Wednesday, November 7, 2012

FSS Is Saving Big Bucks, USPS Claims

The troubled Flats Sequencing System is saving hundreds of millions of dollars annually, according to a U.S. Postal Service claim.

Based on information USPS filed recently in a lawsuit, the agency’s $1.3 billion FSS investment will pay for itself after barely three full years of operation.

“The Postal Service saves approximately $325,408 for each month of operation of each FSS machine,” USPS said in response to a lawsuit filed against it by the key FSS vendor, Northrop Grumman. “This is the monthly amount the Postal Service would have to pay employees to manually sort flats to delivery point sequence if the Postal Service did not use the FSS machine, minus the additional cost of operating the FSS machine.”

FSS was supposed to revolutionize the sorting of difficult-to-handle flat pieces like catalogs, magazines, and large envelopes. Mailers hoped the efficiency gains from automating mail sortation that was done by letter carriers would reduce pressure on the Postal Service to increase postal rates for flat mail, but now they fear that FSS isn't paying off. (See FSS Is Increasing USPS's Costs, Expert Says and FSS Machines Running Far Slower Than Planned.)

Because the 100 FSS machines were deployed an average of 12 months later than required by contract, USPS claims Northrop Grumman owes it $393.7 million for lost savings. USPS is seeking an additional $17 million from Northrop for other alleged breaches of contract, such as a lack of spare parts, error-plagued maintenance handbooks, and failure to honor warranty claims.

The USPS filing also denies Northrop Grumman claims that USPS “improperly wrested design control” over the machines from Northrop and thereby caused the delayed implementation and other problems. (For more on Northrop’s claims, see Flats Litigation System: USPS and Vendor Battling It Out Over Huge FSS Machines.)

High rate of return
If the Postal Service’s numbers are accurate, the money it invested in the football-field-sized machines will have a hefty 27% “internal rate of return” if the machines last for only 10 years.

But extensive cost estimates like this rely on assumptions and judgment calls. Because the context of the lawsuit gives USPS the incentive to make the FSS savings seem as large as possible, its estimate begs a few questions:

  • Does the net savings of $325,000 per month represent a best-case scenario -- for example, a machine that runs well with no major hiccups -- or is it truly an average for all machines in all months?
  • Postal officials stated recently that only 60% of flat mail in FSS zones was being sorted on FSS machines. Is the $325,000 estimate based only on the best-utilized machines or also on the machines that are underperforming their intended capacity?
  • As Dead Tree Edition reported in September, FSS machines’ “erratic performance sometimes results in carriers spending just as much time preparing the mail, or even more” and last winter “led to many carriers delivering mail after dark – definitely not a high-productivity environment.” Do the USPS savings estimates include the cost of such downstream disruptions?
  • Mailers, especially magazine publishers, report many customer complaints about the “Flats Shredding System” damaging mail. Is the Postal Service factoring in the lost revenue from those customers not renewing or switching to digital media? (If your answer is “Yes”, contact me about a really sweet deal on a bridge I can sell you.)
  • Postal officials have recently reported improved FSS operations, especially in regard to machine reliability. Does that mean the monthly savings per machine will be even greater than $325,000?
  • Now that the Postal Service has had such a major falling out with the contractor it relied on for such key functions as documentation, training, and modifications, how long will it be able to operate the massive machines effectively on its own? 


M. Jamison said...

The only way this is believable is with an independent audit that accounts for all the downstream problems as well as the costs the Postal Service has likely shuffled off into some other account (like the need for immense physical plant while they are otherwise downsizing same).

@dryMAILman said...

We just had a record high $1.4 billion workers' comp payment; the USPS needs to subtract $745 million in FSS injury costs from the FSS "savings". Look for a $5.9 billion workers' comp payment next year.

We already have walk-sequenced flats. Carrier route flats are already in delivery order. The USPS doesn't consider this mail FSS because it is too uniform in size, shape, and sort quality, and because it was "not invented here". They also ignore EDDM FSS, Saturation FSS, comailed FSS, etc.

Postal FSS has resulted in higher rates for non-postal FSS (the good stuff). This increase isn't nearly enough to cover the costs of the half-assed USPS flats strategy, but it is enough to drive mail out of the system at a cost of $3.75 billion a year. Remember Newsweek? Postal FSS killed Newsweek.

Postal FSS has caused distracted driving and civilian casualties. The PRC should consider these motor vehicle accidents when assessing USPS service performance measurements. Add another $1.4 billion in costs.

This comment was inspired by the award winning "Safety Depends on Me!" campaign.

ET - 10 Jeffrey E. Simmons said...

Saving big bucks? Is that why they're suing Northrop Grumman, because of all the money they're saving on a system with 20% less throughput than originally projected? Mark Jamison for PMG! He is easily the most knowledgeable and sensible person on the great postal 'debate'.

Anonymous said...

Every time I read an article about the FSS, a certain date comes to mind. 12/6/06. That is the date the Postal Board of Governors approved the purchase of this monstrosity. The very next day, the Postal Accountability Act was introduced to Congress. Within two weeks, that bill was signed into law.

I do not believe this timeline is coincidence.

Since FSS has been introduced in the field, employees, contractors and mailers have all been blamed for FSS shortcomings.

All of a sudden, now that the Postal Service is involved in a multimillion dollar lawsuit, the machines are saving more money than ever projected, all because of the superior intellect of our management team.

The people in upper leadership positions at the U.S. Postal Service are diobolical liars at best, sociopaths at worst.

Anonymous said...

Some days 1-2 trays other days 7-8 trays which results in overtime to deliver.before we could regulate sequenced flats leave some for next day.More even volume.Great Savings??? Yea right! When Liers figure figurers lie.

Anonymous said...

Should we believe the claims of the same people that signed a contract w/the APWU and almost immediately after it was officially signed and recognized by both parties, turned around and begged Congress to break the contract for them?

Anonymous said...

They said their savings come from not manually sorting the flats.Have they forgotton that the FSM 100 has been doing this job quite well for years.Since the carriers still have to DPS their mail due to the machines problems there is no savings there. Oh yeah,thier fudging the numbers once again on their path to self destruction

Anonymous said...

I don't believe anything the USPS says. Since its implementation, the USPS has done nothing but complain about the FSS. Now it's a God-send.

Anonymous said...

The amount of money spent on transportation for the FSS mail negates any alleged savings. Our plant has about 20 extra trips a day to and from the plant that does the FSS.
These postal managers should be arrested for falsifying documents with their phony accounting practices.

Anonymous said...

can't believe a word postal management says about costs or savings. i believe they make up stuff to suit whatever agenda they have. if the office of the inspector general was doing their job we would not have such a 'shady' postal management team. but they(OIG) aren't, so we do.

Anonymous said...

Some days we just have circular in fss mail how could that be saving money you take mail in order already put it on a machine to be put in order then you get that same mail rejects for the next week or so sounds like money saving to me. These machines are not worth it too many miss sorts magazines shreded what a waste.

Anonymous said...

We have 4 FSS machines in the plant I work. Over a month ago one of the clerks was told by a supervisor that the throughput on our machines was 58%. If the machine is rejecting 42% of the mail that then has to be rerun on an AFSM100 machine and that is then sent to the carrier for casing how is the machine saving money?

Anonymous said...

I deliver a high volume route that has FSS flats and DPS. The FSS is the worst idea that the USPS has come up with. It takes longer to deliver the mail at least an hour or more everyday. Look at the wear and tear on the LLV's that are already worn out. The wear and tear on the carriers is causing on the job injuries and causing carriers to work longer hours. The only saving is that they have taken money out of the pockets of the carriers.

Anonymous said...

Mr. Jamison is correct regarding the outside audit. How does the USPS account for the HUGE transportation, maintenance, and construction costs for this thing? Throughput of the machines has never reached specs and most of the mail run on this thing was already sorted to the carrier route level. Even a relatively low reject rate of 5% of so results in at least 2 extra manual sortings of the mail.

Staffing on the machines is labor intensive and these machines are deployed as flats volume continues to collapse. If the machines are effective as the USPS claims why are they suing Northrop Grumman?

Anonymous said...

we have always been told at our station that they are busting open bundles that have already been put in sequence to run them on the fss machines and get their number up. It's just like everything else with the post office...its phony numbers.

Anonymous said...

just got home.27 years 12 trays of fss 9 dps..12 hours...they trying to hurt carriers..can not see in the first..bring flats back.