	Background

USPS’s mail processing network consists of multiple facilities with  different functions, as shown in a simplified version of this complex  network in figure 1. In its June 2008 Network Plan, USPS determined that it will reexamine its  mail processing network on an ongoing basis given changes in mail  volume and outlined several initiatives to improve management of its mail  processing operations, retail operations, and workforce to increase  efficiency and reduce costs. With regard to its mail processing operations  specifically, USPS identified three major initiatives to improve efficiency:  (1) closing Airport Mail Center (AMC) operations, (2) transforming the  Bulk Mail Center (BMC) network, and (3) consolidating AMP operations. USPS’s Network Plan also included criteria for evaluating decisions, the  three most important of which were cost, service, and capacity. USPS Has Realigned Part of Its Mail Processing Network and Has Estimated Cost Savings

USPS has realigned parts of its mail processing network and continues to  seek additional opportunities to achieve its goal of creating an efficient  and flexible network. For fiscal year 2009, USPS realized a cost savings of  almost $30 million from eliminating all AMC operating functions and  closing nine of these facilities and reorganizing the functions of the BMC  to the Network Distribution Centers (NDC). USPS  officials told us that they plan to reclassify the 12 remaining facilities and  determine whether some of them can be closed. USPS realized a cost savings of about $17.7  million for fiscal year 2009, with a projected cost savings of about $233.8  million from additional reorganization in fiscal years 2010 and 2011. According to officials, USPS also plans to integrate its Surface Transfer  Center (STC) functions into the NDC network to further eliminate  redundancy and move all mail traveling the same route through the same  facilities. Consolidation of AMP operations and facilities. USPS Has Followed Its Guidance and Consistently Applied Criteria in Consolidating Its AMP Facilities

		USPS Has Followed Its Process for Consolidating Area Mail Facilities

On the basis of our analysis of 32 AMP proposals that were implemented,  approved, or not approved since October 2008, USPS has followed the key  steps in the AMP process. Our analysis found  that USPS completed each step of the AMP process. It took about 6  months on average to complete the review process from initiating an AMP  proposal to making a decision on 27 AMP proposals we analyzed. In our analysis, we found that USPS consistently notified the  stakeholders when a feasibility study was initiated and when a final  decision was made; we also found that USPS consistently held public  meetings and summarized public input for each AMP proposal we  reviewed. The last step in the AMP process is completion of two postimplementation  reviews to assess the results of the consolidation. For  both postimplementation reviews, additional savings have been realized in  part because mail volume has continued to decline resulting in further  reductions in work hours and transportation costs. According to the AMP guidance,  USPS must consider the following four criteria:  impacts on the service standards for all classes of mail, issues important to local customers, impacts to USPS staffing, and   savings and costs associated with moving mail processing operations. USPS estimated a total annualized cost  savings of about $98.5 million for the 29 approved and implemented AMP  proposals we reviewed. Agency Comments

We provided a draft of this report to USPS for official review and  comment. In response, USPS provided technical comments that we  incorporated where appropriate.
Why GAO Did This Study

Deteriorating financial conditions and declining mail volume have reinforced the need for the U.S. Postal Service (USPS) to increase operational efficiency and reduce expenses in its mail processing network. This network consists of interdependent functions in nearly 600 facilities. USPS developed several initiatives to reduce costs and increase efficiency; however, moving forward on some initiatives has been challenging because of the complexities involved in consolidating operations. In response to a conference report directive, GAO assessed (1) the overall status and results of USPS's efforts to realign its mail processing network and (2) the extent to which USPS has consistently followed its guidance and applied these criteria in reviewing Area Mail Processing (AMP) proposals for consolidation since the beginning of fiscal year 2009. To conduct this assessment, GAO reviewed USPS's Network Plan, area mail processing consolidation guidance and proposals as well as other documents; compared USPS's actions related to consolidation of area mail processing facilities with its guidance, and interviewed officials from USPS, the USPS Office of Inspector General, and employee organizations. GAO provided USPS with a draft of this report for comment. In response, USPS provided technical comments that were incorporated where appropriate.

What GAO Found

USPS has realigned parts of its mail processing network since the beginning of fiscal year 2009 and continues to seek additional opportunities to achieve its goal of creating an efficient and flexible network and realize cost savings. Specifically, USPS: (1) eliminated all functions of the Airport Mail Centers, closed 9 of these facilities, and now uses the remaining 12 for other purposes, resulting in a realized cost savings of about $12.2 million in fiscal year 2009; (2) reorganized the functions of the 21 Bulk Mail Centers into newly developed Network Distribution Centers, resulting in a realized cost savings of about $17.7 million in fiscal year 2009; and (3) implemented 23 proposals to consolidate AMP operations and facilities and approved another 6 AMP consolidation proposals. USPS estimated an annual cost savings of about $98.5 million for the 29 approved and implemented AMP proposals. Additionally, USPS officials stated that they plan to integrate the Surface Transfer Center functions into the Network Distribution Center network to further eliminate redundancy in transporting mail. USPS has developed specific program targets for the ongoing reorganization efforts of the Network Distribution Centers and estimated a cost savings of about $233.8 million for fiscal years 2010 and 2011 from reduction in work hours and transportation costs. On the basis of GAO's analysis of 32 AMP proposals that were implemented, approved, or not approved since the beginning of fiscal year 2009, USPS has followed its realignment guidance by completing each step of the process and consistently applying its criteria in its reviews. GAO's analysis found that it took about 6 months on average--a month more than USPS's target of 5 months--to complete the review process from initiating an AMP proposal to making a decision. USPS officials noted the importance of the AMP decisions and the need to sometimes take longer than what the guidance suggests to ensure the correct decision. GAO also found that USPS consistently notified stakeholders when key steps of the AMP process were completed, such as when an AMP proposal was initiated, or public meetings were held. For each of the AMP proposals that GAO reviewed, USPS also consistently evaluated its four criteria related to AMP consolidations: (1) impacts on the service standards for all classes of mail, (2) issues important to local customers, (3) impacts to USPS staffing, and (4) savings and costs associated with moving mail processing operations.