U.S. Postal Service Taps Optimization Software to Slash Transportation Costs
Generating more efficient mail routes helps the post office reduce fuel use by 615,000 gallons per year.
Wed, April 22, 2009
InfoWorld
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Gas prices more or less doubled between 2003 and 2008, spurring organizations throughout the country to find ways to reduce fuel consumption. Among them is the United States Postal Service (USPS), which has harnessed the power of IT to substantially reduce fuel costs, along with associated greenhouse gas emissions, and overall transportation expenses.
The USPS announced last year its success in cutting annual transportation costs by more than $5 million. The decrease in transportation has 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 determines 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 accounts for parameters such as starting and ending points, delivery times, truck-capacity restrictions, and mail classes. The system analyzes existing scenarios then generates 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), says E.J. Matto, an associate partner at IBM.
So, hypothetically, the system might find 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.
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The savings USPS has enjoyed are 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 have 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.
