More AMP Studies Released: Network Rationalization not looking very rational

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Yesterday the Postal Service released more AMP studies, and we’re getting a clearer picture how much the Network Rationalization plan to consolidate about 230 mail processing plants will save and where the eliminated positions will come from.  Not surprisingly, the savings look to be a lot less than the Postal Service has been saying, and it’s still a mystery where 34,000 positions will be eliminated.

The impressive mountain of data the Postal Service submitted to the Postal Regulatory Commission (PRC) in December described an abstract plan of how the new processing network would operate.  (The Postal Service has even applied for a patent on the "facility optimization" system it apparently employed in developing the Rationalization plan.)  Based on this abstraction, the Postal Service calculated how much money the new network would cost to operate compared to the current network.  The Postal Service estimated $2.6 billion in total savings, minus $500 million in lost revenue due to the reduced service standards caused by the new network alignment, for a net savings of $2.1 billion a year.

The PRC asked the Postal Service to provide a copy of the AMP study for each of the 264 mail processing facilities studied for possible consolidation, and yesterday the Postal Service submitted a file with 184 of the studies.  It’s not clear why the file is missing 80 studies, but presumably the complete file will be made available to the PRC soon.  You can find links to the 184 studies on PostalMag.com, and you can download the .zip file with all the studies, here.

[CORRECTION: The Postal Service was not required to do AMP studies on all 264 facilities — 52 facilities were annexes and mail processing operations within customer service facilitis, and these may be closed without an AMP process.  The Postal Service conducted 212 AMP studies, so 28 were missing from the file given to the PRC, not 80.] 

Now that we can see the actual AMP studies for over 80% of the 223 facilities approved for consolidation, there’s not much need to speculate and extrapolate to envision how much the total savings will be.  These AMP studies describe the reality on the ground and not an abstract computer simulation conceived in postal headquarters.  After reviewing these studies, the Network Rationalization Plan is looking more like a rationalization than a plan.

These 184 studies provide the clearest picture yet of how much money will be saved by Network Rationalization and where the eliminated positions will come from.  As with our two previous exercises along these lines (the first using the PowerPoint presentations at 70 public meetings and the second using 134 AMP studies), the numbers just don’t add up to anything like what the Postal Service has been saying. 

[UPDATE: On March 30, the Postal Service released a table summarizing the results of 203 AMP studies.  The table is here, and the spreadsheet is here.)

Here’s a table summarizing the latest data (you can download the Excel spreadsheet with all the data here):

Savings Category
Savings for 184 AMP studies
Extrapolated to 223 facilities approved
Mail Processing Craft Workhour Savings
$452,729,346
$568,052,053
Non-MP Craft/EAS + Shared LDCs Workhour Savings (less Maint/Trans)
$34,423,258
$43,795,369
PCES/EAS Supervisory Workhour Savings
$121,068,008
$152,007,734
Transportation Savings
$54,992,609
$89,779,925
Maintenance Savings
$291,084,546
$360,833,851
Space Savings
-$1,551,318
-$1,880,130
Total Annual Savings
$961,749,357
$1,223,499,936
Net Contribution Loss   $500,000,000
Total Savings   $723,499,936

The Postal Service says the plan will save $2.6 billion, minus $500 million in net lost revenues, for a net savings of $2.1 billion.  The AMP studies indicate the plan will save $1.2 billion, minus $500 million in lost revenue, for a total of $720 million in savings — one-third of what the Postal Service has said.

The Postal Service says the plan will eliminate 34,000 positions.  The AMP studies give us an idea of where 15,000 positions will come from, but the other 19,000 remain a mystery. 

Type of Position
Actual for 184 AMPs
Estimated for 223 approved
Craft Position Loss
11,938
14,468
PCES/EAS Position Loss
436
528
Total Position Loss
12,374
14,997

Then there’s the issue of how these positions are going to be eliminated.  The no-layoff clause in union contracts means that the positions will need to be eliminated through attrition, and that’s exactly what the Postal Service says will happen.  But how quickly can 34,000 positions be eliminated through attrition?  The recent history of attrition suggests that it may take quite a while. 

From 2000 to 2010, the total workforce complement (including career and non-career) went from 901,238 to 671,687, a drop of 25%, or 2.5% a year.  For the past five years, the rate has been 3.3%, and FY 2010 reflected a drop of 6%.

There are 150,000 workers in the mail-processing network.  If 6% of them left the service each year, it would take nearly five years to eliminate 34,000 positions and reach the goal of $2.1 billion in savings.  Basically half of the excessed workers would have to quit or retire over the next few years. 

Now, it may be that the Postal Service will be able to accelerate the rate of attrition with its Network Rationalization plan.  Excessing workers to a facility a hundred miles away will surely make life difficult and push workers to quit or retire.  There may be financial incentives coming soon as well. 

But with an unemployment rate over 8% and good-paying jobs hard to come by, how many postal workers are really ready to leave their jobs?  Indeed, the Five-Year Business Plan released by the Postal Service a couple of weeks ago identified several “significant risks” in the plan, and one of them was simply, “Employee attrition may be too slow, which will drive up costs.”

As noted in the previous posts on this subject, it may be that the AMP studies do not capture much of the cost savings that may be realized with the new network configuration, and there may be other places where a significant number of positions can be eliminated.  Perhaps this method of calculation is simply flawed.  But at this point, it is really up to the Postal Service to offer an explanation about why the AMP studies don’t add up to what it’s been saying.

If an explanation doesn’t come soon, the Postal Service is going to lose a lot of credibility, and so will anyone in Congress who supports the consolidation plan.  If the Postal Service proceeds with the consolidations in June, before the PRC finishes its Advisory Opinion, that credibility will decline even further — a lot faster than falling mail volumes.

(Photo credits: Processing plants approved for consolidation in Fayetteville NC;  Kalazamoo MILafayette IN; and Binghamton NY.)

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