Postal Service needs more automation, GAO says

USPS could cut costs further with systems for supply chain management, a GAO states.

"GAO report on USPS' supply-chain management programs"

The U.S. Postal Service has had some success in reducing costs by adopting supply chain management practices, but savings have been limited because the agency lacks certain automated systems, government auditors reported this week.

Supply chain management practices depend on information systems to give accurate baseline purchasing data and real-time pricing information. The Postal Service lacks systems to provide that information even about supplies and services bought in large quantities, the General Accounting Office reported.

USPS is putting in a new purchasing system that will automate some supply chain management tasks now handled manually, but that project isn't scheduled for completion until at least the end of fiscal 2006. Meanwhile, the agency is saving only a fraction of the amount the President's Commission on the U.S. Postal Service said could be saved through the use of supply chain management and other corporate business practices.

In fiscal 2003, USPS spent about $11.3 billion on supplies, services, rent and transportation.

Postal officials reported savings and revenue of $78 million in fiscal 2003 from three supply chain management initiatives: bulk fuel purchases; contracts with national suppliers for commodities such as boxes, labels, custodial products and tires; and reverse auctions for awarding contracts for highway mail-delivery routes.

But GAO auditors said they could not confirm all $78 million because they found spotty purchasing data prior to the supply chain initiatives. The lack of good baseline data for judging the success of supply chain management is a problem not unique USPS, the report states.

The service has had better success with its use of Web-based software for conducting reverse auctions. Such auctions take place online, and bidders are able to see competing bids and bid prices down to win a contract for supplies or services. Since May 2002, the Postal Service has conducted reverse auctions for about 17,000 of its contracted highway routes, for example.

In fiscal 2003, USPS officials claimed more than $5.9 million in savings from contract route auctions, but GAO's report states that $2.1 million of the savings are questionable.

In their response to the audit, USPS officials generally agreed with auditors' findings, but noted that it covered only a small portion of spending that the service does via reverse auctions. The study was conducted from July 2003 to April.

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