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Financial Constraints

The new Postal Service network represents a network that minimized capital spending.  It uses only existing facilities and existing mail processing equipment.  In addition by expanding processing windows, the Postal Service expands the use of its new letter sorting equipment and eliminates the need to replace its older automated sortation equipment.

The financial constraints have an impact on both the Postal Service's operating costs and the quality of service that the Postal Service can offer. 

The financial constraints affect the operating costs of a streamlined network in two ways.


  • First, the network must use existing facilities.  While some existing facilities are close enough to the cost-optimized locations for a 200 plant network that they would continue to be used, significant parts of the country would be better served by replacing an existing facility with one a significant distance from where existing facilities are located.  Also some plants in optimal locations may be too large or too small for its optimal service area and a less optimally located facility has the capacity in place.    Using facilities in locations that less than optimal eliminates the need for significant capital to build an optimal network but most likely will generate higher processing and transportation costs than would be found in an optimal network designed without the capital constraints.  Facility location has a big impact on decisions to transport mail by air or truck

  • Using existing facilities also limits the Postal Service to using the footprint of existing facilities.  This set the limit on the amount of sortation equipment that a facity can hold extending sortation times.   Longer sortation times may shift some mail from ground to air transportation to meet two and three day service commitments as wel as affecting mail processing costs.
  • Second, the network can use only a portion existing equipment.   The Postal Service operates multiple generations of automated sortation equipmen with varying levels of productivity.   The amount of equipment used reflects capital constraints that set limits on the amount of equipment that can fit into the proposed network   The focus on minimizing equipment use also focuses on improving capital utilization with an uncertain impact on labor utilization.   A network optimized to minimize total costs might be less constrained by the amount of equipment used and depending upon other constraints might require more equipment than is now in the Postal Service's inventory to minimize costs or sort mail over shorter periods of time in order to further reduce transportation costs.

 

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