Technology

US Postal Service reduces costs with transportation scenario analysis

By Amelia Kwok | 15 September 2008

The United States Postal Service (USPS) has realised over US$5 million in annual savings through a strategic transportation management initiative.

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Developed by USPS and IBM using ILOG CPLEXR optimisation software, the Highway Corridor Analytic Program (HCAP) uses advanced technology to analyse USPS highway transportation scenarios and identify cost-saving opportunities.

The HCAP model examines routing and scheduling options to minimise costs while meeting business goals - leading to a savings of over US$10 million in the two years since the model was deployed in 2006.

The USPS transportation network is large and complex - including responsibility for shipping over 200 billion pieces of mail per year through a system of transportation networks - and accommodates many different levels of services to its customers.

The USPS network must consider different classes of mail, including Priority, First Class, and Standard, as well as different types of mail, such as letters, flats, and parcels. These complexities of various mail sizes, weights, and classes, coupled with the large scale of the USPS network, create a challenging environment in which to plan and manage transportation.

To address these challenges, the HCAP model uses specialised optimisation technology to identify the best allocation of mail among transportation resources. Optimisation technology enables quick calculation of the best possible usage of resources - including vehicles, people, time, processes, equipment, raw materials, supplies, capacity, and securities - needed to achieve a desired business result, such as minimising cost or process time or maximising throughput, service levels, or profits.

“The USPS operates in a very unique business environment, where the overall size of operations and the inherent logistical complexities create significant challenges in managing the transportation network,” said E.J. Matto, Associate Partner, IBM. “Using optimisation technology for the transportation model helps the USPS uncover opportunities to streamline areas of long-haul transportation through consolidation.”

The HCAP initiative helps to identify opportunities to consolidate trucks to maximise use of resources without sacrificing service levels. In addition, USPS is provided with the most efficient plan for using existing transportation assets, accounting for specified parameters, such as routes, delivery time, truck capacity restrictions, and mail class.

The size of a typical scenario is bound by approximately 15,000 business constraints and 3200 variables. The programme’s model can be applied to a wide variety of scenarios to ensure timely delivery of mail, while not exceeding truck capacity or violating routes.