in High Traffic Post Offices
  • Enhance Customer Convenience Through Expanded
  • Retail Partnerships
  • Preserve Retail Services in Rural America
    • 50% of Post Offices realigned to match community needs
slide15
Western Area Focus Group

Facilities management & Disposal

15

slide16
Facilities Optimization

USPS Facilities

New Jersey Network Distribution Center – 1.4M Sq Ft

Owned 8,596

Leased 23,763

16

Ochopee FL Post Office – 62 Sq Ft

slide17
Facilities Optimization

Objective

  • Generate Revenue and Reduce Expenses by:
    • Selling owned buildings
    • Terminating leases
    • Re-purposing space

Over 6.7M Sq. Ft. Eliminated

advantages of a transformed infrastructure
Advantages of a Transformed Infrastructure
  • Fewer Facilities
  • Denser Bundles/Trays and Pallets
  • Increased Equipment Utilization
  • Increased Productivities
  • Maximized Transportation
  • Better Utilization of Air/Surface Trips
  • Gain Economies of Scale
  • Right-sized Workforce
  • Employee Flexibility
  • Revised Pay Structure

Complement

slide19
Western Area Focus Group

Major FY 2014 Initiative

DSCF Standard Mail Load Leveling

Erica Brix

Manager, Operations Support

Western Area

19

slide20
Imbalance of Mail Delivered by DOW

45%

Disproportionate amount of Standard Mail is

scheduled for delivery on Monday resulting in:

40%

  • Service Variability

35%

  • Operational Inefficiencies
  • Increased Cost

30%

25%

20%

15%

10%

5%

0%

SAT

MON

TUE

WED

THU

FRI

Postal Quarter 1 FY 13

slide21
Expected Days of Delivery

SCOPE OF LIMITED CHANGE

DELIVERY DAYS MEETING SERVICE STANDARD

Thursday

Friday, Saturday, Monday

Friday, Saturday, Monday

DSCF Standard Mail**

Dropped Before 4pm* on

Prior to April 10

Current

Friday

Saturday, Monday

Saturday, Monday, Tuesday

Saturday

Monday, Tuesday

Monday, Tuesday, Wednesday

Sunday

Monday, Tuesday, Wednesday

Monday, Tuesday, Wednesday

*The current Critical Entry Time (CET) for Standard mail is 4 pm

**For delivery in the continental United States

21

slide22
Expected Days of Delivery

What Hasn’t Changed

  • Standard mail dropped at a DDU does not change
  • Standard mail dropped at a NDC does not change
  • EDDM Retail does not change
  • Periodical/Newspaper processing does not change
  • First-Class does not change
  • Priority does not change

22

slide23
Delivered Volume

% OF Total Delivered Volume by Day

Baseline PERIOD

DSCF Load Leveling to Date *

* 4/19 through 6/6

23

slide24
Service Performance

DSCF Standard Letters

4/12 – 5/23

Standard SCF Letters

UCL / LCL

UCL / LCL

Target

Target

SPLY

SPLY

Standard SCF Flats

DSCF Standard Flats

4/12 – 5/23

24

slide25
Standard DSCF Flats

April 11 – May 30

Friday Start-the-Clock

Day 1 – Saturday 23.82%

Day 2 – Monday 53.99%

Day 3 – Tuesday 19.00%

Service Variance

slide26
DSCF Standard Mail Load Leveling
  • Results are Promising
    • Mail Processing working to capacity
    • Reducing average hours per route
    • Balanced workload with consistent service performance
  • Controls and Monitoring
    • Facility Audits
    • New data driven diagnostic reports
    • Address the Vital Few Opportunities
    • Operational Tiger Teams for site visits and improvement recommendations
slide27
Benefits
  • Benefit to Mailers and Customers
  • Predictable and Reliable Service
  • Consistent Delivery Times by Day of the Week
  • Less Competition in the Mailbox
  • Increase Visibility
  • Cost Containment – Maintain Affordable Prices

27

slide28
100% Visibility

100% Product Visibility

Provides the ability to

track mail pieces and containers through the postal network and provide business intelligence to enhance operational performance and provide customer value

28

slide29
Attributes of 100% Product Visibility

Unique barcodes on letters, flats, packages, trays and containers

Access to analytical capabilities for forecasting and predictive workloads

Real-time

Data & Intelligence

29

slide30
Next Generation Equipment

Delivery Sortation System

PASS

Real-Time Scanners

Mobile Delivery Device

(Replaces Real-Time Scanners)

C007

Dec 2012- March 2014

Nov 2012-Sept 2013

Feb-May 2013

Jul 2014-Dec 2014

Jan–Dec 2014 Deployment

May-Nov 2014 Deployment

Jan 2015 – Aug 2015

Scanning Units

Scanning Units

Scanning Units

Scanning Units

Scanning Units

Scanning Units

Scanning Units

Total – 12,500

Total – 4,167

Total – 225,000

210,608

75,000

150,000

11,700

3,137

1,030

800

30

slide31
Delivery Management System (DMS)
  • Evaluates Carrier Route Status to plan and color-coded route status
  • Estimates Delivery Time for all packages in unit
  • Currently being tested in limited ZIP Codes

31

slide32
Predictable and Measureable

HOW?

Does USPShave the mail?

Where is it in the process?

When will itbe delivered?

How did the overall mailing perform?

An optimized plan for:

Full Service

Intelligent Mail

Strategies

Avoidingbottle necks

Balance resources & reduce costs

Response Rates & ROI

Consistent, predictable delivery

Business Intelligence Enhances the Performance& Value of Your Mailings

32

slide33
Phase 2

Network rationalization

slide34
PHASE 2 NETWORK RATIONALIZATION

VOLUME REALITIES

Mail Volume Shifting to a Less Profitable Mix

Volume in Billions of Pieces

slide35
PHASE 2 NETWORK RATIONALIZATION

NETWORK RATIONALIZATION STATISTICS

slide36
PHASE 2 NETWORK RATIONALIZATION

FIRST-CLASS MAIL SERVICE AFTER IMPLEMENTATION

Overnight – 20.05%

2 Day – 35.6%

3 Day – 44.1%

The time it takes First-Class Mail to reach its destination will increase

from an overall average of 2.14 days to 2.25 days

slide37
Network Rationalization

NETWORK CAPACITY

1970

2014

2006

37

slide38
Plant Consolidations

Processing Plant Consolidations

800

  • Over 350 Facilities Eliminated
  • Reduced over 75M miles

673

700

623

614

599

600

528

487

500

461

417

400

320

300

Phase 1

200

38

slide39
PHASE 2 NETWORK RATIONALIZATION

EMPLOYEE IMPACT

  • Approximately 15,000 employees affected
  • Will work within negotiated employee agreements, laws, and regulations to place employees in other vacant positions available through normal attrition
slide40
Western Area Focus Group

Growth

Opportunities

Drew Aliperto

Vice President

Western Area

40

slide41
Growth Opportunities
  • Enhance the value of Direct Mail and Catalogs
  • Increase Market Share of Packages
  • Innovate across USPS Business Platforms

Continue to Optimize the Value of the Infrastructure

41

slide42
Mail is Relevant –

Most Direct Way to Communicate

12%.....the share of total American marketing spend on mail. It’s been consistently about 12 percent for the past 30 years.

  • Four Key Ideas:
    • Personally Relevant – Interest
    • Actionable – Speed to purchase
    • Functional – Imbed technology in paper
    • Creative – Color, construction, size

42

slide43
Growing Direct Mail

The Impact of Direct Mail is Significant

Using direct mail and email in integrated campaigns creates synergies that boost response more than using either medium alone.

Source: Marketing Sherpa Study

43

slide44
Mobile Commerce

Mobile Technology Helping Drive Long-Term Value with Direct Mail and Catalogs.

  • Smartphones and tablets interact with the printed page
  • Direct Mail or Catalog becomes “catalyst” for mobile commerce
  • Direct Mail and Catalog integration with technology increases:
    • Relevance
    • Effectiveness
    • Convenience
    • Responsiveness
    • Engagement

NFC

Mobile Barcode

Image Recognition

Augmented Reality

44

slide45
Committed to Mail
  • We remain committed to growing mail
  • Will collaborate with the industry to grow and enhance direct mail and catalogs
  • Embrace technology to attract consumers to new possibilities
  • Continue to seek promotional ideas from customers

The power of mail enhances package delivery & returns.

45

slide46
Growth Opportunity

Opportunity in Packages

Building a World Class Package Platform

46

slide47
E-Commerce Continues to Grow Rapidly

Attain market share NOW

grow with hyper-growth of market

47

slide48
Package Growth Opportunity

Elements to Building a World Class Platform

  • Integrated Package Network Plan
  • Product Development Plan
  • Package Delivery Optimization Plan
  • Next Generation Equipment
  • International Package Processing Plan
  • Improve Customer Pick-up Experience
  • 100% Product Visibility

SEVEN

KEY ELEMENTS

48

slide50
Growth Opportunity

Align Our Returns Portfolio with the Needs of Ecommerce Shippers

Create a simpler returns product line

  • Consolidate disparate offerings to Network and First Mile

Eliminate obstacles to onboarding

  • Fees
  • Separate permits

Make products easier for users

  • Roundtrip label
  • Print and Deliver label
  • Expand customer base for Scan-based Payment
slide51
Customized Shipping

Customized Products to Meet the Needs of Large Ecommerce Shippers

Sunday Delivery

  • Leveraging Sunday delivery to grow our overall package business

Parcel Select Next-Day

      • Next-day delivery for SCF-dropped packages (last mile and a half)

MetroPost

  • Same-day, competitive-priced delivery
  • Talking with larger retailers with NYC introduction
slide52
Western Area Focus Group

the Future is Now

Innovation Platforms

52

slide53
Consumers’ busy lifestyles demand more delivery convenience

These changes set new consumer expectations

Growing Consumer Expectations

New businesses take notice of these demands and offer more expedient deliveries

Existing players improve their offerings to meet demand

slide54
Emerging Trends

Directional patterns that may generate market, customer, or organizational needs or opportunities.

Industry

Developments shaping how businesses are organized and how transactions take place

Social

Patterns of human interaction,movement, and preference

E-Commerce

Simplicity

Technology

The application of scientific knowledge and engineering in the digital age

Do-It-Yourself Consumer

Same-Day Delivery

Public-Private Partnerships

Collaborative Consumption

Automation

Big Data

3D Printing

54

slide55
Innovate Across Business Platforms

First Mile

Physical Network

Last Mile

Digital

  • Expand delivery solutions
  • Capitalize on the expansion of E-commerce and technology
  • Optimize route flexibility and productivity
  • Boost the demand for mail and packages
  • Expand and simplify induction points
  • Integrate emerging digital, big data, and consumer trends to grow
  • Leverage USPS’s brand, trust, and reputation to drive profit
  • Leverage market-leading physical assets
  • Incorporate evolving logistics solutions
  • Develop a structure that fosters agility and innovation

Optimizing the Value of the Infrastructure

55

slide56
Enable American Commerce

with a World - Class Shipping Platform

slide57
Western Area Focus Group

Collaboration & outreach

slide58
USPS – Industry

USPS – industry Collaboration & outreach

  • Continue to collaborate through:
    • MTAC
    • Assn. Meetings
    • NPF
    • Trade shows and other events
  • Leverage PCC’s & Area Focus Groups to Work With Local Leadership to Resolve Issues

Commitment to Communicate

Area Mailing Industry Focus Groups – Calendar by Area at https://ribbs.usps.gov/index.cfm?page=periodicalsfocus

Success requires collective effort

58

slide59
Western Area Focus Group

Thank You

Questions?

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