Sunday, September 20, 2009

Can the Flats Sequencing System Be Fixed?

It may be time for the U.S. Postal Service to go back to the drawing board on the Flats Sequencing System, which faces trouble on two fronts.

USPS is pressing ahead with installation of the football-field-sized FSS machines, even though the system recently fell short of standards for the second time in an acceptance test. The throughput rate improved over a test late last year but was still 23% short of the standard, USPS's inspector general's office recently revealed.

The inspector general's report recommended installing only one more FSS machine "until the system demonstrates operational stability and sucessfully passes the field acceptance test." The machines are supposed to automate the labor-intensive process of handling such flat mail as catalogs and magazines. (See "The Unofficial Guide to Flats Sequencing" for more information.) Only a handful of the 100 machines in Phase I of the FSS program have been installed.

USPS management acknowledged that FSS "did not meet the key contract performance requirements" and said it would conduct another acceptance test, but indicated it would not slow deployment of the machines.

"When fully deployed, the expected annual FSS savings are $600 million. As such, it is in the best interest of the Postal Service to take advantage of every available opportunity to sustain the deployment while ensuring that it does not adversely affect the forecasted savings and/or increase operational burdens," wrote David E. Williams, acting vice president at USPS, in response to the inspector general's report.

The math seems to be on Williams' side. Achieving annual savings of $600 million with an investment of only $1.4 billion looks like a good deal; even if the machines last only 15 years, that would represent a 40% internal rate of return. That gives the Postal Service and lead contractor Northrop Grumman plenty of incentive to fix the machines.

But then there's the second problem with FSS: Not only is it not yet living up to its design, but the design may already be obsolete.

The system was designed under the assumption that flats volume would continue growing into the future. Large postal rate increases, competition from other media, and the economic recession have reversed that trend, causing flats volume to decline at an annual rate of about 11% the past two years.

USPS management has responded by increasing the territory that will be served by Phase I machines. A few days ago, it added more ZIP codes to the program, bringing the total to 2,314 instead of the approximately 1,300 in the original design.

That means each machine will serve far more addresses than originally intended, some in ZIP codes that did not qualify for the program at first. And some of the machines will go to locations that didn't originally pass muster for Phase I. All of this suggests that the $600 million estimate, which has been around for at least a year, is no longer valid.

Insiders say postal executives have already concluded that the machines are too big and need to be tweaked in other ways. But estimating the level of flats volume 5 or 15 years from now, or what type of machine could best handle that, could be quite a challenge.

Failure of the machines to meet contractual standards so far might be a blessing in disguise for the Postal Service: That could give it leverage to force Northrop Grumman to make desired changes to the design. Or even grounds to cancel the contract and go back to square one.

To anyone who has heard postal officials talk enthusiastically about FSS, the idea of USPS abandoning the program seems extreme.

But consider this fact: Much of the work on and learning about FSS has been done at Dulles, VA, where three machines are running and a fourth is being altered. Five days ago, the Postal Service announced that it has begun a feasibility study "to determine if efficiency could be increased by consolidating mail processing operations" from Dulles to the nearby Northern Virginia facility in Merrifield.


Anonymous said...

I believe that there are some very large areas in which the FSS would be a great money saver, but for the most part logistics makes for an impossibility given our current delivery standards. I handle flats every day and lack of uniformity may also contribute to the problems in areas where it may be feasible. Postal Headquarters needs to rationalize the validity of their data and step back and rethink the speed that they are jumping into this fire.

Anonymous said...

In order for the FSS to be re-thought and designed around the real world, someone would have to admit it was a mistake to begin with. No one is going to do that, they never have. If you read the latest OIG report, it's obvious this dinosaur is going to end up like the APPS (another monster that couldn't perform).

Anonymous said...

Just like COR they will try to implement it knowing its not ready

Anonymous said...

Knowing the way Postal Mismanagement works, some person or persons received a large kickback on these boat anchors.

Just another in the long list of money pits from the bozos in D.C.

Not to worry though; just eliminate a few thousand more craft positions and all will be well.

Bonuses on the way !

Anonymous said...

Rube Goldberg is alive and well and working for the USPS !

Anonymous said...

The $600 million in savings only applies if the machines are running at 100% efficiency. If the tests showed a 23% shortfall in performance, can we expect the savings would be reduced by 23%? That the USPS would continue with deployment is nothing new. People in high places have been paid large bonuses to make FSS a reality. It will happen for good or for bad.

The USPS has a history of buying machine that don't live up to their expectations going back to the second generation DBCS machine.
Take a sports car advertized as "capable of 120 mph", but the dealer says, "There are some bugs in it. You can only go 25 mph" Would you still buy the car? The USPS would.

Anonymous said...

Does the $1.4 billion price tag include building modifications, insurance, installation and energy required to run these mammoths?

Generally productivity percentages do not scale with savings figures. That 23% productivity shortfall would more likely mean much more than a 23% reduction in yearly savings.

Knowing how much more productive the FSS is than the current system would help to better analyze the number crunching behind the USPS' logic in continuing to purchase these machines.

Anonymous said...

@anonymous 12:40AM

If it was a Rube Goldberg design it would probably work better.

Anonymous said...

You guys don't understand how this works. USPS can deploy these machines and the Maintenance people employed right now will work out the bugs. That's how it's always been done. This machine is going to work and I for one will make sure it gives the USPS what it can deliver. That says it all from the Maintenance department. Lets roll D.C. we got your back!!!

Anonymous said...

I now work with the FSS system as a letter carrier and I must say that it sucks to high hell because it takes too long to deal with a third bundle that is inconsistant. I have so much mail that belongs to other routes, mail addresses turned the opposite direction, upsidedown flats and to be continued. The mail is never on time and at least 2 times a week we wont recieve any flats at all and when we do recieve it its so much mail that management tells us to bring it back.... Way to go customer service post office broke yeah right!@!!!