Automation underperforming for US Postal Service, watchdog says

Aug 31, 2023

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WASHINGTON — Early results of the U.S. Postal Service’s push to modernize mail and package processing reveal that the agency is falling far short of performance goals, according to its watchdog unit.

An audit by the Postal Service’s Office of Inspector General (OIG) found that 350 automated guided vehicles (AGVs) purchased and deployed at processing centers between October 2019 and April 2022 were severely underused, which led to a $105 million shortfall in labor savings the equipment was supposed to generate for the agency.

“Specifically, we identified 177 AGVs (or 46 percent) were used, on average, less than once per day during 2022,” the report stated. “This occurred because the Postal Service did not require or adequately monitor the usage of AGVs, resolve issues, or follow up with facilities after deployment to improve use.”

The OIG also found during the period covered by the audit (October 2019 to June 2023, at nine selected processing sites) that the Postal Service did not accurately account for all its AGVs. “This occurred because the Postal Service did not provide oversight when AGVs were transferred between processing facilities.”

Creating “Best in Class” mail and package processing is one of the core elements of the Postal Services’ 10-year Deliver for America plan launched in March 2021. The plan projected operating with a positive net income beginning in 2023 or 2024.

Earlier this month, however, the Postal Service reported an $860 million loss on an adjusted, non-GAAP basis in its fiscal 2023 third quarter, which ended June 30.

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Despite the underuse of equipment and the savings shortfall, the OIG audit suggested that the Postal Service’s investment in AGVs is not wasted. The equipment, which resembles a forklift and is used to pick up and drop off pallets and containers of mail within a processing facility, was productive at high-use facilities where management was able to overcome issues that inhibited AGVs at lower-use facilities, including:

To improve equipment utilization and cost savings, the OIG recommended that Postal Service management:

While Postal Service management agreed with the recommendations, they disagreed with the causes of failing to meet AGV usage goals.

“The unprecedented impact of the increase in packages during the pandemic, followed by continuing increases in package volume, and the associated changes to equipment and building layouts to process this volume in a timely manner, are the true root causes of the AGV usage challenges,” management’s response to the report stated.

Management also disagreed with how the OIG characterized the estimated savings shortfall.

“Increases in package volumes and other system changes made the AGVs unusable in most targeted plants in the current environment. The program is evolving, but there was little opportunity to achieve savings during the audit time frame.”

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Click for more FreightWaves articles by John Gallagher.

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