US Postal Service 2005 Annual Report Download - page 44

34 | 2005 Annual Report United States Postal Service
Transformation Plan
Our 2002 Transformation Plan has helped us become a
leaner, more effective and modern organization. Under this
Plan, we attained record levels of service and customer
satisfaction and achieved our goal of $5 billion in cost
reductions ahead of our 5-year target. The cumulative cost
savings under the Plan are over $15 billion.
Postage rates have been stable since 2002 as a result
of improvements in productivity and a legislative change
that reduced our payments to the Civil Service Retirement
Fund. Additionally, we have eliminated outstanding debt
from $11.1 billion at the close of 2002 to zero at the end of
2005. Under the 2002 Transformation Plan, we have been
using the flexibility available within current law to think be-
yond what was perceived as possible only a few years ago.
The Strategic Transformation Plan 2006–2010, published
in September 2005, is our blueprint for the future. Like the
Transformation Plan, published in 2002, it describes how
we will improve the value of mail and, by doing so, help
sustain a financially stable enterprise that best serves the
nation’s mailing needs as it provides affordable and reliable
universal service. The Plan is organized around our four
strategic goals: Generate Revenue; Reduce Costs; Achieve
Results with a Customer-Focused, Performance-Based
Culture; Improve Service.
This Plan builds upon the momentum of the 2002
Transformation Plan, while helping to ensure that we can re-
spond to changing customer needs, market requirements,
technological developments, and legal requirements. We
will continue our commitment to take $1 billion out of the
cost base each year through 2010, which, in combination
with revenue growth strategies, will sustain our mission of
providing universal service at reasonable rates.
Evolutionary Network Development
We will establish Regional Distribution Centers (RDCs)
mainly from existing facilities. In addition to other responsi-
bilities, RDCs will consolidate parcel and bundle distribu-
tion to take advantage of shape-based processing and
automation efficiencies, as well as function as consolidated
transfer points for all mail.
We are expanding our transportation surface reach through
the creation of Surface Transfer Centers which will provide
consolidation opportunities to maximize vehicle capacity
and eliminate redundant transportation. For those products
that must remain in the air we are creating partnerships
that allow us to purchase a low cost air solution. Through
these efforts we are creating a flexible logistics network
that reduces costs, increases operational effectiveness,
and improves the consistency of service.
In the last decade a combination of changes in mail mix/
mailer behavior and Postal Service automation capability
provides the opportunity to consolidate and streamline
postal processing.
In 2005 with the volume of Standard Mail exceeding
First-Class Mail, the proportion of mail drop shipped into
the postal network in downstream locations continues
to increase. With single piece First-Class Mail volume
continuing its eight year decline there are less cancella-
tions and processing at originating processing centers.
As workshare First-Class Mail volume increases it, too,
bypasses originating operations and is first processed on
automation at destinating network facilities.
Further, Postal Service automation has not only provided
significant efficiency increases, but it also has higher
throughput rates and is more flexible. For example, the
new Automated Package Processing System (APPS) sorts
bundles and packages. The combination of changes in our
customers’ mail and mailing patterns, and improvements
in postal automation provides the opportunity to consoli-
date processing classes of mail. That consolidation yields
less complex transportation network requirements, which
will be less expensive.
Outlook
Even before the recent hurricanes took their toll on the
economy, we expected economic growth in 2006 to slow
down. Hurricanes Katrina and Rita dealt a significant
Financial review
Part II
TRANSFORMATION PLAN 2002 – 2005
$1.4 B
$4.2 B
$9.4 B
$15.4 B
2002 2003 2004 2005
Cumulative Savings / Cost Avoidance