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USPS – The Government Agency that Innovates

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USPS uses technology to stay competitive

The increasing connectivity is facilitating the logistics world keep up with the growing demand of consumer’s expectations of real-time information on delivered goods at a low price.  Although it is not often we would think to look towards a public entity for cutting edge business practices, the United States Postal Service (USPS) is an exemption to this widely held belief.  With the increasing use of amazon and other online business, there has been a growing burden on the package delivery companies to keep up with demand.  In addition, these package delivery companies need to improve their operations in order to improve profitability since the USPS took a loss of approximately 5 billion dollars in both 2014 and 2015. [5]

The United States Postal Service has certain government requirements to service all us residences, despite geographic location, at a constant price and level of service.  Some of these customers may be unprofitable customers for the agency to serve, but that is part of their charter as a government entity.  The agency has been developing plans to use technology to reduce costs and increase revenues to remain competitive while still keeping true to their value proposition of serving all residents with an equitable price and high level of service.

One of the core expectations of the USPS is fast, reliable service to anywhere in the united states in a stated time frame, typically 1-5 days depending on the service level.  In order to meet customer expectations, the business must have enough trucks performing routes daily to deliver packages, which drives their variable cost up (pun intended!).  In order to pacify this dynamic tension, the USPS is implementing two initiatives that take advantage of real time sensors; optimizing the size and weight of packages loaded onto a given truck and using real-time traffic information to optimize the route.  USPS estimates that these two initiatives together will reduce costs by $120 million a year.  [2]

In addition to improving the routing of the vehicles, USPS is evaluating a real-time predictive maintenance system (See Figure A for an example illustration [4]) that could save 70 million dollars a year in maintenance costs [2].  This system would reduce the long term costs of operating the vehicles by proactively doing maintenance at the signal of a failure, before it is a costly catastrophic failure that renders the vehicle inoperable on the side of the road.  Plus, by having fewer surprise maintenance problems, labor could be reduced by scheduling repairs during normal working ours rather than having emergency repair shops, which would level load the work for this cost center.  In addition to lower costs, this aligns with providing high quality service to customers because there will be fewer trucks breaking down en route, which in turn fail to deliver packages on time to customers [2].

Figure A

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USPS is not only looking to reduce costs – they are looking to improve user experiences and provide more value to ever demanding customers.  With the increase in food delivery services, USPS is evaluating putting in temperature control drop boxes in high population areas to open up a new delivery method for fresh groceries or temperature sensitive medicine.  With the decreasing cost of sensors, USPS can reliably and cost effectively implement this new functionality if there is customer demand for it.

One area where this organization has opportunity to improve its service level is in return package pickup.  With so many consumers buying clothing online with retailers offering free return shipping, the number of returned shipments is up 15% from the prior year [1].  USPS can capture this business by providing a frictionless system for consumers to return the product in a physical drop box or near their home.  Using low cost sensors in the drop boxes, USPS can detect the weight and size of the product, signaling a pickup is required with specific package information.  This is just one of the many things USPS should consider to remain relevant and effective in an industry where the demands are only growing.

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Source

  1. Chao, Loretta. “The Rising Cost of Free Returns” The Wall Street Journal. October 9th, 2015. http://www.wsj.com/articles/the-rising-cost-of-free-returns-1444398695 November 17, 2016
  2. Miskanic, Randy. “The Internet of Postal Things” Office of Inspector General of the United States Postal Service. August 3, 2015. https://www.uspsoig.gov/sites/default/files/document-library-files/2015/rarc-wp-15-013_0.pdf November 17, 2016
  3. “Next generation mailbox undergoes testing,” Postalnews.com, January 20, 2015, http://postalnews.com/blog/2015/01/20/next-generation-mailbox-undergoes-testing/ November 17, 2016
  4. Hilton, “IoT and Predictive Maintenance,” Bosch ConnectedWorld Blog, February 15, 2013, http://blog.bosch-si.com/categories/manufacturing/2013/02/iot-and-predictive-maintenance/ November 17, 2016
  5. “United States Postal Service 2014 Annual Report to Congress” United States Postal Service. 2014. http://www.prc.gov/Docs/91/91029/FY14.17_Annual-Report-Comp-Stmnt.pdf November 17, 2016

3 thoughts on “USPS – The Government Agency that Innovates

  1. Distribution services could use more technology in their industry, especially the USPS. Rather than using sensors, I think that it would be interesting if the USPS could work with developers to develop a USPS app that is able to detect the size of a package, based on taking a picture of the package, as well as place the package on your phone to weigh it. It would be similar to how we do mobile banking now of days. Allowing USPS or any distribution company to get more information up front about the package that is being shipped will allow them to be more efficient in their pickup/delivery processes. Also, as they collect this information from users, they could then turn this into a business opportunity by selling packages that are in the greatest demand, for example if they find that most items are being shipping in a 6x8x10 box, then they can try to sell more of those.

  2. I’m with you on the return package pickup opportunity! As someone who frequently experiences buyer’s remorse, I think USPS could improve on the return package experience by making the process more seamless and convenient. Now that drone technology is increasingly becoming a viable method of delivery, I wonder what that means for the future of USPS. Are they making any investments in this space, or will they continue to use trucks, airplanes, and people as their primary mode of transportation and delivery?

  3. USPS gets a lot of flack from the general population and has become somewhat of a scapegoat. I appreciate your shedding light on what the agency has done through technology. An additional way USPS has leveraged the Internet of Things is through its online tracking platform. I have had great success in using the website and have heard first-hand about what it took to create it. A friend of mine at Accenture worked on the project and shared some of its complexities.

    I also agree that returns is an area ripe for improvement. I love shopping online, yet still view returns as a hassle. I understand why retailers may want to add friction to the process, but from USPS’s viewpoint, creating an easy process should be the goal. User jcbedi’s idea of using images is a very interesting approach!!

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