U.S. Postal Service taps optimization software to slash transportation costs

2009 Green 15: Generating more efficient mail routes led to a big reduction in fuel consumption

The United States Postal Service (USPS) announced last year its success in cutting annual transportation costs by more than $5 million. The decrease in transportation resulted in reducing fuel consumption by 615,000 gallons per year. What made this possible is a transportation-optimization system called HCAP (Highway Corridor Analytic Program), developed by the USPS and IBM using Ilog Cplex optimization software.

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HCAP helped to determine the most efficient plan for using existing mail-transportation assets in various types of scenarios, such as bulk-mail delivery and planning for holiday peak volumes, weekend transportation, and along highway corridors. It accounted for parameters such as starting and ending points, delivery times, truck-capacity restrictions, and mail classes. The system analyzed existing scenarios, then generated alternative loads and routes that would save USPS money but still meet all of its service goals (such as getting that first-class letter from Boston to Washington, D.C., within two days), E.J. Matto, an associate partner at IBM, said last September when the results of the HCAP project were announced.

So, hypothetically, the system might have found that USPS needs three fewer trucks driving from Chicago to Phoenix on a given daily run, or that 12 routes in Northern California could be consolidated into seven.

[ Learn how Welch's leveraged business intelligence to trim its transportation costs. ]

The HCAP initiative was implemented in 2006 and served its purpose of helping USPS identify opportunities to consolidate transportation while it was in service through 2008, according to IBM's Matto; USPS has since retired the HCAP model.  However, the savings USPS enjoyed from HCAP were indeed notable. In the Midwest, the organization was able to consolidate transportation, resulting in annual savings of $1.3 million. Savings on the West Coast were even more substantial: Transportation reductions resulted in a savings of $3.7 million per year.

The savings also resulted in a reduction in CO2 emissions. All told, USPS reported a carbon dioxide savings of 6,350 tons. If those reductions could be converted into bankable cash, the value of offsetting those CO2 emissions would be $47,000 per year.

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